India's UID Program Uses Fingerprints and Iris Scans

Identity Checks: Part 2

Dec 16, 2012 • Developing Economies, Education, Financial Markets, Households, Innovation, International Trade and Finance, Labor, Macroeconomic Measurement, Money and Monetary Policy, Uncategorized • 211 Views    No Comments

In a developing nation, sometimes the first step is just proving who you are.

Meet Shivanna. A 55 year old Indian farmer, he lived in Gagenahalli, when Wired Magazine introduced him to me. In Gagenahalli, three-quarters of the population lives on less than $1 a day, the homes are made of dried mud, and most people are landless peasants.

One day, a man, walking through the village banging a drum to get everyone’s attention, asked people to gather at the local schoolhouse. The reason was the Unique Identification program (UID) through which people could get 12-digit Aadhaar numbers. They just needed to get their fingerprints taken, their irises scanned, and some data recorded. And then, never having had birth certificates or driver’s licenses or voters cards, for the first time, they could prove who they were.

Being able to confirm your identity, you can create a bank account. Even if no bank has an office nearby, you can use your cell phone with a local storekeeper whom a bank names as its “local correspondent” to facilitate deposits and withdrawals. Then you can save small amounts and, because millions of people are just like you, the financial system gets massive injections of new cash. In addition, signing up for government assistance, you can prove you are receiving the subsidy instead of someone who might falsely claim to be you. And that 40 mile trip and the wasted hours for your government handout are no longer necessary because of electronic transfers.

Shivanna in the countryside, Kiran, an illiterate mother of 3 children in Delhi, and Mohammed in a homeless shelter are the people the UID program is targeting. In this January, 2012 econlife post, we told more about the specifics of the program. Since then, the number of enrollees in India has grown to 200 million.

Our bottom line: Nations with emerging markets can use technology to create the financial and social service infrastructures that will fuel their economic growth.

Sources and Resources: 5 pages long, this Wired Magazine article provide a wealth of detail, fascinating examples and a video link about India’s UID program. For a more academic perspective that links India’s program to other developing nations, this paper was excellent as was this New Yorker profile of Nandan Nilekani, the businessman who made it all possible. Finally, this FT Tim Harford column was the best up-to-date analysis of India’s program.

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