UID - Aadhaar Shreerang Chhatre and Ankit Jain MIT India Reading Group February 24 th, 2011

Motivation for the UID project An initiative that would provide identification for each resident across the country and would be used primarily as the basis for efficient delivery of welfare services. It would also act as a tool for effective monitoring of various programs and schemes of the Government.

Timeline of the UID initiative Project approval for distributing UID to families below poverty line March 2006 Empowered group of ministers (EGoM) merge the UID with the national poulation register December 2006 UIDAI was formally constituted January 2009 Mr. Nandan Nilekani joined as UIDAI chairman July 2009 August 2010 – January 2011 First UID numbers to be issued 600 million UIDs to be issued in the next 5 years भारतीय विशिष्ट पहचान प्राधिकरण UIDAI = Unique Identification Authority of India

Structure of the UID Authority of India

Basic information about UID (Aadhaar)

Information collected for UID What is unique about India’s UID program? Presentation by Raj Mashruwala, UIDAI

Strategy for UID enrolment UIDAI Strategy Overview, downloaded from RSBY = Rashtriya Swasthya Bima Yojanahttp://uidai.gov.in/

UID enrollment projections Total cost of the project is expected to be ~150,000 crore ($32 B) Budget allotment for 2010/2011 is 1900 crore ($410 M)

Focused efforts to enroll marginalized groups Urban poor –Co-resident enrollment of migrant workers –Micro-finance institutes and NGOs Women –Micro-finance and self-help groups –The National Commission for Women Children –Integrated Child Development Scheme (Anganwadi) for children under 6 years. ICDS has >40,000 centers with 25 million children and 5 million expectant mothers –Compulsory for school enrollment? Disabled people –National Center for Promotion of Employment of Disabled People Tribals –State governments in the tribal areas

Risks involved in the UID project 1.Adoption risk A critical mass is required for the participation of service providers 2.Political risk Support from state and local governments is critical 3.Enrollment risk Enough touch points in rural areas and enrolling 60,000 newborns every day 4.Risk of scale Administration and storage of ~1B records 5.Technology risk Authentication, de-duplication and data obsolescence 6.Privacy and security risk Biometric data security 7.Sustainability risk Maintaining the initial momentum over a longer term

Pilot scale implementation of the UID project First UID issued in September 2010 in in the tribal village Tembhli, in Nandurbar, Maharashtra 650,000 people in Tumkur and Mysore districts in Karnataka have UIDs All 28 districts in Karnataka will start implementing by end of 2011 Launched in Kerala this morning

What is unique about India’s UID program? Presentation by Raj Mashruwala, UIDAI

Micro Banking in India

Bank account penetration in India

Challenges faced by banks in rural India Access to institutional finance remains constrained in rural India Lack of identity documentation is a bottleneck Inability of banks to do micropayments due to high transaction costs – Rs 10 per transaction 82,000 bank branches cater only to 5% villages The poor rarely consumes all of what he/she earns!

Tipping Point for Financial Inclusion Policy Changes –New entities can act as Business Correspondents (Kirana shops, petrol pumps..) –UEBAs (UID Enabled Bank Accounts) No frills bank account, balance < INR 50K KYR serves for KYC Technology Infrastructure –National Payments Corporation of India Payments, clearing and settlements – large volume at very low cost –UID Authentication, traceability and accountability

UID enabled banking - deposit

UID enabled banking - withdrawl

Pricing structure to incentivize the use of UID enabled micropayments