Paper
An Approach Paper for the Delivery of Comprehensive Financial Services to the Informal and Unorganised Sector
A Study: Facilitative infrastructure for the growth of the unorganized sector in India
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43 pages
This note attempts to articulate a vision for a scaled, national, financial infrastructure that would deliver a complete suite of financial services to the unorganized sector in India. The note:
- Suggests strategies for the creation of an Enabling Environment through investments in facilitative infrastructure for the growth of the sector.
- Bases its argument for the creation of a facilitative infrastructure on the following premises:
- Tiny enterprises boost the local economy, as they are labor intensive;
- The highly dispersed presence of the sector throughout the country creates positive distribution of wealth;
- Existence of a vibrant financial infrastructure tuned to the unorganized sector, could catalyze its growth.
The note examines:
- The role that the unorganized sector plays in the economy of the country;
- The reasons for the growth of small and tiny enterprises in India;
- The ways in which access to finance helps the growth of the unorganized sector by aiding:
- Investing in productive assets;
- Expanding the existing businesses;
- Improving individual productivity;
- Permitting individuals to move to higher levels of consumption;
- Increasing investment in education;
- Increasing overall risk-taking ability;
- Increasing wage labor activities.
- A strategy to reduce overall need for capital in the unorganized sector, while increasing its supply.
- The constraints of information asymmetry and difficulty of access.
The paper concludes by recommending investments in facilitative infrastructure in the areas of basic and soft infrastructure and a supportive policy and regulatory framework.
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