Financial Literacy is the need of the hour. Our Mission is to create a financially literate India, leading to a financially secure society, wherein each person has access to basic banking and other financial services.
Conventional banking have been able to make financial inclusion particularly of rural poor. in three ways .
1) Walk in customers ( non poor)- who voluntarily visited branch with some knowledge.
2) Mandatory inclusion (mostly poor)- those identified beneficiaries of government pro poor programme for the purpose of availing benefits like low cost micro credit , subsidy etc.,
3.) Local branch initiatives ( mostly non poor)- personal efforts taken up by the field officers for reaching some financial mandatory target for inclusion.
All these ways have resulted in a very limited coverage leaving nearly half of farming community in rural India remain excluded. . Many of these accounts, opened for distributing the benefits under government programs, have subsequently become in operative due to no further transaction after the programme was over.
The major barriers to financial inclusion, experienced in the given level of illiteracy in rural area is lack of financial literacy and submission of identification documentation for foraying into banking arena.
In the recent past, both these barriers have been successfully addressed through the program called SHG linkage with the banks in India with the support of NGOs and other SHG promoting institutions. (SHPI) and the programme involving payment of wages for the poor worker under government programme through bank account system. Both systems facilitate enhancing financial inclusion with the less cost.
After the advent of micro financing through Self Help Group (SHG system) under the linkage banking programme introduced by the apex banks NABARD and supported by the policy making central bank –Reserve Bank of India since 1990, many poor women even in remote areas have been successfully included in banking industry. Under this programme, the SHG (social capital), which is a collective body of 15 to 20 women members belonging to the poor, is formally linked with the bank after a few initial months of its formation with the recommendation of NGOs who nurtured them. This system has successfully included new accounts holders into banking fold and there is continued financial transaction of micro savings, and micro credit and other miscellaneous services. Many SHG promoters (SHPI) from different sectors activated this linkage programme intensively and extensively in rural front enabling more financial inclusion of hitherto excluded poor. This process does not involve much cost and also facilitate for avoiding other mal practices such as fraud, money laundering etc as feared.
In another instance, the payment of wages to the poor rural worker identified under government employment programme, is made through their bank account. Under the National Rural Employment Guarantee Prograame (NREGP) it is ensured that every household in need can ask for paid work for up to 100 days per year. In one of the states in India, arrangement ahs been made for the beneficiaries of the NREGP for opening bank accounts and are issued smart cards to enable transactions at several locations besides the branch. This type of payment system also facilitate more financial inclusion particularly hitherto excluded rural poor with least cost.
In general for effective financial inclusion there is an imperative need for financial literacy to be propagated with more awareness programme in vernacular on the prospects of banking products and services for the poor and infusion of development orientation on social financing to the poor for the bankers working in the rural front. A successful least cost financial inclusion calls for strategies based more on demand side perspectives. Even if there is a cost, it need not matter much since micro-financing, focusing on wellness of the poor, deserves it.