In the 1980s famous BBC serial Yes Minister, the minister’s permanent secretary declares, when questioned on the wisdom of the bureaucracy on setting spending priorities: “The public doesn’t know anything about wasting government money. We are the experts.”
The minister sets the policy, and the bureaucracy bungles it. Maybe, that happens everywhere, and in India, this seems to be the operating principle of governance.
If there is one area where the political and economic vision and commitment of the UPA government is well articulated, it is financial inclusion. However, a closer look will reveal that the bureaucracy and the regulator have been at it, botching up the plan through indifference and unwarranted policy interventions.
On 1st January 2013, the UPA-II government launched its ambitious scheme of direct cash transfer of subsidies. It was, however, a watered-down version that was rolled out. Originally to be introduced in 51 districts, the government curtailed the number of beneficiary districts to 20 at the last minute. It covers only seven welfare schemes instead of the 20 initially planned. Food, fertilisers and fuel have been kept out of its purview currently. The government also renamed the scheme as direct beneficiary transfer (DBT), ostensibly to avoid the controversy of doling out cash for votes.
SKOCH Report: Some Recommendations
- SHG overhaul: Demand-side targets on SHG formation, entrepreneurial credit, priority sector, DRI and lending to marginalised sections;
- Financial literacy: create one financially literate woman per Gram Panchayat as a business facilitator at a realistic compensation;
- Direct bank access: Through banks on wheels, kiosks, micro-branches;
- Active role of Department of Posts;
- Liberal distribution of bank licenses;
- Make available all relevant products;
- Need for all regulators to work on silo-bursting and creating common distribution channels;
- All amenable benefits to be converted to DBT and converged with the financial inclusion plan;
- Banks to charge realistic interest rates;
- All bank accounts in a bank should run from one core banking infrastructure;
- Sensitisation of bank manpower;
- Technology-driven platforms for financial inclusion; and,
- Setting up of a financial inclusion mission mode project.
Such caution is warranted as the DBT scheme is likely to attract adverse attention from the strong lobby of pro-poverty politicians and the NGO industry simply because it makes good economic sense and has amongst its supporters not just economists but also a large number of the middle class that has increasingly become frustrated with their tax money being wasted through a very leaky delivery system and subsidies that are too broad based and cover a lot more people than just the poor. No wonder that Rahul Gandhi has conceptualised this scheme as his trump card for 2014.
There is a telling gap between ambition and reality, even though Finance Minister P Chidambaram calls DBT a ‘gamechanger’ and Congress party managers believe the scheme will help the ruling alliance win yet another mandate in the general elections of 2014. The cash subsidy benefit will go directly into the bank accounts of beneficiaries who meet the mandatory requirement of having an Aadhaar card. The government says the programme can generate much-needed budget savings by eliminating corruption. It may not cut down the bloated subsidy bill of Rs 1,640 billion, but officials hope it will ensure benefits reach targeted groups and prevent leakages.
A deeper look reveals that the programme suffers from several inconsistencies that will inevitably make the whole idea of direct cash transfers ‘doubtful cash transfers’ at best, or ‘derailed cash transfers’ at worst. The infrastructure that will facilitate the smooth functioning of DBT simply doesn’t exist in rural India. The pilot programme in 51 districts was predicated on the supposition that all these districts are 100 per cent (or even 80 per cent) financially included; this is simply not true. SKOCH recently conducted a workshop and the consensus amongst senior bankers there was that a fairly inadequate number of people in these districts have got bank accounts. Even the bank accounts that exist, quite a few are not linked to the Aadhaar number. Similar is the case with the social schemes as their beneficiary databases too are not linked to the Aadhaar system. So the question is, who will get this money and how?
One solution that has come forth with the intervention of Jairam Ramesh, Minister for Rural Development, is to use post offices for disbursement of DBT. But he recognises the fact they are not ready. His ministry, in fact, has had first hand experience of MGNREGS, where in there has been a mass migration of benefit transfer from post offices to banks. Quite a few states have found shifting to a manual system better. The post offices simply do not have the infrastructure, technology or competent manpower to be able to handle bank functions and their own transformational project called Project Arrow has become a case study in botching up projects of national significance. The reach of the post office system is unquestionable therefore, in order for DBTs to be routed through this system, it will require a lot of catching up.
DBT is not a one-size-fits-all solution. Only some subsidies are amenable to DBT (e.g., pensions, MGNREGS wages, etc.) while others (food, education, health, etc.) require a more cautious approach. There is talk of a 3 per cent transaction fee for disbursements in pilot districts (but, what about deposits?) and shared ATMs for all banks being provided by third party service providers in a state. The moot question is: Is this practical?
Fortunately with a very significant political focus on this scheme it is quite likely that all these issues would be sorted out more sooner than later and given the resolve of the government to get it going, banks, institutions and domain ministries will fall in line. This hopefully will address the major issue of providing bank accounts to the unbanked before the 2014 elections.
DBT cannot be a substitute for good governance and systemic reforms at the grassroots level. It is not a silver bullet to achieve financial inclusion, either. This is essentially because all the woolly talk about welfare collides with ground reality. Programmes aimed at achieving financial inclusion have proved to be sterile so far in the country. “Government activism continues to be absolutely essential, but it needs to be re-targeted toward health and education facilities, and infrastructure in public services. This will also increase the possibilities of higher earnings. Inclusion is not about redistribution but creating additional opportunities,” says Ashima Goyal, Professor of Economics at the Indira Gandhi Institute of Development Research (IGIDR).
“Access to finance by the poor and vulnerable groups is a pre-requisite for poverty reduction and social cohesion. This has to become an integral part of our efforts to promote inclusive growth.” Thus begins the recommendations of the Committee on Financial Inclusion chaired by C Rangarajan, released in February 2008. The recommendations outlined the various financial services that would be needed to underpin inclusive growth such as credit, savings, insurance and payments, and remittance facilities. The objective of financial inclusion is to extend the scope of activities of the organised financial system to include within its ambit people with low incomes, the committee declared.
The UPA, since 2005, has made financial inclusion a major plank of its socio-economic programmes. The term ‘financial inclusion’ began gaining currency after Finance Minister P Chidambaram used it in his Union Budget 2007-08 speech, defining it as “the process of ensuring access to timely and adequate credit and financial services by vulnerable groups at an affordable cost”. In the speech, the finance minister announced the government’s resolve to implement two decisions of the Committee on Financial Inclusion. The first was the institution of a Financial Inclusion Fund (FIF) to meet the cost of developmental and promotional interventions. The second was to establish a Financial Inclusion Technology Fund (FITF) to meet the costs of technology adoption.
The Union government’s plan, since Mission Financial Inclusion was rolled out in the 2000s, is pivoted on leveraging the latest biometric identification techniques and mobile phone technologies to make the effort widespread and sustainable. Since that landmark speech, several panels have been formed to get to the bottom of the concept and come up with fresh ideas on how to make financial inclusion the holy grail. As recently as last October, the Reserve Bank of India (RBI) had named a panel whose mission is to give the objective a whole new direction.
In an article in this edition of the magazine, Rangarajan again defines financial inclusion as a three-way process. One, as making available, particularly credit services, to the vulnerable sections of society. Second, making available financial services to all activities within the country, i.e., whether it is agriculture or small-scale or industry or services. And third, a more balanced regional development in the sense that regional disparities in the availability of financial services must be eliminated.
Yet, the report card so far reads dismal. The heart of the matter is that applying biometric identification techniques and mobile phone technologies can only be effective when implementation is flawless. However, the implementation part has been turned into a tangled web of bureaucratic indifference, misguided policy interventions and a less than assertive regulator. This continues to scupper good intentions and makes schemes like DBT leaky and ineffective.
Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, has no illusions about where we have reached on financial inclusion. “Both the 11th as well as the 12th Five Year Plans stressed inclusive growth. One of the main pillars of inclusive growth is financial inclusion, especially because empirical evidence seems to suggest that reforms over the last twenty years or so have led to inequalities in the economy. Unfortunately, financial inclusion has not got the attention that it deserves,” he says.
The SKOCH Group has been researching inclusion since 1997. Its research, over the years and particularly since it proposed a model of inclusive growth in 2009, shows that financial inclusion has become a ‘populist’ term that has lost meaning under the weight of bureaucracy and half-baked – or even half-hearted – implementation.
India has the dubious distinction of having the largest unbanked population in the world. According to authentic estimates, 65 per cent of the adult population in India is excluded from the formal financial system. Since 2004, the RBI has worked in tandem with formal banking institutions to open almost 100 million so-called no-frill accounts. These accounts, the RBI stipulated, were to target the poorer and weaker sections of society.
Montek doesn’t hide his frustration about the nation’s failure in spreading the banking network. “According to the 2011 Census there were over a 100 million households, out of the total 247 million households in the country which did not have a bank account and even those that did get an account (in fact in the last year-and-half a very large number of them have been covered in terms of the no-frill account), does this really amount to financial inclusion? The answer would obviously be no,” he says.
This is of course damning indictment from a high-ranking government official. However, it is interesting to note that ‘underbanking’ tells only a portion of the whole story. There is a darker truth: of how the plan to make banking a vital component of financial inclusion has failed.
“Transaction cost or cost of delivering small amounts of credit is very high. Several measures have been tried – group lending, lending through micro-credit institutions, business correspondents – all with an effort to reduce cost of delivering credit,” observes noted economist, Nitin Desai. Still, financial inclusion remains a far cry, he adds.
SKOCH has done extensive research on the subject. About eight years into the RBI’s strictures on no-frill accounts as an instrument to make India’s growth inclusive, the central bank’s own data finds that between 2004 and 2012, the change in percentage (46 per cent) of total bank branches reflects the yawning gap between urban/semi-urban and rural India in terms of penetration of banking services. In the same period, the percentage of growth of new bank branches in metro cities went up by 93.63 per cent, urban areas by 72.12 per cent and 69.61 per cent in semi-urban areas. In contrast, new bank branches in rural areas – India’s poverty-stricken heartlands – registered a measly 12 per cent growth.
What does that tell? “During 1990-2010 the number of rural branches opened was less than the number of urban, semi-urban and metropolitan branches. There were no specific guidelines for rural or urban areas. That is why we said 25 per cent of all branches should be opened in rural areas,” says K C Chakrabarty, Deputy Governor, RBI.
Moreover, RBI data reveals that population per bank branch office declined from 16,000 in March 2004 to 13,000 in March 2012. Yet, given the under-par growth rate of rural bank branches, the decline in population under banking cover is more pertinent to urban or semi-urban areas than their rural counterpart.
The RBI, when it introduced the business correspondent (BC) model in January 2006, hoped that this method will take formal banking services to rural India. The model was touted as the panacea for providing hassle-free banking services to the poor and was implemented with vigour. For instance, in her speech in February 2011at the launch of the Swabhimaan programme, UPA Chairperson Sonia Gandhi declared that the BC model will ensure banking facilities in habitations with a population of over 2,000 by March 2012.
BCs were supposed to make banking accessible to even the remotest areas of the country. They work on a commission basis and are paid by the bank. They are barred from charging any money from the customers. RBI guidelines listed disparate entities, including non-governmental organisations and microfinance institutions registered under the Societies Act or Indian Trusts Act, societies registered under the Mutually Aided Cooperative Societies Act or the Cooperative Societies Act of states, post offices or various other individuals, who qualify the RBI criteria eligible for becoming a BC. The model was founded on the thesis that these agencies or individuals are appointed by banks to act as their agents and provide basic banking services such as opening bank accounts, accepting deposits and disbursing money.
Yet, the results have been patchy. In the words of Chakrabarty, “Earlier, to start banking operations, a banking license was required. But today anyone can be appointed a BC with a handheld device and a mobile phone who can go anywhere to do a banking transaction. In the process, more than 100,000 BCs have been employed, but they are not delivering desired results.” The reality is that the entire priority sector developmental banking responsibility had been palmed off to BCs, who are in any case not working very well “The number of individual business correspondents or facilitators has not increased even though the Reserve Bank has expanded the category of people who can become business correspondents and facilitators. We really need to introspect,” says Rangarajan. “One of the things that can help the organised banking system is to bring more and more people into the purview of the organised financial system is the SHG–bank linkage model. Business facilitators and business correspondents do have a role to play in outreach,” he added.
Table – 2
Since its introduction the BC model has struggled to create a viable business model and hence generating volumes has been a big hurdle. To compound their woes, most BCs are confined to no-frill accounts and limited remittance services, thus encumbering their product and service range. In states where the BC model is up and running, like Maharashtra, Bihar and Jharkhand, the experience shows that it has run out of steam owing to flawed cost structure, lack of commitment on the part of banks, absence of financial literacy, lack of knowledge between customer service point operators (CSPs) of BCs and clients, and the near-absence of a robust grievance redressal system.
In 2009, there were 13,000 CSPs and the number went up to around 116,000 in March 2012. Out of these, 72,000 were added under the financial inclusion plan of the Union finance ministry. These cumulative numbers are, however, deceiving because in the last two years, many CSPs have closed down but are still reflected in the cumulative numbers. It’s interesting that when SKOCH did field research, it found that even out of the 72,000 that have reportedly been set up under the financial inclusion plan, many were missing and some others were operational only partially. So while these CSPs on paper, the data is incorrect by almost 30 to 40 per cent.
“BCs have been appointed in many villages, but they have not been able to come up to the expectations of the bank in that area of reaching out to customers. There is a learning curve. Not that we have not made efforts, but we find that the cost has been a barrier in scaling up. It may take us a while to revise our business models to make it more cost-efficient,” observes B A Prabhakar, CMD, Andhra Bank.
“We offer smart cards with basic built-in overdraft facility and our BCs are trained to extend this business for procuring applications for KCCs (Kisan Credit Cards) and GCCs (General Credit Cards). BCs get an incentive for each completed transaction. Despite all this, it is not scaling. Probably, we are not addressing the demand properly leading to productive money going towards consumption,” says M V Tanksale, CMD, Central Bank of India.
Analysis of the BC model also shows the urban-rural divide. The average growth of urban CSPs has been around 400 per cent in 2011-12, whereas rural CSPs grew by merely 81 per cent.
Focus on opening no-frill accounts has led to neglecting other banking products like fixed deposits or recurring deposits. Nevertheless, the number of active accounts reported by different banks varies between 3 per cent and 20 per cent. But the national average is only 11per cent, according to SKOCH research. Also, just under 2 per cent of the total no-frill accounts (138.50 million accounts by March 2012, according to RBI data) have an overdraft, which totals a mere Rs 1.08 billion. (Refer Table II)
Financial illiteracy, low income savings and lack of bank branches in rural areas continue to be roadblocks to financial inclusion in many states
As of the case in 2009 when SKOCH had come up with the first state of the sector report, the usage of no-frill accounts was a minuscule 11 per cent. The whole objective of opening these accounts was to give some semblance of credit, only 2 per cent of these accounts actually have an overdraft account facility. The Indian Banks’ Association spent Rs 1 billion on advertising the fact that they had no-frill accounts out of which Rs 10.08 million had been given overdrafts. They should have airdropped that money to the poor. Similarly, about Rs 60-70 billion worth of technology has been procured in the name of the poor and the end result is that only 11 per cent of non-frill accounts are in actual use.
Table – 3
- Data are provisional and relate to select banks which cover 95 per cent of total non-food credit extended by all scheduled commercial banks.
- Micro-credit under priority sector includes loans of very small amount not exceeding Rs 50,000 per borrower provided by banks either directly or indirectly through Self- Help Groups (SHGs)/Joint-Liability Groups (JLGs) mechanism or to Non-banking Finance Companies (NBFCs)/ Microfinance Institutions (MFIs) for on-lending up to Rs 50,000 per borrower.
This leads to three obvious conclusions. One, the total figure of no-frill accounts is nothing but misleading. Second, there are only a trivial number of Kisan Credit Card and General Credit Card accounts that are linked to no-frill accounts. And third, no-frill accounts will remain active only if there is an overdraft incentive attached to them.
All in all, there is precious little instrumentality available to give credit in these accounts and it is an alarming fact. It is very clear that a big chunk of the no-frill, low-income accounts either exist only on paper (the system of weeding out dead accounts in our banking institutions leaves much to be desired) or have sub-optimal use. They offer, in other words, no crutch to the financial inclusion goals of the government. “No-frill accounts really amount to statistical inclusion because a very large number of these no-frill accounts (more than 80 per cent) are inoperative. This is also amply demonstrated by the fact that even though RBI suggested that overdraft facilities be given liberally to these accounts, only about 1.5 per cent of such accounts have enjoyed this facility,” Montek observes.
With such a big mismatch between ambition and success, how can the challenge of enabling small and marginal farmers obtain credit at lower rates from banks and other financial institutions, a goal enunciated in the Swabhimaan campaign be met? However, financial illiteracy, and low income savings and lack of bank branches in rural areas continue to be roadblocks to financial inclusion in many states.
“We need financial literacy and skill development. We are lending to people who do not have adequate skills to utilise money skillfully,” remarks Tanksale.
Skoch also focused its research on priority sector lending. Table II shows that priority lending decelerated to 12.9 per cent during 2011-12 from 13.5 per cent in the previous year. Non-food credit growth was down to 17 per cent in 2011-12 from 20.6 per cent in 2010-11. Another alarming fact is that cooperative societies, a backbone of the rural economy, are dying a slow death. Data for 2010-11 shows that total demand for medium term and other loans issued as well as total collections were at an all-time low. (Refer Table III)
Domestic credit provided by the banking sector in India stands at an abysmally low level compared with many emerging Asian economies. There is a strong need to develop stronger linkages with the real sector in this respect. “The approach paper to the 12th Five Year Plan did recognise the need for the banking sector to expand and for microfinance to be revitalised for fixed capital formation to grow at a rate consistent with the GDP growth of 9 per cent. Unfortunately, the policies to make this happen are missing,” Montek opines.
S S Tarapore, Distinguished Fellow, SKOCH Development Foundation, has another take on financial inclusion. “You must have a viable delivery mechanism. Postal system has the widest geographical coverage. Commercial banks are nowhere near it and any amount of attempted financial inclusion without including the postal system as a bank is bound to fail. I think it is time for legislative changes to make the postal system part of the banking system.”
One of the core components of financial inclusion is livelihood linkage. Unfortunately, financial inclusion thus far has been looked at only from the prism of making financial services available, opening no-frill accounts, giving smart cards, etc. But at the grassroots level, people who consume this credit on the demand side are self-help-groups. Yet, their decline is noteworthy.
Skoch’s research on SHGs, which can play an important role in spreading inclusive growth, found stunted growth of SHGs. They are rapidly shrinking in size and scale. The declining growth trends of SHG linkages is striking over the last four years. The negative growth rate went from -1.4 per cent in 2009-10 to -2.5 per cent in 2010-11 and -4.2 in 2011-12. (Refer Table IV)
It is no wonder that the government has stopped publishing cumulative data of SHG credit linkages from 2006-07.
A closer look at data reveals that the situation on the ground may be worse as the cumulative number of SHGs’ credit linkage could be window-dressing act, as in many instances the second or third tranches of credit disbursal may get counted as a fresh linkage. Anecdotal evidence and field research shows us that a lot of banks are reporting second tranches of credit and third tranches of credit to the same SHGs as a fresh linkage. So the decline in growth may be far worse than data reveals. The cumulative numbers are also suspect because as they do not weed out inactive SHGs and assume zero mortality. Nearly 80 per cent SHGs are run by women and therefore gendered exclusion has become more pronounced over the decades.
The current scenario on SHGs is one of institutional failure on the part of NABARD, thereby creating an opportunity for the bureaucracy to step in to set up NGOs, etc. The story has become murkier because of this, as data has been churned out mainly to serve the purpose of window-dressing.
Keeping all these in mind, there is a greater need now to reorient financial inclusion. The first point of financial inclusion is adequate and timely credit supply. Have we been able to achieve this? The answer is no. Support to livelihood – have we been able to act on these? The answer is no. Promoting entrepreneurship – the results are distressing. Creating a sense of empowerment for the people – it’s a case of benign neglect.
Any financial inclusion initiative that does not help alleviate poverty is a meaningless exercise. What are the possible answers? SKOCH research has led to the obvious conclusion that in theory and practice, financial inclusion plans have been reduced to ‘exclusion by design’. The Samavesh programme run by SKOCH to accelerate inclusive growth has been instructive in terms of what needs to be done to make growth inclusive. It offers a ready-reckoner on achieving ‘inclusion by design’ in letter and spirit.
“Development has many dimensions. It must be inclusive, it must lead to poverty reduction and it must be environment friendly, but at the same time we must ensure that growth remains high,” says Rangarajan. “In my view, growth and equity should not be posed as opposing considerations. They must be weaved together to produce a coherent pattern of development and therein lies economic statesmanship.”
The question confronting India is, will the government be able to measure up to this challenge?
Two ideas to make financial inclusion work…
The Business Correspondent Model: The BC facilitates two things:
(i) marketing of financial services; and, (ii) facilitate transactions. Existing BCs have no expertise to carry out financial intermediation, i.e., cash handling, controls, checks, etc. This has resulted in BCs underperforming. This is coupled with no-frill accounts that are being opened that remain inoperative and BCs not get no incentive for what they do. Net, net, financial inclusion has suffered.
Unfortunately, microfinance institutions or NBFCs, which could have played this role of intermediation, have been kept out of the ambit of becoming BCs.
BC model is simply not viable – low value of transaction and high costs of technology deployment coupled with staff maintenance are adding to the woes. By allowing MFIs or NBFCs to become BCs, a major part of problem could be addressed.
Install 100,000 full-fledged ATMs across rural locations:
The government plans to connect all 250,000 odd Gram Panchayats across the country. The possibility of setting up ATMs at minimum 100,000 locations could be explored which shall solve the problems of cash disbursement.
::An easy access point for carrying out a transaction for a customer any time without having to depend on the individual agent of the BC;
:: Direct or indirect employment opportunities like security, cash handling, and marketing of financial services for hundreds of
thousands of rural youth;
:: Maintenance of ATMs and running expenses can be borne by Panchayats thus reducing the cost of handling by banks;
:: Local agents can address specific requirements of senior citizens, disabled or physically challenged at their doorstep;
:: Make financial inclusion part of core banking system so that rural India does not receive second grade treatment.
Once the above infrastructure is available, BC or BC Agent would need to primarily focus on marketing of the financial services rather than worry about transactional issue. This will help bring much-desired focus to the approach leading to meaningful financial inclusion while providing access and flexibility.
Srinivas Bonam, Head–Inclusive Banking Group, IndusInd Bank. The views expressed are those of the author and not of IndusInd Bank
Beacons of Hope
SEWA’S Sukhi Mahila SEWA Mandal Programme
Sukhi Mahila SEWA Mandal, an organisation formed by tribal women affected by the construction of Sukhi Dam Reservoir in Bodeli district of Gujarat, has done some pioneering work to promote financial inclusion through its successful rural banking and self-sustainable revenue models. SEWA formed the organisation after it was invited by the state government to play a role in the Sukhi River Women’s Economic Rehabilitation & Resettlement Programme.
The government had rehabilitated 469 families, provided 5 acres of land with cash compensation to each family. But the land given was barren and lacked basic infrastructure. After the resettlement, SEWA mobilised the poor tribals and started building their capacities to ensure sustainable livelihoods for the women by making them credit-worthy. In parallel, it ran financial literacy and vocational training programmes. It encouraged the women to save and lend within their respective SHGs. SEWA provided the women with various technical training and support services to make agriculture viable in the resettlement area.
A Work Security Fund (WSF) was set-up by the women as a hedge against crop failures owing to natural disasters. SEWA then set up a rural banking model, through which women borrowed loans from the WSF. The installment for repayment was finalised by the women themselves on the basis of their occupation.
The Sukhi Mahila SEWA Mandal also works with adolescent girls in the district as part of the programme to take forward the movement of full employment and self-reliance for women. These girls are also provided with financial literacy training.
Sammaan Foundation’s Rickshaw Project
In India, about 95 per cent rickshaw operators don’t own the rickshaw they pedal. They take them on a daily rent of Rs 20-30. Sammaan Foundation worked to create a business model that supports some rickshaw operators to raise their living standards.
It got banks to finance rickshaws to operators. A nominal amount of Rs 20-25 per day was charged from them as equated daily instalments of their loan. It made the select group of rickshaw operators open bank accounts, and covered them under a Rs 100,000 insurance plan.
It ran a programme called Sammaan Gyaan, under which both operators and their children attended free evening education classes.
Through the communication channel called Sammaan Sabha, rickshaw operators were motivated to quit alcohol and tobacco products. Sammaan Sabha was also used as a platform to organise free medical check-ups and health awareness campaigns. It also educates them on AIDS and other communicable diseases.
Centre for Rural Development’s Rickshaw Bank
The Rickshaw Bank provides every rickshaw operator with an aerodynamically designed rickshaw (originally designed by IIT, Guwahati) for Rs 25 a day. The rickshaw is lighter in weight, has an improved center of gravity, carries more luggage and has a canopy to cover both the puller and passengers. This fee is applied towards eventual ownership of the rickshaw, social security, insurance, uniform, licences, photo ID and training. But more importantly, it provides the rickshaw pullers with a decent income, potential savings, and access to financial institutions. Besides rickshaws, innovative goods carrying carts for transport goods, sell food, vegetables, fruits, etc. are designed and delivered to poor people as a means of livelihood and capacity building.
Rickshaw Bank provides a means of self-employment to rickshaw puller communities by offering a “rent-to-own” financing option to purchase the rickshaws. Rickshaw Bank also provides a comprehensive package of insurance, licenses, uniform and photo ID cards, to add dignity to their profession. An equal amount of daily rent is considered as daily installment and one can own the Rickshaw in maximum 18 months time.
From 2004, Rickshaw Bank has directly supported 6,000 pullers out of which 4,700 have become owners of the rickshaws. The impact of Rickshaw Bank is best illustrated by the overwhelming demand from drivers for more rickshaws and financial services. Rickshaw Bank is able to reach more than 30,000 pullers in partnership model in India. It has now designed utility carts and delivers it with same financial model.
Corporation Bank’s Financial Inclusion Programme for SHGs in Belgaum and Tumkur districts in Karnataka
The programme involved widely propagating the benefits of group borrowing and savings among residents of the two districts primarily comprising of women who are agricultural labourers, self-employed or under-employed and formation of JLGs/SHGs who would be provided with banking services utilising the bank’s financial inclusion and branchless banking model.
The programme chalked out the formation of 80,000 SHG/JLG groups comprising of 5 to 20 members each and opening of their accounts at the branches. In addition to this, approximately 600,000 individual members’ accounts are to be opened. Branchless Banking facility is planned at about 1,500 locations in these districts. The objective is to provide banking services to the rural poor, especially women. Financial assistance to needy groups by way of credit facility is also being considered under the programme.
Under its Branchless Banking Initiative, so far, over 40,000 SHGs have been enrolled and 39,500 accounts opened. Transactions are being carried out in all accounts, to which smart cards have been issued. Branchless banking facility has become operational at 887 locations so far.
Central Bank of India’s Last Mile Access Programme
The bank provides banking services in villages through its business correspondent (BC) model with the help of technological interfaces. It has opened ultra-small branches in 3,629 villages with population greater than 2,000. The bank has also covered 4,762 villages in addition to the 3,728 allotted villages (population > 2000), making the total number of villages covered 8,490 in order to make financial services accessible to hitherto unbanked people. This also covers e-Shakti project in Bihar and MGNREGA payments in Rajasthan.
The bank has permitted inclusion of shadow area villages in Madhya Pradesh for ensuring services within a radius of 5 km. The bank has added about 4.65 million no-frill accounts and has mobilised deposits of Rs 1.25 billion through these.
Union Bank’s Meaningful Financial Inclusion in Ernakulam
After the plan was implemented in Ernakulam district, it was declared as the first district in the country having achieved ‘meaningful financial inclusion’. The plan set five parameters to achieve its goals: (i) ensure at least one operative bank account for each family and inculcate banking habits among the unbanked population; (ii) persuade the new account holders to use the savings accounts actively; (iii) provide micro-credit to the needy for their genuine requirements; (iv) provide remittance facility to all; and (v) bring all under micro-insurance cover.
Having set the roadmap, the bank worked with an NGO, Kudumbasree Mission, at the Panchayat level to conduct a baseline survey to do demand assessment. Based on the findings of the survey, responsibility to open fresh accounts were assigned to each service area bank branch. A coordinator was appointed in each local body to expedite the strategy’s implementation.
In tandem with this process, the bank launched awareness campaigns, internal staff mobilisation and contact programmes with people’s representatives with support of the district administration.
Linkage of accounts with Aadhaar numbers has been made to kickstart the Aadhaar Enabled Payment System and other government-to-people payments. Increased usage of micro-ATMs and simple and hassle-free remittance has been ensured.