Nonbanks and India's Unbanked

December 1, 2010

When it comes to financial inclusiveness, non-banks are better suited to meet the needs of the unbanked in India than are regulated financial institutions. As a result, the government there needs to include nonbanks in efforts to expand financial inclusiveness.

That's the bottom line of an analysis released today by Gerson Lehman Group, an independent global consultancy.

The experts who penned the analysis - aptly titled Non-Banking Finance Companies are Best Suited for Promoting Financial Inclusion- suggest the current crisis of confidence in Indian microfinance can be pinned on a regulatory framework that ignores the important roles played by non-banks financial services providers in India.

Nonbanks, they said, "are best suited for promoting [the Indian government's] agenda on Financial Inclusion," because they have a 60-year track record providing need-based and asset-backed credit, in both urban and rural markets, and because these institutions already have regulatory oversight that's at least as good as the banks'.

Americans purchase $75 billion a year in money orders from non-banks

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