When you look at the numbers put out by Nabard on the financing of Self Help Groups (SHGs), or by banks using moderately-priced mobile phone solutions (Rs 20,000 for the full kit including a scanner to take biometric details) to provide rural banking, you’re convinced the goal of financial inclusion isn’t too far away. According to Zero-Mass Foundation which provides these solutions, nearly 25,000 new customers are added by it on a daily basis. The way it works is that, instead of setting up an expensive rural branch, a bank just appoints a ‘banking correspondent’ (the kirana shop owner, for instance) who uses a Rs 20,000 ‘near field communication’ phone/a scanner/a thermal printer to get the details of a customer—the phone connects wirelessly to the bank’s server which then stores all the details of the customer. So, instead of spending Rs 3-4 lakh to set up a rural branch, the bank can do this for as little as Rs 20,000. Several bank managers I’ve spoken to say they’re now in a position to break even on rural banking. The millions of smart cards being issued by different branches of the government, from the health ministry to the rural employment agencies, also send out the same signal of financial inclusion working. Leading telecom firms like Bharti Airtel, similarly, are working on low-cost means of transferring money using their mobile phone networks.
Talk to Vikram Akula, the poster-boy of microfinance, and you come away with the same message. In another year or two, according to Akula, he’ll have more customers than even the Grameen Bank of Bangladesh. Speak to the ICICI Foundation’s Nachiket Mor, however, and you get a different story. Mor welcomes the likes of Akula and thinks they’re fulfilling a very important role, but he’s not convinced the Akula model is going to work—he doesn’t think a financial institution selling just one product is going to work. He favours the model based on bricks-and-mortar where, using technology, the bank can sell a variety of products (insurance, mutual funds, etc) that the main bank sells in the big city. Mor is working with one such branch, and is convinced this is the way to financial inclusion.
So what is the truth? Is microfinance and financial inclusion in the country just a fancy marketing tool, used by both NGOs and politicians, or is it something real? Is it really happening or is it like e-governance, always on the verge of happening but never really fructifying into something tangible? Sameer Kochhar, who has been in this area for several years, organising conferences, making films on the success stories and failures across different parts of the country, has put together a book with articles from all the main players. This list includes bankers doing rural banking, those selling banking products like the Zero-Mass Foundation, those involved in computerising land records, those selling both medical and other insurance. In other words, the major players involved in financial inclusion are mostly contributors to this book.
In that sense, it’s a book worth reading if you’re interested in this business. While each individual success story makes your heart beat just that much faster, what’s important, the book brings out, is that financial inclusion has to go beyond the lip service of one account for every household. As the book’s editors point out, large sums of money are being credited to the accounts of individuals, but they remain as insolvent today as they were earlier. In other words, if financial inclusion is seen as a goal in itself, instead of being linked to financial self-sufficiency, it will never succeed. A good example of this is the Bhamashah Financial Empowerment Scheme of the Rajasthan government when Vasundhara Raje was the state’s chief minister. Under the scheme, bank accounts were to be opened for more than 50 lakh poor households. This was done through the Punjab National Bank, and the bank was in the process of hiring 13,000 business correspondents across the state, each equipped with the Rs 20,000 set of phone/scanner/printer—to incentivise these poor households, the state promised to credit Rs 1,500 to each family’s account. The scheme, powered through a smart-card, also promised life and health insurance to the card-holders. While there was a dispute between the Union government and the state government on the card, it was on whether a Rajasthan government card should be used in place of a Union government one! But now that a new government is in place in the state, it wants to discard the scheme!
Edited by Sameer Kochhar et al
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