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Directions: Read the passage and answer the question based on it.
I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.
The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.
The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.
The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.
The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.
The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.
Q. Identify the correct statement from the following:
  • a)
    Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.
  • b)
    Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.
  • c)
    Financial sector should also look into their role of broadening social safety nets.
  • d)
    Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
Directions: Read the passage and answer the question based on it.I ha...
As per 3rd Para, last few lines: The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.
Hence, the correct option is (d).
ositive_Mark: 3
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Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Which of the following statements is correct?

DIRECTIONS for questions: The passage given below is accompanied by a set of three questions. Choose the best answer to each question.The issues and preoccupations of the 21st century present new and often fundamentally different types of challenges from those that faced the world in 1945, when the United Nations was founded. As new realities and challenges have emerged, so too have new expectations for action and new standards of conduct in national and international affairs. Since, for example, the terrorist attacks of 11 September 2001 on the World Trade Centre and Pentagon, it has become evident that the war against terrorism the world must now fight – one with no contested frontiers and a largely invisible enemy – is one like no other war before it.Many new international institutions have been created to meet these changed circumstances. In key respects, however, the mandates and capacity of international institutions have not kept pace with international needs or modern expectations. Above all, the issue of international intervention for human protection purposes is a clear and compelling example of concerted action urgently being needed to bring international norms and institutions in line with international needs and expectations.The current debate on intervention for human protection purposes is itself both a product and a reflection of how much has changed since the UN was established. The current debate takes place in the context of a broadly expanded range of state, non-state, and institutional actors, and increasingly evident interaction and interdependence among them. It is a debate that reflects new sets of issues and new types of concerns. It is a debate that is being conducted within the framework of new standards of conduct for states and individuals, and in a context of greatly increased expectations for action. And it is a debate that takes place within an institutional framework that since the end of the Cold War has held out the prospect of effective joint international action to address issues of peace, security, human rights and sustainable development on a global scale.With new actors – not least new states, with the UN growing from 51 member states in 1945 to 189 today – has come a wide range of new voices, perspectives, interests, experiences and aspirations. Together, these new international actors have added both depth and texture to the increasingly rich tapestry of international society and important institutional credibility and practical expertise to the wider debate.Prominent among the range of important new actors are a number of institutional actors and mechanisms, especially in the areas of human rights and human security. They have included, among others, the UN High Commissioner for Human Rights and the International Criminal Tribunal for the former Yugoslavia, both created in 1993, and its sister tribunals for Rwanda established in 1994 and Sierra Leone in 2001.The International Criminal Court, whose creation was decided in 1998, will begin operation when 60 countries have ratified its Statute. In addition to the new institutions, established ones such as the UN High Commissioner for Refugees, and the ICRC and International Federation of Red Cross and Red Crescent Societies, have been ever more active.Nearly as significant has been the emergence of many new non-state actors in international affairs – including especially a large number of NGOs dealing with global matters; a growing number of media and academic institutions with worldwide reach; and an increasingly diverse array of armed non-state actors ranging from national and international terrorists to traditional rebel movements and various organized criminal groupings. These new non-state actors, good or bad, have forced the debate about intervention for human protection purposes to be conducted in front of a broader public, while at the same time adding new elements to the agenda.Q. Which of the following is true regarding the debate on intervention for human protection purposes?

DIRECTIONS for questions: The passage given below is accompanied by a set of three questions. Choose the best answer to each question.The issues and preoccupations of the 21st century present new and often fundamentally different types of challenges from those that faced the world in 1945, when the United Nations was founded. As new realities and challenges have emerged, so too have new expectations for action and new standards of conduct in national and international affairs. Since, for example, the terrorist attacks of 11 September 2001 on the World Trade Centre and Pentagon, it has become evident that the war against terrorism the world must now fight – one with no contested frontiers and a largely invisible enemy – is one like no other war before it.Many new international institutions have been created to meet these changed circumstances. In key respects, however, the mandates and capacity of international institutions have not kept pace with international needs or modern expectations. Above all, the issue of international intervention for human protection purposes is a clear and compelling example of concerted action urgently being needed to bring international norms and institutions in line with international needs and expectations.The current debate on intervention for human protection purposes is itself both a product and a reflection of how much has changed since the UN was established. The current debate takes place in the context of a broadly expanded range of state, non-state, and institutional actors, and increasingly evident interaction and interdependence among them. It is a debate that reflects new sets of issues and new types of concerns. It is a debate that is being conducted within the framework of new standards of conduct for states and individuals, and in a context of greatly increased expectations for action. And it is a debate that takes place within an institutional framework that since the end of the Cold War has held out the prospect of effective joint international action to address issues of peace, security, human rights and sustainable development on a global scale.With new actors – not least new states, with the UN growing from 51 member states in 1945 to 189 today – has come a wide range of new voices, perspectives, interests, experiences and aspirations. Together, these new international actors have added both depth and texture to the increasingly rich tapestry of international society and important institutional credibility and practical expertise to the wider debate.Prominent among the range of important new actors are a number of institutional actors and mechanisms, especially in the areas of human rights and human security. They have included, among others, the UN High Commissioner for Human Rights and the International Criminal Tribunal for the former Yugoslavia, both created in 1993, and its sister tribunals for Rwanda established in 1994 and Sierra Leone in 2001.The International Criminal Court, whose creation was decided in 1998, will begin operation when 60 countries have ratified its Statute. In addition to the new institutions, established ones such as the UN High Commissioner for Refugees, and the ICRC and International Federation of Red Cross and Red Crescent Societies, have been ever more active.Nearly as significant has been the emergence of many new non-state actors in international affairs – including especially a large number of NGOs dealing with global matters; a growing number of media and academic institutions with worldwide reach; and an increasingly diverse array of armed non-state actors ranging from national and international terrorists to traditional rebel movements and various organized criminal groupings. These new non-state actors, good or bad, have forced the debate about intervention for human protection purposes to be conducted in front of a broader public, while at the same time adding new elements to the agenda.Q. A criticism that the author levies against international institutions is that

When people react to their experiences with particular authorities, those authorities and the organizations or institutions that they represent often benefit if the people involved begin with high levels of commitment to the organization or institution represented by the authorities. First, in his studies of people's attitudes toward political and legal institutions, Tyler found that attitudes after an experience with the institution were strongly affected by prior attitudes. Single experiences influence post experience loyalty but certainly do not overwhelm the relationship between pre-experience and post experience loyalty. Thus, the best predictor of loyalty after an experience is usually loyalty before that experience. Second, people with prior loyalty to the organization or institution judge their dealings with the organization's or institution's authorities to be fairer than do those with less prior loyalty, either because they are more fairly treated or because they interpret equivalent treatment as fairer.Although high levels of prior organizational or institutional commitment are generally beneficial to the organization or institution, under certain conditions high levels of prior commitment may actually sow the seeds of reduced commitment. When previously committed individuals feel that they were treated unfavourably or unfairly during some experience with the organization or institution, they may show an especially sharp decline in commitment. Two studies were designed to test this hypothesis, which, if confirmed, would suggest that organizational or institutional commitment has risks, as well as benefits. At least three psychological models offer predictions of how individuals' reactions may vary as a function of (1) their prior level of commitment and (2) the favorability of the encounter with the organization or institution. Favorability of the encounter is determined by the outcome of the encounter and the fairness or appropriateness of the procedures used to allocate outcomes during the encounter. First, the instrumental prediction is that because people are mainly concerned with receiving desired outcomes from their encounters with organizations, changes in their level of commitment will depend primarily on the favorability of the encounter. Second, the assimilation prediction is that individuals' prior attitudes predispose them to react in a way that is consistent with their prior attitudes.The third prediction, derived from the group-value model of justice, pertains to how people with high prior commitment will react when they feel that they have been treated unfavorably or unfairly during some encounter with the organization or institution. Fair treatment by the other party symbolizes to people that they are being dealt with in a dignified and respectful way, thereby bolstering their sense of self-identity and self-worth. However, people will become quite distressed and react quite negatively if they feel that they have been treated unfairly by the other party to the relationship. The group-value model suggests that people value the information they receive that helps them to define themselves and to view themselves favorably. According to the instrumental viewpoint, people are primarily concerned with the more material or tangible resources received from the relationship. Empirical support for the group-value model has implications for a variety of important issues, including the determinants of commitment, satisfaction, organizational citizenship, and rule following. Determinants of procedural fairness include structural or interpersonal factors. For example, structural determinants refer to such things as whether decisions were made by neutral, fact-finding authorities who used legitimate decision-making criteria. The primary purpose of the study was to examine the interactive effect of individuals (1) commitment to an organization or institution prior to some encounter and (2) perceptions of how fairly they were treated during the encounter, on the change in their level of commitment. A basic assumption of the group-value model is that people generally value their relationships with people, groups, organizations, and institutions and therefore value fair treatment from the other party to the relationship. Specifically, highly committed members should have especially negative reactions to feeling that they were treated unfairly, more so than (1) less-committed group members or (2) highly committed members who felt that they were fairly treated.The prediction that people will react especially negatively when they previously felt highly committed but felt that they were treated unfairly also is consistent with the literature on psychological contracts. Rousseau suggested that, over time, the members of work organizations develop feelings of entitlement, i.e., perceived obligations that their employers have toward them. Those who are highly committed to the organization believe that they are fulfilling their contract obligations. However, if the organization acted unfairly, then highly committed individuals are likely to believe that the organization did not live up to its end of the bargain.For summarizing the passage, which of the following is most appropriate

When people react to their experiences with particular authorities, those authorities and the organizations or institutions that they represent often benefit if the people involved begin with high levels of commitment to the organization or institution represented by the authorities. First, in his studies of people's attitudes toward political and legal institutions, Tyler found that attitudes after an experience with the institution were strongly affected by prior attitudes. Single experiences influence post experience loyalty but certainly do not overwhelm the relationship between pre-experience and post experience loyalty. Thus, the best predictor of loyalty after an experience is usually loyalty before that experience.Second, people with prior loyalty to the organization or institution judge their dealings with the organization's or institution's authorities to be fairer than do those with less prior loyalty, either because they are more fairly treated or because they interpret equivalent treatment as fairer.Although high levels of prior organizational or institutional commitment are generally beneficial to the organization or institution, under certain conditions high levels of prior commitment may actually sow the seeds of reduced commitment. When previously committed individuals feel that they were treated unfavourably or unfairly during some experience with the organization or institution, they may show an especially sharp decline in commitment. Two studies were designed to test this hypothesis, which, if confirmed, would suggest that organizational or institutional commitment has risks, as well as benefits. At least three psychological models offer predictions of how individuals' reactions may vary as a function of (1) their prior level of commitment and (2) the favorability of the encounter with the organization or institution. Favorability of the encounter is determined by the outcome of the encounter and the fairness or appropriateness of the procedures used to allocate outcomes during the encounter. First, the instrumental prediction is that because people are mainly concerned with receiving desired outcomes from their encounters with organizations, changes in their level of commitment will depend primarily on the favorability of the encounter. Second, the assimilation prediction is that individuals' prior attitudes predispose them to react in a way that is consistent with their prior attitudes.The third prediction, derived from the group-value model of justice, pertains to how people with high prior commitment will react when they feel that they have been treated unfavorably or unfairly during some encounter with the organization or institution. Fair treatment by the other party symbolizes to people that they are being dealt with in a dignified and respectful way, thereby bolstering their sense of self-identity and self worth. However, people will become quite distressed and react quite negatively if they feel that they have been treated unfairly by the other party to the relationship. The group-value model suggests that people value the information they receive that helps them to define themselves and to view themselves favorably. According to the instrumental viewpoint, people are primarily concerned with the more material or tangible resources received from the relationship. Empirical support for the group-value model has implications for a variety of important issues, including the determinants of commitment, satisfaction, organizational citizenship, and rule following. Determinants of procedural fairness include structural or interpersonal factors. For example, structural determinants refer to such things as whether decisions were made by neutral, fact finding authorities who used legitimate decision making criteria. The primary purpose of the study was to examine the interactive effect of individuals (1) commitment to an organization or institution prior to some encounter and (2) perceptions of how fairly they were treated during the encounter, on the change in their level of commitment. A basic assumption of the group-value model is that people generally value their relationships with people, groups, organizations, and institutions and therefore value fair treatment from the other party to the relationship. Specifically, highly committed members should have especially negative reactions to feeling that they were treated unfairly, more so than (1) less-committed group members or (2) highly committed members who felt that they were fairly treated.The prediction that people will react especially negatively when they previously felt highly committed but felt that they were treated unfairly also is consistent with the literature on psychological contracts. Rousseau suggested that, over time, the members of work organizations develop feelings of entitlement, i.e., perceived obligations that their employers have toward them. Those who are highly committed to the organization believe that they are fulfilling their contract obligations. However, if the organization acted unfairly, then highly committed individuals are likely to believe that the organization did not live up to its end of the bargain.For summarizing the passage, which of the following is most appropriate

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Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Identify the correct statement from the following:a)Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.b)Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.c)Financial sector should also look into their role of broadening social safety nets.d)Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.Correct answer is option 'D'. Can you explain this answer?
Question Description
Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Identify the correct statement from the following:a)Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.b)Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.c)Financial sector should also look into their role of broadening social safety nets.d)Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.Correct answer is option 'D'. Can you explain this answer? for CAT 2024 is part of CAT preparation. The Question and answers have been prepared according to the CAT exam syllabus. Information about Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Identify the correct statement from the following:a)Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.b)Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.c)Financial sector should also look into their role of broadening social safety nets.d)Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CAT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Identify the correct statement from the following:a)Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.b)Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.c)Financial sector should also look into their role of broadening social safety nets.d)Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.Correct answer is option 'D'. Can you explain this answer?.
Solutions for Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Identify the correct statement from the following:a)Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.b)Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.c)Financial sector should also look into their role of broadening social safety nets.d)Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.Correct answer is option 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for CAT. Download more important topics, notes, lectures and mock test series for CAT Exam by signing up for free.
Here you can find the meaning of Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Identify the correct statement from the following:a)Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.b)Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.c)Financial sector should also look into their role of broadening social safety nets.d)Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.Correct answer is option 'D'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Identify the correct statement from the following:a)Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.b)Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.c)Financial sector should also look into their role of broadening social safety nets.d)Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.Correct answer is option 'D'. Can you explain this answer?, a detailed solution for Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Identify the correct statement from the following:a)Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.b)Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.c)Financial sector should also look into their role of broadening social safety nets.d)Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.Correct answer is option 'D'. Can you explain this answer? has been provided alongside types of Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Identify the correct statement from the following:a)Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.b)Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.c)Financial sector should also look into their role of broadening social safety nets.d)Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.Correct answer is option 'D'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice Directions: Read the passage and answer the question based on it.I have tried to introduce into the discussion a number of attributes of consumer behaviour and motivations, which I believe are important inputs into devising a strategy for commercially viable financial inclusion. These related broadly to the (i) the sources of livelihood of the potential consumer segment for financial inclusion (ii) how they spend their money, particularly on non-regular items (iii) their choices and motivations with respect to saving and (iv) their motivations for borrowing and their ability to access institutional sources of finance for their basic requirements. In discussing each of these sets of issues, I spent some time drawing implications for business strategies by financial service providers. In this section, I wilt briefly highlight, at the risk of some repetition, what I consider to be the key messages of the lecture.The first message emerges from the preliminary discussion on the current scenario on financial inclusion, both at the aggregate level and across income categories. The data suggest that even savings accounts, the most basic financial service, have low penetration amongst the lowest income households. I want to emphasize that we are not talking about Below Poverty Line households only; Rs. 50,000 per year in 2007, while perhaps not quite middle class, was certainly quite far above the official poverty line. The same concerns about lack of penetration amongst the lowest income group for loans also arise. To reiterate the question that arises from these data patterns: is this because people can't access banks or other service providers or because they don't see value in doing so? This question needs to be addressed if an effective inclusion strategy is to be developed.The second message is that the process of financial inclusion is going to be incomplete and inadequate if it is measured only in terms of new accounts being opened and operated. From the employment and earning patterns, there emerged a sense that better access to various kinds of financial services would help to increase the livelihood potential of a number of occupational categories, which in turn would help reduce the income differentials between these and more regular, salaried jobs. The fact that a huge proportion of the Indian workforce is either self-employed and in the casual labour segment suggests the need for products that will make access to credit easier to the former, while offering opportunities for risk mitigation and consumption smoothing to the latter.The third message emerges from the analysis of expenditure patterns is the significance of infrequent, but quantitatively significant expenditures like ceremonies and medical costs. Essentially, dealing with these kinds of expenditures requires either low-cost insurance options, supported by a correspondingly low-cost health care system or a low level systematic investment plan, which allows even poor households to create enough of a buffer to deal with these demands as and when they arise. As has already been pointed out, it is not as though such products are not being offered by domestic financial service providers. It is really a matter of extending them to make them accessible to a very large number of lower income households, with a low and possibly uncertain ability to maintain regular contributions.The fourth message comes strongly from the motivations to both save and borrow, which, as one might reasonably expect, significantly overlap with each other. It is striking that the need to deal with emergencies, both financial and medical, plays such an important role in both sets of motivations. The latter is, as has been said, amenable to a low-coat mass insurance scheme, with the attendant service provision. However, the former, which is a theme that recurs through the entire discussion on consumer characteristics, certainly suggests that the need for some kind of income and consumption smoothing product is a significant one in an effective financial inclusion agenda. This, of course, raises broader questions about the role of social safety nets, which offer at least some minimum income security and consumption smoothing. How extensive these mechanisms should be, how much security they should offer and for how long and how they should be financed are fundamental policy questions that go beyond the realm of the financial sector. However, to the extent that risk mitigation is a significant financial need, it must receive due attention of any meaningful financial inclusion strategy, in a way which provides practical answers to all these three questions.The fifth and final message is actually the point I began the lecture with. It is the critical importance of the principle of commercial viability. Every aspect of a financial inclusion strategy - whether it is the design of products and services or the delivery mechanism -needs to be viewed in terms of the business opportunity that it offers and not as a deliverable that has been imposed on the service provider. However, it is also important to emphasize that commercial viability need not necessarily be viewed in terms of immediate cost and profitability calculations. Like in many other products, financial services also offer the prospect of a life-cycle model of marketing. Establishing a relationship with first-time consumers of financial products and services offers the opportunity to leverage this relationship into a wider set of financial transactions as at least some of these consumers move steadily up the income ladder. In fact, in a high growth scenario, a high proportion of such households are likely to move quite quickly from very basic financial services to more and more sophisticated ones. In other words, the commercial viability and profitability of a financial inclusion strategy need not be viewed only from the perspective of immediacy. There is a viable investment dimension to it as well.Q. Identify the correct statement from the following:a)Casual labour segment may not require risk mitigation products like insurance as their expenditures on consumption are high relative to their incomes.b)Income of upto Rs. 60,000 per year is the benchmark for official Poverty Line.c)Financial sector should also look into their role of broadening social safety nets.d)Risk mitigation of casual labour must receive attention in any meaningful financial inclusion strategy.Correct answer is option 'D'. Can you explain this answer? tests, examples and also practice CAT tests.
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