Well at first because access to formal sources of banking and credit is something that is desirable irrespective of the section or social strata. No-one wants to get fleeced by a local money-lender even if he/she is illiterate however the fact of the matter is that for a needy person with no other option there is no choice.
The other fact is that commercial banks today want only a ‘limited- edition’ of the Indian cross-section. That section which is limited to metros and is educated and has the funds to park in the CASA accounts. They certainly don’t care too much about the other large half of the population. Our central bank too has been speaking about the need for financial inclusion for the longest time but not much has happened on the action front
Foreign banks and private banks are still been considered as eligible for new branch licenses although they don’t have any presence in what can be classified as the rural and semi-urban areas .Their brazen attitude of ‘for the elite only’ seems to be okay with the RBI. The nationalized banks have little choice in the matter due to the majority govt holding and are left holding and nurturing the financial inclusion idea to the best of their ability. In reality depending upon the situation most public sector branches in rural areas lack people, infrastructure and the technology to be able to cater to financial inclusion in its true sense. In fact the conventional evaluation system still uses parameters like CASA,credit cards issued,home loans etc for evaluating and rewarding the branch personnel. There is little incentive therefore (other than the pure inclination) of the individual to service the lessor privileged section of the population.This is evidenced by the fact that only about 40% of India’s population has bank accounts and about 20% have access to insurance products.In these percentages the bulk belong to the creamy layer of the rural population-the rich farmers who are able to afford the access to bank accounts.
Microfinance can therefore bridge the gap between the ‘have-nots’ and the conventional banking system as we know it in India.However the irony is that this sector too is in doldrums at the moment largely because it was allowed to grow in an unchecked manner and mainly because of the actions of some of the private players.
Sustainable development initiatives too are important especially in the Indian context. Grassroots level initiatives that impact the lives of the larger cross-section at the bottom of the pyramid can have a larger impact compact to mega ventures that require huge investments and have long gestation periods.Howver such initiatives too require access to formal sources of credit which is an important ingredient to ensure viability
The linkage therefore is as follows: banking and financial inclusion initiatives like microfinance are important to ensure that grassroots level initiatives such as livelihood projects that ensure food and long-term livelihood security get an opportunity to access mainstream banking.This is important to ensure continuity of such initiatives and a long-term impact
The sad part is that despite much ‘educated talk’ about financial inclusion, it’s still a very big challenge for an uneducated individual to get a savings account opened in a nationalized bank (foreign banks and private sector banks in India will not entertain such customers at all!)Even getting hold of a savings account opening form requires multiple visits. Getting assistance in filling the form, guidance on the supporting documents required etc is a whole different ball game. Getting seed-capital and /or guidance to open a small business or engage in a livelihood supporting activity is virtually not possible. Banks just don’t have the time and inclination to cater to ‘such’ customers.
My experience working for a foreign bank in India was no different. While we were incentivized and generously compensated to chase the wealthy and called ‘Relationship Managers’ there was not much that the bank did in the financial inclusion area. We were told that the ‘segment’ of the population that the bank followed had certain demographic profile and that it was the banks conscious decision to cater to such a profile.
But the question is that if everyone is so busy skimming the cream-where is the residue supposed to go?
The good thing is that there are a lot of initiatives that being taken by various committed entities like NGO’s,Self Help Promoting Agencies etc that have positively impacted the lives of many people especially in rural parts of India. Most of these efforts are aimed at addressing the livelihoods issue while also linking the beneficiaries in some way to mainstream banking such that they are not exploited by local money lenders and touts.The idea is to provide a holistic solution such that the livelihood initiatives are able to ensure food and financial security of the participants
This blog is an endeavour to discuss a host of such issues and to highlight both success stories as well as areas of concern.After all needs such as food security, shelter,medical care,safety and livelihood opportunities are aspirations that are all of us want.
To quote Mahatma Gandhi’ Mother Earth has enough to provide for everyone’s need, but not to provide for everyone’s greed’.