Unlocking Financial Inclusion Beyond Credit Scores

Editor’s Note – This blog is adapted from a talk by Siddharth Jagetia at the Future of Finance Meetup hosted by GeekyAnts. In this session, Siddharth draws on his experience as a credit product builder to explore India’s unique challenges and opportunities in expanding credit access.

I am Siddharth Jagetia, a credit product builder. I spent a couple of years in the United States working at Credit Karma, where I still serve as a Senior Product Manager. I moved back to India about three months ago to explore India’s unique financial position. India has built one of the world’s most ambitious digital finance infrastructures, but millions still lack access. That contrast motivates my work.

Financial inclusion is a broad term. It includes access to formal banking services such as insurance, savings, and credit. For this discussion, I will focus only on credit inclusion.

My goal is to share what I am learning, highlight the scale and impact of the problem, show the strength of India’s digital rails, point out emerging opportunities, and encourage discussions that may inspire some of us to work on this challenge.

The main problem I address is how credit assessment systems create a paradox. If someone wants financial products, they need a credit history or score. But to build a credit history or score, they need financial products. This cycle has affected many of us, especially when we applied for our first credit cards or education loans.

This paradox exists worldwide and is not unique to India. Credit bureaus calculate scores based on data reported to them. What complicates the issue in India is that many Indians already demonstrate responsible financial behavior. Many of us grew up saving and managing money carefully. We show financial responsibility in daily life, unlike some other parts of the world. This gap makes the problem more complex in India.

The impact is vast. Out of 1 billion eligible Indians (aged 18 to 80), only one-third have access to formal credit. About 45 crore Indians remain underbanked or unbanked. That group equals the combined population of the United States, Canada, Australia, and the Netherlands.

When I say "unserved," I mean individuals without any credit product. When I say "underserved," I mean individuals with limited access, often holding fewer than two credit products.

Two major groups face exclusion:

• Micro and Small Enterprises (MSEs)
  
• Individuals, who include:
  
  
• Urban poor (informal workers, gig workers, domestic workers)
  
• Youth (new to credit or thin-file customers)
  
• Rural populations

Lack of credit access is not only a social issue but also an economic obstacle. Financial products help people escape poverty and build resilience against emergencies, such as medical expenses that often push Indian families back into poverty.

Limited access to credit reduces consumption and inhibits upward mobility. Without education loans, many cannot pursue higher education. Without housing loans, many cannot own homes. Business growth suffers because MSEs cannot access funds to expand, innovate, or create jobs.

Credit exclusion costs India about 1% of its GDP every year due to lower consumption and reduced MSME growth.

Despite these challenges, I see strong reasons for optimism. India has made significant progress over the past decade:

2014-2016: Laying the Foundation

• PMJDY: Helped millions open bank accounts. Today, about 54 crore Indians have formal banking access, raising the banked population from 53% to 80%.
  
• India Stack and UPI: Enabled secure identity verification and instant payments.
  
• Mudra Loans: Provided collateral-free loans for MSEs.
  
  

2018-2020: Strengthening Data Infrastructure

• Account Aggregator Framework: Introduced consent-based data sharing.
  
• TReDS: Enabled MSMEs to finance receivables.
  
• Public Credit Registry: Centralized borrower information.
  
  

2021-2023: Enabling Credit Access

• Open Credit Enablement Network (OCEN): Unbundled the lending value chain, making credit more accessible.
  
  

2024-2025: Exploring Alternative Assessments

• We are now focused on alternative assessments to serve those traditional models cannot reach.

India Stack forms the infrastructure for this transformation, built on four pillars:

1. Aadhaar: Simplified eKYC.
   
2. UPI: Provided transaction data and seamless fund transfers.
   
3. DigiLocker: Streamlined document verification.
   
4. Account Aggregator: Enabled consent-based financial data sharing.
   
   

This infrastructure gives India an advantage that many other countries lack.

Before OCEN, lenders managed every part of the credit value chain. OCEN unbundles this process, allowing each participant to specialize while connecting through open APIs.

OCEN:

• Democratizes credit access.
  
• Lowers integration costs.
  
• Expands reach to underserved populations.
  
• Supports hyper-specific credit products.

I see three main frontiers:

1. Supplemental Trust Scores

We can build trust scores using:

• Financial transaction data
  
• Bill payments and platform data
  
• Business data for MSEs
  
• Digital footprints
  

These supplemental scores can support or replace traditional credit scores, especially for youth, thin-file customers, and informal workers. With India’s Account Aggregator framework and open APIs, we can achieve this efficiently.

Global companies like Upstart attempt similar models, but India’s infrastructure makes the process far more scalable.

2. Hyper-Personalized Credit Products

With better data, we can create niche lending products:

• Education and Upskilling Loans: Flexible financing for skill development. Today, only 5% of upskilling participants access formal loans.
  
• Healthcare Emergency Loans: Financing for medical shocks. About 60% of Indians lack health insurance, and millions face unmanageable medical expenses each year.

We can underwrite these products by leveraging enrollment data, engagement patterns, health records, and insurance data.

3. Embedded Distribution

Historically, banks struggled with customer acquisition due to complexity across the lending lifecycle. OCEN allows different participants to specialize, reducing leakage and improving scale.

Lenders now focus on underwriting and collections. Other specialized agents handle origination, servicing, and distribution.

In conclusion, India has built one of the world’s most promising digital financial infrastructures. By combining alternative data, specialized lending, and embedded distribution, we can unlock financial inclusion for millions who remain excluded today.