MFIs can achieve financial inclusion aims

Micro-Finance Institutions (MFIs) could act as business correspondents of commercial banks to deepen the process of financial inclusion in Orissa.

This was suggested by a group of experts who participated in a conclave on “Financial Inclusion in Orissa: A Way Forward” organised by the Centre for Youth and Social Development (CYSD) in collaboration with the Swamshree Micro-Credit Services (SMCS).

Speaking in the conclave, Banabihari Panda, deputy general manager, Indian Bank, said, more and more MFIs are needed to be roped in as business correspondents to reach out to the people at the grassroots level and help facilitate opening of no-frills accounts.

“It is not feasible on the part of the commercial banks to achieve complete financial inclusion through their network of branches. Even the business correspondents of banks engaged for the purpose of financial inclusion can operate only within a radius of 15 km. This is where the role of MFIs can be handy and these institutions can ensure that every individual opens a no-frills account”, he added.

He pointed out that less than 40 per cent of the people in the country have bank accounts and less than 10 per cent of the country’s population has insurance coverage. “About 90,000 branches of the different commercial banks are needed to achieve 100 per cent financial inclusion in the country. Moreover, there is a need for greater penetration of mobile telephony to expedite the process of financial inclusion”, he said.

Sanatan Sethy, deputy general manager, Reserve Bank of India (RBI), Bhubaneswar, said, “We have to focus on poverty alleviation measures to achieve financial inclusion. The concept of achieving financial inclusion through business correspondents needs to be popularized in Orissa.”

CR Pattnaik, chief general manager, National Bank for Agriculture and Rural Development (Nabard), Bhubaneswar, said, Today only 27 per cent of the people in the country are benefited from the formal credit system and to ensure that more number of people are brought under the credit system, we need resources and initiatives from all the stakeholders.

“Technology has to be utilized to a great extent but without much expenditure to achieve financial inclusion in the country. For achieving the goal of complete financial inclusion, the focus should be on upgrading physical infrastructure like connecting roads, providing educational and social services and support services like marketing and processing in rural areas”, he added.

LK Vaswani, director, KIIT School of Management, said, “The important concern is the cost of using technology to reach out to people in rural areas and whether it would be viable on the part of financial institutions to bear the costs of this technology. This apart, we also need to conduct an impact assessment of the MFIs to get a clear picture of the benefits of such institutions in rural areas.” According to data compiled by the National Sample Survey Organisation (NSSO), 51.4 per cent of the farmer households in India are financially excluded from both formal and informal sources while 73 per cent of the farmer households do not have access to formal sources of credit.