30 June 2016 13:46 GMT
- See more at: http://www.planetbiometrics.com/article-details/i/4669/desc/guest-post-biometrics-for-inclusive-banking-and-microfinance-in-developing-countries/#sthash.ry9ZnAIc.dpuf
By Danny Thakkar, CEO, Bayometric “More than 130 million people used Aadhaar in March 2016 to authenticate their identity and receive a government benefit or service, according to the latest figures submitted to the Prime Minister’s Office (PMO).” - The Economic Times, India [1]
Aadhaar, mentioned above, is the name of biometric identification system of government of India. It aims to enrol 1.2 billion of India’s population using their biometrics which include 10 fingerprints, iris scans and a digital photograph. But India is not alone. Similar programs have been started in many developing countries to biometrically identify their citizens for efficient delivery of social benefits directly to them. “Many of such programs (the world over) use digital biometric identification technology that distinguish physical or behavioural features, such as fingerprints or iris scans, to help “leapfrog” traditional paper-based identity systems.” - Centre for Global Development [2] Biometrics has the potential to bring a sea change in the way banking and e-finance is delivered to the masses in the developing world. With financial inclusion of the masses into the mainstream, their development activities can be carried out in a targeted way. Biometric citizen databases are being linked to the direct delivery of state provided benefits and subsidies to the people. Banks play a key role in this transfer of benefits as they are the enablers of the money transfers from government to the people. It is in this context of government benefit transfers that e-finance enabled with biometrics is being embraced across the developing countries. In this article, we will start by taking a look at what is biometric identification. We will then take a look at how developing countries are embracing biometric identification for enlisting their general population. Finally, we will look at how banks and microfinance institutions are using biometrics to facilitate financial inclusion of masses with the use of biometric banking. Biometric identification The term biometric refers to a measurable physical characteristic which is unique for every individual. Biometrics include traits such as fingerprints, iris patterns, retinal patterns etc. All these traits have well developed scientific measurement methods. Biometric identification refers to accurately determining the identity of a person based on his captured biometric traits. Biometric identification systems work in two steps - enrolment and identification. In the enrolment step biometrics of eligible individuals are captured. These captured images are then ‘read’ using sophisticated pattern recognition algorithms. Once read, the captured images are then encoded using established scientific standards to their equivalent digital biometric templates. These templates are then stored in a central biometric database. The authentication step happens when a previously enrolled individual tries to gain access to an access controlled asset. He presents his biometric for scanning which is then converted to its equivalent biometric template. This captured biometric template is then compared for a match against the templates stored for all the valid users in the biometric database. If a match is found, then the person is authenticated and is allowed to access the asset. Else, he is asked to re-attempt authenticating himself. Biometrics such as fingerprints, iris patterns, voice analysis etc. have been developed into mature technologies. They now possess the desired accuracy with FAR (False Acceptance Ratio) and FRR (False Rejection Ratio) being brought down to low insignificant levels. Multimodal biometrics, which refers to authentication using multiple biometrics concurrently, reduces the FAR and FRR even further. Majority of the public biometric programmes being carried out in developing countries capture multiple biometrics to create unique national identification database for their citizens. Biometric identification in the developing world Delivering efficient public services as well as targeted financial benefits to the masses requires accurate identification of its citizens. Developing countries were lagging behind their developed counterparts in citizen identification till a few years ago. But with the development of affordable and accurate biometric identification technologies, biometric citizenship databases are becoming a reality. Many developing countries such as India, Philippines, South Africa, Mexico among others, are creating such biometric databases. Biometric citizenship databases have become a key enabler in efficient delivery of benefits to the citizens. Such direct benefit transfer to citizens allows a government to surpass existing corruption and other systemic malpractices. In addition, such biometric database can be integrated with financial institutions such as banks and micro-finance companies. Such an integration allows building inclusive financial institutions which can reach the hitherto unbanked population using e-finance or e-banking. Under normal circumstances, rural or economically less-developed people in developing countries do not have any identification documents. Banks and credit organizations are thus hesitant in enrolling individuals from such poor classes because they cannot trust their identities. But with government-funded biometric citizenship databases being integrated with banks, and by ensuring security of the stored citizenship information, this economic divide can be safely bridged. Banking enabled by biometric citizenship databases Most of the banks and micro-credit organizations in developing countries have e-enabled their operations. With the creation of national biometric citizenship databases, they are now enrolling citizens using their biometrics. Since biometrics cannot be faked, money intended for a person cannot be usurped in a fraudulent way by someone else. Fingerprints and Iris scans are the two biometrics primarily being used to facilitate direct cash benefit transfers in developing countries. Let us look at a few successful programs where biometric identification has been used to deliver benefits to citizens – · South Africa has used fingerprints to transfer as many as 5 million grants for provident fund using fingerprint-based biometrics. · 14.5 million people have been enrolled using their fingerprints into a National Life Insurance Scheme in India. · Pakistan transferred cash to 200,000+ Afghanistan refugees under a scheme by UNHCR. It used iris-recognition for refugee identification · Ghana has been able to include 340,000 of their unbanked citizens using fingerprint-based identification. Micro-finance institutions can now expand their customer base using biometric citizenship databases. Disbursement of micro-credit to a vast section of population living in villages and remote areas will now be possible. Their credit history can now be tracked across locations in case they migrate. With biometric identification, loan recoveries will become better as a person’s identity can no longer be hidden. Micro-finance is thus poised for an inclusive and expansive growth in the developing countries. Conclusion Biometrics has the potential to uplift an entire section of population of the developing world who were till now devoid of benefits due to identification issues. National biometric identification schemes launched by governments of developing countries are an excellent step in this direction. The last enablement step is of integrating the national citizenship databases with banking and e-finance organizations. This will ensure financial inclusion of the unprivileged population with the accuracy and safety of biometric identification. [1] PMO happy as 13 crore people used Aadhaar for IDs and received benefits in March - The Economic Times [2] Identification for Development: The Biometric Revolution – Centre for Global Development - See more at:
http://www.planetbiometrics.com/article-details/i/4669/desc/guest-post-biometrics-for-inclusive-banking-and-microfinance-in-developing-countries/#sthash.ry9ZnAIc.dpuf
