Fighting for financial inclusion

Ike Señeres

FINANCIAL inclusion is a goal that is stated in many government documents, including the corporate charters of several government financial institutions. Simply put, it is the goal of including everyone in the financial horizon of our society, meaning to say including those who are below the poverty line or those who are at the bottom of the pyramid, so to speak. Although these goals are well written usually in faultless prose, it is really easier said than done and more often than not, these would just end up being slogans, at best becoming dreams or wishes. Putting it another way, the goal is also about empowering the unbanked and about the higher goal of building an inclusive society.

Call it any fancy name that you like, but the bottom line of this is poverty or the reduction of poverty. In simple terms, we are really talking about including or counting everyone into the broader society, without excluding anyone in other words. Although we are basically discussing an economic topic, this is really about democracy and democratic principles, because anything that is exclusionary or discriminatory is not democratic. In that sense, we could say that this problem is deeper than it looks, because there are many people among us who do not even have birth certificates. Not having that, they also could not register as voters, which is really a deprivation of their rights.

In theory, it could be said that those who do not have birth certificates could not even be considered as Filipino citizens because they have no documents to prove that, in other words they could not even prove that they are Filipinos in the first place. Perhaps they could even claim that they are foundlings, but that category seems to belong to those who have money to argue such. Talking about money, it is implied that those who do not have birth certificates could not even apply for passports, therefore they could not even travel abroad to look for jobs that would enable them to earn more money. The fact is, they may not even have the opportunities to look for local jobs, because they could not even establish their identities.

Going straight to the point, anyone who wishes to be included or recognized in the financial horizon of our country needs to have a credit history that would of course also reflect his credit rating. In that regard, it could be said that anyone who pays cash for all of their purchases would never have a credit rating, or in other words, if they are not buying anything on credit terms. On that note, it could be said that those who are subscribed to power, water, cable and phone services would have a good chance to build a credit history. On top of that however, it would be good for them to get a credit card, or to get a credit line from department stores or appliance stores.

Having a credit history is basically an issue of identification or authentication. What is needed is to identify that a person is who he claims to be, meaning to say that his claim has to be authenticated. There are many ways of doing that, and one popular option is biometrics, using any technology that is based on the data taken or read from the human body, such as fingerprints or retinal scans. Another option is the use of a public and private key infrastructure, commonly known as PKI. As usual, scanned signatures are the affordable options along with scanned photos, but these are not considered as secure. Recently, some other options have emerged, such as three dimensional (3D) bar codes and quick response (QR) codes.

Very recently, I had the chance to interview Mr. Mukesh Babu, a co-founder of Anvaya Analytics. His company has developed a consumer loyalty system that enables customers to track their rewards points. On closer look however, I realized that the system could also be used to establish the credit history of customers, using only their mobile phone numbers in tandem with QR codes. Of course, I would always say that biometrics and PKI would be more secure, but are unfortunately more expensive. I think however that the two options should not be pitted against each other, because of the dissimilar price points. For sure, the Anvaya system could be upgraded later on to include biometrics, assuming that these would become affordable later on.

Regardless of which technologies would eventually dominate the market, the bottom line and the ultimate goal should be financial inclusion for everyone, a goal that I would also interpret to mean universal access to credit or financing. On the practical side however, lending is of course based on the assessment of credit risks and of course we could not waive that requirement. To be fair however, we should give equal chances for everyone to borrow money when they need it for business, but it is up to them to show that they have low credit risks. For lack of any other affordable option, it would be practical to start using the Anvaya System as early as possible, perhaps initially for the cooperatives movement.

E-mail: iseneres@yahoo.com