IGF 2019 WS #233
Strategy for financial inclusion of informal economy workers

Relevance to Theme: With an overwhelming part of workers in India remaining ‘informal’, contractual, unorganized or simply not having any channel to be formal; a strategy to formalization/inclusion is pivotal to address the most basic of developmental issues. To note the root causes of informality becomes important to create strategies. Technology becomes important to scale and accelerate an intended transition towards financial inclusion. This paper has brought out one strategy financial inclusion of the static workers in the informal economy. It draws out a blueprint for a socio-technical transition involving Distributed Ledger Technology. Now the stage is set to start the niche stage of a socio-technical transition.

Relevance to Internet Governance: Our proposal talks about the problems the informal sector faces in India and how to solve those problems by devising a scheme for their financial inclusion. To achieve this goal, we intend to discuss the role of internet governance.

The research being cited (attached) for this workshop narrates that there is a particular problem till recently which created a disconnect between global/national policy to local realities in India. While some of these disconnects have been addressed, many persist and may pose as a dangerous risk towards sustainable development of emerging economies including India. Additions to the research has pointed out that while the internet could have reduced the disconnect several interviews with local stakeholders in India and Germany has pointed that the internet, its present architecture, platforms, business models, and governance of the internet are increasing the disconnect. This workshop will also deliberate on the method used for creating the narrative and data collection which is the Gender, Age and Disabilities (GAD) lens of inclusion.

While the access to mobile and data is widespread, the usage for financial services is limited. Internet Governance and cutting edge technology may be a great enabler in the process of formalizing smart contracts between workers of the informal economy and their clients. Process maps using technologies such as Distributed Ledger Technology (DLT) and Artificial Intelligence (AI) will then be drawn out to generate scalable contracts which will ensure trust and traceability without disrupting the existing mechanism. The current social media applications of the internet are more standardized to familiarization and entertainment aspects leading to a big void in terms of local utility and professional services.

The internet tool devised by us,SeenAb, would not only collect the data from the user for this purpose but would also bridge the data inconsistencies among the users.

The footprint of Internent governance on financial inclusion is well acknowledged in various parts of the world. Fintech, or financial technologies, are becoming the norm in various ways, with positive results. There is strong correlations between mobile ownership and usage and reduction in household poverty alongside significantly higher per capita consumption expenditures as well. The financial internet technology provides entrepreneurial opportunities for business operators in the informal economy, and is fundamental for facilitating local-local and global-local financial flows.

Internet Governance’s role has to be multidimensional in nature, enabling transactions between various stakeholders in both monetary and non-monetary ways. Legally tenable and enforceable contracts that are based on non-monetary relationships may provide the necessary confidence to the banks to start looking at these as ‘monetizable’. Such contracts may be used by the financial institutions to take a next step towards providing credit to the informal sector workforce.

The same smart service contract may be the first step towards recognizing the ‘formality’ of the Indian informal sector. The static nature of business may need to redefine the formality paradigm and may also help design policies which not only provide the credit but also insurance service. The current budget, envisages providing minimum insurance coverage to the informal sector. The quasi-formal work contracts and its recognition in the formal domains may further alleviate the risks of higher policy provisions and leakages in such forward looking policy provisions.

Role of internet governance in providing formal financial services to informal sector is crucial. Internet Technologies can be be leveraged to address both the gaps identified above, firstly, the information asymmetry about the policy and second the formalization of contracts. Due to the diffused nature of the engagements at the community levels, it is necessary that the particular concerns and peculiarities get addressed suitably. Most suitable internet technology platforms, which are not only robust but also easily accessible, need to be identified to undertake the cumbersome exercises with significant transaction costs attached to them. Further, a lot of these contracts also have to be allowed by emerging technologies in real time to ensure the objectives of reducing both time and costs stated earlier in a secure, trustworthy manner. In such a scenario, platforms based on blockchain technology emerges as a viable option to ameliorate these challenges.