The Hindu Business Line : Financial inclusion: An integrated approach required

Mangalore, Dec 24 It is said that one’s strengths can be another’s weakness. If both of them come together, they can reap the benefits from such an association.

This strategy can be applied for providing banking facilities to the un-banked in rural areas.

A glance at the stakeholders in such a project – banks, technology developers, self-help groups, primary agriculture co-operative societies (PACs), and post offices – shows that all of them (in most of the cases) work in isolation, and concentrate on developing and marketing their own products.

An integrated approach by all these stakeholders can change the scenario of banking in un-banked areas.

The approach models could be formulated based on the demography of the region.

India has around 6 lakh villages and many of them still do not have banking facilities. But in most of the rural areas, other channels such as SHGs, PACs and post offices are there.

Of the 1.55 lakh post offices in the country, 89 per cent of them are in rural areas. At the end of March 2006, there were 1.06 lakh PACs in the country. Nearly 2.9 million SHGs existed till then.

What all these facts indicate is that there is good scope for taking banking activities to the rural areas. But it needs an integrated approach, where every one can be benefited from such a move.

Strategies

Some technology-based strategies need to be explored for taking banking activity to rural areas. Here are some of the strategies being practised by banks to use information technology in rural areas.

Banks entering into this area have to look at the infrastructure available in rural areas, before putting strategies into action.

First, banks plan providing services in those villages where there are a few households.

Some banks have already started using a local villager, identified by the manager of the nearest branch, as business correspondent. This correspondent carries the job of a bank through IT-enabled simple gadgets. With this strategy, the banks can think of using the biometric-enabled technology for providing service in such areas.

Second, some banks have entered into tie ups with SHGs using the business correspondent model in those regions with better SHG network.

Third, banks, using the better telecommunication connectivity available in some villages, are setting up IT-enabled kiosks with facilities to provide the services.

Fourth, banks are aiming at leveraging the strong network of PACs and post offices to provide a better service to the local populace. It may be mentioned here that State Bank of India has already tied up with Department of Posts in this regard.

Telecom operators can play a vital role in taking forward the financial inclusion programme, as telecommunication facility is the basic infrastructure needed for carrying out banking activity through simple IT gadgets. In such a situation, both banks and telecom operators can mull alliances for their mutual benefits.

On the technology front, technology developers need to have a unified IT system for rural banking that is simple, convenient and accessible in remote places with minimum requirements.

Incentives

The Government needs to encourage branchless banking districts with incentives to make financial inclusion more meaningful.

These initiatives will help all stakeholders in future, including the corporate sector.

When rural India has greater access to banking activities through IT-enabled solutions, it will definitely provide them a great market in future.

When all is said and done, 185 million un-banked people provide a huge opportunity for all the stakeholders to exploit. That calls for more innovations, whether in the form of new operating models or new implementation strategies.

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Financial inclusion: An integrated approach required