Financial inclusion drive finding usage in access in gulbarga
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Financial Inclusion Drive: Finding Usage in Access in Gulbarga. Minakshi Ramji Centre for Micro Finance – IFMR CAB-CMF Conference on Microfinance 16 January 2009. Introduction. Important policy initiative in India 2005: RBI mandates the creation of a No Frills Account

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Financial Inclusion Drive: Finding Usage in Access in Gulbarga

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Financial Inclusion Drive: Finding Usage in Access in Gulbarga

Minakshi Ramji Centre for Micro Finance – IFMR CAB-CMF Conference on Microfinance16 January 2009


Introduction

  • Important policy initiative in India

    • 2005: RBI mandates the creation of a No Frills Account

    • 2006: RBI promotes a drive for financial inclusion

    • 2008: Committee for Financial Inclusion recommends each rural/semi-urban branch open 250 accounts per year 11.5 million accounts overall

  • Results

    • 100% financial inclusion in Puducherry, Himachal Pradesh and in some districts of Haryana, Karnataka, Kerala, Punjab and Rajasthan

    • As of Sept 2008, 15 million No Frills Accounts opened (Economic Times, 12 Sept 2008)

Timely and pertinent to examine the financial inclusion drive given the resources devoted to it


Research Questions

  • This study looks at the financial inclusion drive in Gulbarga, Karnataka to answer the following questions:

  • How does a household become financially included?

  • What are the levels of awareness about the drive?

  • How do households perceive formal vs informal financial services?

  • How does becoming financially included influence financial behaviour?


Methodology

  • Specifically targets poor people

    • All respondents holders of BPL ration cards

  • Two blocks of Gulbarga district: Shorapur and Gulbarga, which have highest proportion of BPL population

    • 25 villages in each block, 20 BPL households in each village

  • Data Collection

    • Questionnaires: 999 surveys in total

    • Qualitative Interviews: 15 interviews

    • ‘Elite’ interviews with RBI and bank officials


Findings: Respondent Profile

  • Largely non-literate population

  • Livelihoods depend on agriculture

    • Small landholdings

    • Extremely dry area, mostly rainfed

  • Incomes are either weekly or seasonal

  • Daily wage for agricultural labour: Rs. 50 for men, Rs. 30 for women

  • Daily wage for NREGP: Rs. 80


Findings: Overview of Accounts Opened


Findings: Awareness

  • Levels of awareness low

  • Panchayat officials more involved


Findings: NREGP Beneficiaries


Findings: NREGP Beneficiaries

  • 30% of respondents are NREGP beneficiaries

  • Of the 10% who knew about zero minimum balance accounts  71% were NREGP beneficiaries

  • Of the 17% who opened accounts between July 2006 and July 2007  78% were NREGP beneficiaries

  • Given involvement of Panchayat officials  NREGP accounts rather than Fin Inc accounts

  • People opened accounts to receive govt. assistance


Results: Savings Accounts

  • 64% had some form of formal/semi-formal savings accounts

  • Most popular: bank accounts, SHG membership, post office accounts


Results: Usage


Findings: Reasons for low Usage

  • Low recall  possibly opened, but never used

    • Evidence from qualitative interviews

  • Accounts for NREGP assistance show usage  have specific utility

  • Expense of traveling to a bank  Rs. 20 on average

  • Cultural, psychological and informational misconceptions about banks

    • Evidence from qualitative interviews

    • See banks as being for bigger amounts

      • Of those who didn’t open accounts, 56% indicated insufficient savings  96% of these same people said they save regularly informally


Some Conclusions

  • Drive has doubled access to bank accounts

    • Not clear if it targeted excluded populations

    • Significant numbers remain excluded

  • Access doesn’t always lead to usage

  • Government programmes are one the best ways in India to reach BPL households

    • Coupling government assistance with formal banking system may increase financial inclusion better than just offering people accounts

    • Doesn’t seem to improve savings, this may change with time

  • Better marketing and increasing levels of awareness


Thank You


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