Fincial Inclusion: The Way Ahead

By Arindam Gautam

In the recent years, India’s economy has made rapid strides at various quarters and now it would not be out of place to mention India as a fast growing economy. Much of this can be attributed to the fact that India since the post 1991 liberalization regime has created an environment for promotion of entrepreneurial energy and thus accelerated the productivity as well as investments in the industrial sector. Apart from this India also carved a niche for itself by being able to provide skill based services to the rest of the world.  But while a section of the populace is benefitted to some extent, a vast section, especially the rural counterparts are not reaping such dividends. There exists a gap between the haves and the have–nots. They are still uble to reap the dividends emerging India is offering. While there may be many factors, which are failing the rural populace to face their urban counterparts, the moot factor that is acting as a deterrent towards improving their quality of lives is that a huge chunk of the populace, especially those hailing from the rural areas are still fincially excluded.

This exclusion— especially of the rural populace— from standard banking services is having manifold impact in their lives. It is making them dependent on informal sectors to meet their savings as well as loan requirements. A fincially illiterate person remains totally outside the ambit of formal fincial services. He is uble to use the fincial services and products to enhance his quality of life. Lack of fincial knowledge also makes him vulnerable to frauds and cheating by some fake fincial organizations. Sometimes, owing to lack of knowledge, and absence of budgetary planning he becomes susceptible to over indebtedness by resorting to credit facilities much beyond his scope. Lack of fincial literacy also deters one from making a sagacious choice regarding a loan scheme and taking up a suitable entrepreneurial venture that is technically feasible and economically viable. Apart from this a fincially excluded person is also bereft of the payment system. In other words, a person by being fincially excluded is bereft of two things— one, a savings process and two, exclusion from formal credit markets.    

It is in this context that for a country like India Fincial literacy has assumed significant importance. The Reserve Bank of India (RBI) has constantly strived in its various policy statements that fincial literacy be given top priority. While the RBI has been focusing on the importance of Fincial Inclusion since 2005, realizing the importance, recently the Prime Minister of India for deepening Fincial Inclusion also launched the Pradhan Mantri Jan Dhan Yoja(PMJDY), which changed the earlier mode of covering villages to households under the Sub service area concept. In fact the PMJDY has been quite historic in its endeavour achieving remarkable targets by opening about 11.5 crore bank accounts.  Union Fince Minister Arun Jaitley while lauding the progress said that India has almost become a fully banked country. He has expressed optimism by saying that the success of this mission has paved the way for direct transfer of benefits through bank accounts thus weeding out the scope of siphoning of funds. There is no gainsaying the fact that this is a laudable initiative and might be considered as a game changer for the Indian economy.  However, it may not be out of place to mention that the opening of accounts is arising out of enthusiasm in the prospect of getting the add–on benefits that the PMJDY is claiming to provide. But is it really making all the citizens fincially literate and willing to avail of the baking services, the question remains. The following few indicative question back this assumption. One, the forms and other documents of most banks are printed in English making it difficult for a person difficult to comprehend. Two, banks are located far away from where they live and it very costly to commute there to deposit and withdraw money. Three, the filling up of the loan application forms is too cumbersome. On the contrary the roadside money–lender is much more convenient to be dealt with.

True and agreed that as a part of awareness programme banks have been asked to conduct fincial literacy programmes on every Saturday.  But unfortutely, albeit a few, most of the Fincial Literacy Camps (FLCs) organized by banks on Saturdays are not beyond mere rituals. In most of the FLCs, there is no target group. It is often seen that a routine one–size–fits–all session is undertaken without much thought on the content as well as the output. This is why most people take the sessions to be dry and unintelligible and thus develops an aversion to them, resulting in fewer attendees in the subsequent FLCs.  This is essentially an area which should be carefully looked into. There is a need to chart out a well–charted out content plans customized for the various target groups. Branch officials can be given adequate training on how to conduct successful FLCs.  If the need arises, branches can be provided with audio visual aids to supplement the sessions. The use of pictorials and diagrams and pamphlets etc can be used to make the sessions lively and interesting. For FLCs conducted for school children— who are actually the next generation customers—  some small quizzes and role plays can be held and students can be given some small prizes in a bid to boost their morale. The same also holds true for the FLCs conducted by various NGOs and Microfince institutions. There is a need to work on their delivery process. In short, the basic premise behind holding FLCs should be to ingrain the idea and benefits of being fincially included and this should be worked upon meticulously by the implementing agencies so that the process becomes spontaneous and people develop a liking for it. The role and importance of banks, MFI and NGOs are significant in this process as they have a greater outreach as compared to other modes of communication like TV, radio etc where the message is usually unidirectiol. FLCs conducted by banks, unlike TV, Radio and newspapers advertisements, leave ample scope for interaction as well as bringing the people closer to the banking personnel.

These are certain indicative facts that need special factoring while addressing the importance of Fincial Literacy. While there is no gainsaying the fact that fincial inclusion is aided with sufficient fincial literacy but the second must complement the first. That is to say, people must find some yield after opening an account. Or to say they must be benefitted. Otherwise organizing fincial awareness and literacy will not serve the desired purpose if the end product is not customized to the needs of the targeted people. First of all, there is a need to identify the needs of the people and then devise products and services to fill that gap. True and agreed that people can save money and withdraw the same by opening a savings account but is it the only requirement of the people especially those who are still fincially excluded? The product should be designed in such a way that by merely opening a saving account and by filling the requisite data there, a person is entitled to a life insurance, accidental insurance, debit card and a pension scheme, if applicable. One should be able to get a sort of integrated products at one go and with just one set of documents. There ought to be simplicity in the application forms. At best it should a single page A4 size form with all the required fields which should be printed both in English as well as the tive language of the region. At present even in the RRBs and co–operative banks most of the forms are in English which makes it difficult for the rural people to comprehend.

Secondly, the banks should move beyond business correspondents and bank mitra and involve some alterte delivery channels. It is normally seen that today every individual has access to a mobile phone and in majority of the cases it is the prepaid phone that has the most subscribers. In most of the rural areas, it is seen that the outlets where mobile top–ups and recharges can be done are frequented mostly by the people. This is a key strategy that can be capitalized upon. The retail outlets where mobile recharges are done can be given the responsibility of opening accounts and accepting forms. They can be also given a commission on the number of accounts they have enrolled, just like the remuneration they are given on selling SIM cards. If such recharge outlets are given such responsibilities, it won’t be too much of a problem as there is not much difference in the set of documents required for the procurement of a new SIM card and opening of a bank account. Secondly, most of the branches even RRB branches are located far away from the villages. There remains the problem of people from far off places visiting the branch for depositing money in the limited time frame of the banking hours. Here too the process employed by mobile operators for recharging can be utilized. Just like a prepaid mobile subscriber visits the mobile recharging outlet and recharges the mobile, this facility can be extended by the banks where one can deposit money in the account with the help of the mobile recharging point. This may not seem too difficult as this process is in vogue with the mobile service providers and may be suitably customized with the banking software. For withdrawal purposes some ATM like low–cost simplified devices can be located at some strategic places for the people residing in the far–flung areas.

In the ultimate alysis, it is quite apparent that fincial literacy requires some holistic approach. But at the same time it needs no reiteration that fincial literacy will be a successful endeavour if the fil product will find takers. This is where banks need to work upon. There is an urgent need to evolve customized and integrated products with simpler documentation process. There is a need to utilize technology to the fullest and also make people aware about its products and services in a delightful way, suiting the needs and desires. A cue can be taken from the E–choupal initiative of the ITC where today farmers are not at all reluctant to visit. The task of bringing the womenfolk to the ambit of banking services can also be under undertaken if modalities like the Shakti–amma project—where a women usually a senior women of the village was entrusted with the responsibility of sensitizing the womenfolk about cleanliness and filly the importance of using soaps— of Hindustan Unilever is worked upon. As highlighted by eminent magement guru CK Prahalad in his semil work enlighteningly titled: “Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits”, this class of hitherto fincially excluded people is an immense business opportunity. It is time the banks, as commercial entities, realized the prospect and seized the opportunity. Owing to their locations and network, this assumes special importance for the RRBs as well as cooperative banks. For RRBs and Co–operative banks, this can be a great business opportunity, provided the fact that they are able to reap it in the right way.

(The writer works with the Assam Gramin Vikas Bank. The views expressed are his persol views)