Financial Inclusion covers a broad canvas which includes access to micro-credit, banking services, insurance and money transfers to both individuals and small enterprises. This is a high policy priority of the Government of India which has launched a number of flagship programmes such as the Prime Minister’s Jan Dhan Yojana that has opened approximately 247 million bank accounts (as of 29 September 2016) for previously unbanked households.
This paper focuses on two specific areas of financial inclusion which have been identified as priorities by the Government of India and on which more attention can perhaps be focused. These are access to affordable finance for micro, small and medium enterprises (MSMEs) and access to affordable housing finance for households. While both these areas are widely recognised as key drivers of economic growth and job creation in all economies, MSME credit and mortgage finance markets are often fraught with market failures and imperfections for which interventions by the government become important. In this paper, we specifically focus on credit guarantee schemes for both MSME financing and affordable housing and draw from UK experience in describing characteristics of effective credit guarantee schemes.
We hope that as a next stage both governments, regulators and the private sector will look to discuss the recommendations in this paper in greater detail, with a view to identifying specific actions and assigning roles for implementation. The private sector is committed to playing its part in this process. The IUKFP Working Group that helped produce this paper will continue to support this endeavour and be available for specific discussions with practitioners and policymakers. We propose that a review of progress be undertaken by the end of June 2017 and reported to the co-Chairmen of the IUKFP.