It is impossible to talk about the India growth story without talking about financial inclusion. Its almost universally agreed that without financial inclusion comprehensive growth cannot be reached, especially for a country which has a billion population and a stark divide between the organized and unorganized sector.
Financial inclusion means the delivery of banking services at an affordable cost to a large part of the population, especially the low-income group. An efficient society is often characterized by unlimited access to public goods and services. Hence the ready availability of banking services, without any discrimination, for the population has already been included as one of the key objectives of the government.
And yet, despite making tremendous progess in banking in the last few years and achieving significant improvements in areas of financial viability, profitability and competitiveness, our country is still grappling with bringing the underserved and underprivileged into the fold of basic banking services.
This is essentially because of deep seated socio-economic issues & mindsets & the lack of reach of our major financial instititions. Though the government has been pushing various steps to promote financial inclusion, we have lacked financial institutions which can penetrate into the fabric of every Indian village.
The recent episode with demonetization shows just how divided the organized and unorganized sectors are in India and how deep financial illiteracy runs in our country. The recent move towards a cashless economy will need more than just awareness and additional banking hours.
The demonetization move does not leave much for individuals who remain excluded from the organized sector. Earlier in 2014, the Indian Government launched the Pradhan Mantri Jan Dhan Yojana with an aim to provide a bank account for every household. Nevertheless, this scheme did not reach the nooks and corners of rural India.
For us to solve the problem, its important to understand what are the characteristics of an unbanked person. First time credit buyers are often people who live in rural areas, or rural parts of urban areas. The majority of men are employed by the unorganized sectors, and so lack basic papers to open a bank account. Given the poor state of women empowerment, women are even less likely to have a bank account. Their family, which includes 2-3 dependents, has an average monthly income of 25K to 35K. Acutely aware of their lack of knowledge and low status in the societal system, such people greatly intimidated of walking into a bank. They are totally unaware about technology or pro-poor government policies and rather trust the local village lenders who charge much higher rates of interest. For those who even wish to visit a bank, not many might find one in the vicinity.
It is in such cases that NBFCs play a vital role, a case in point is Hero FinCorp. This financial institution aims to have a positive impact on the society through its transparent and accessible business practices. Present in over 950 locations across the hinterlands of India, Hero FinCorp’s executives often help educate the customers about loan processing, providing help in putting together relevant documentation and also upon request accompany customers to the nearby bank to have their bank accounts opened. After all, things become less intimidating when you have a trusted friend leading the way.
It is said that ‘Journey of a thousand miles starts with a single step’ – educating the unaware and helping the ignorant are a few steps albeit in the right direction. As more and more customers become a part of this financial inclusion wave, it wouldn’t be long before isolation & ignorance cease to exist and India can truly provide path to prosperity for one and all.
