Banking on rural youth

Barely a third of the country’s 6.28 lakh villages have banking facilities even though rural economy is improving, according to a 2012 survey by World Bank Findex.

So, what does the farmer do when the bumper crop is sold? Does he hoard the profits under his bed or hide it in a pit in his backyard? He might perhaps buy more cows or buffaloes and augment the family’s milk supply, but he has neither the knowledge nor the means to invest in modern financial growth funds.

There has been much talk of inclusive growth, but this can happen only if formal banking systems are in place and villagers, as well as their children who move to cities in search of better prospects, are encouraged to understand the merits of saving, financial planning, budgeting and investments.

It’s no easy task getting newly rich villagers to vest hard-earned money in an unknown institution or person. First, a relationship of trust should be built between the banks and farmers and other village-level customers.

Travelling banks Eighty per cent of the bank accounts opened at village level are dormant, according to experts working with grassroots issues. At an American India Foundation (AIF) discussion on technology and financial inclusion, experts pointed out that the deployment of banking correspondents by an estimated 30-40 organisations had not helped either. Travelling to villages with biometric and other electronic equipment to collect and transfer money into bank accounts, the correspondents also double as financial advisers for credit needs, insurance policies and so on. In the changing rural economy landscape, banking correspondents are increasingly viewed as the last-mile connectivity between rural communities and banks. They allow banks to penetrate deep into rural India without the need for investing in non-viable remote branches.

There are several heart-warming stories of women’s self-help groups opening bank accounts and embarking on entrepreneurship through micro-savings. Banking correspondents have also helped many small farmers to open bank accounts, even though these are mostly operated by their educated children. But these achievements are mere drops in the ocean, as the country has barely skimmed the surface of financial inclusion.

The World Bank Findex survey found that only 35 per cent of adult Indians had access to a formal bank account, 8 per cent borrowed from formal financial institutions, and 2 per cent used a bank account to receive money from a family member living elsewhere.

Financially literate workforce

AIF, which provides job-ready skills to young people who have studied up to Class 8, has joined hands with Citi Foundation to use newer technology to impart financial literacy. At the 14 Market Aligned Skill Training (MAST) centres it runs in Delhi and Jaipur, nearly 3,100 youth are currently training as beauticians, auto mechanics, tailors, computer operators or electricians. Almost 75 per cent of them are likely to find jobs in the formal service sector.

Hemanth Paul, country director of AIF, says that without financial literacy, trained youngsters earning up to Rs 15,000 a month were dropping out as they were unable to understand the mandatory cuts for income tax, provident fund and so on. Other challenges include difficulty in opening bank accounts, operating Net banking, and applying for loans or investment options.

Started in 2011, the financial literacy programme also enables the use of new technology through mobile phones and smart cards to make financial services widespread, affordable, convenient and secure.

In addition to student workbooks, there is a training manual for teachers. Available in English, the Hindi version is being readied now. The 25-hour curriculum is divided into five modules - Employment and Earning, Spending, Saving, Financial Planning and Borrowing.

Lesson goes mobile Two mobile applications were launched in May. The Mobile ‘Kunji’ (reference book) addresses common financial queries - the user-friendly features includes voiceovers, graphics and step-by-step instructions for writing a cheque, Net banking and other tasks.

The second application, a mobile game, reinforces classroom learning and instils positive financial behaviour through an interactive learning tool using real-life situations. It features a virtual 3D board on which the player can earn points (virtual money) by learning key skills and providing correct answers. The game maintains an opening balance in a bank account, cash in hand, and assets and liabilities which change during play. It ends when liability exceeds assets, cash and bank balance or when the whole board is covered with balance. Both applications are available in English and Hinglish (Hindi with English script).

Based on AIF’s experience, applications are designed specifically for first-time employees. Interactive and engaging, they make for an effective, unsupervised learning tool. During the pilot at a skill-training centre in Gurgaon, candidates competed for the highest score in the game and used the kunji to clarify doubts.

A downside was the changing technology platforms on some China-made phones. The applications could not be deployed on non-Android and Java platforms.

Depositing their future in banks The MAST programme links local employers with skill-trained youngsters from disadvantaged sections of society, thereby bridging the demand-supply gap in the job market. It provides around 300 hours of training in chosen technical fields. So far, nearly 1.06 lakh youth have been trained and around 79,000 have found jobs starting at Rs 4,500 a month.

Ten young women, aged 18 to 24, completed the three-month course in cutting and tailoring. Six have started work from home and opened bank accounts, saving Rs 3,000 to Rs 10,000 in just a few months.

The rest could not open accounts as they were migrants and did not possess a ration card, voter card or other identification. Asked how they saved earlier, most said they had gulaaks or piggy banks. One of the women expressed happiness at the 4 per cent bank interest fetched by her savings. As they have no regular income, they are unable to get loans as yet. Except for one, all of them have begun saving, however small the amount.

After completing Class 12, 20-year-old Sarabjit Singh joined the auto mechanics course at the Sant Nishchal Singh Foundation in Gurgaon this year. Now employed there as a lab technician, he hopes to pursue distance education. Thanks to the financial literacy course he did simultaneously, he is able to discuss with his peers various job openings in other companies, as also the merits and demerits of public/ private sector.

Ratan Lal too trained as an auto mechanic from Gurgaon and worked with Suzuki. The 22-year-old bought a second-hand mobile for Rs 6,000 and downloaded AIF-Citi’s Mobile Kunji and mobile game. Although he lost the phone within months, he still has his bank account and ATM card to treasure. “At this stage of our career, it is difficult to keep the required balance of Rs 1,000 in our account, but all of us feel equipped to take on the world,” he declares.

Financial infotainment

The spread of financial literacy is taking many forms including entertainment-based TV shows (such as Makutano Junction broadcast in Kenya and East Africa), movies and games (Farm Blitz by D2DFund), mobile applications (AIF’s Financial Kunji and mobile game) and behavioural change through technology (SMS reminders on mobile phones). Other technical innovations in financial inclusion include Core Banking Solutions (CBS), banking correspondent/ facilitator model and mobile-led models (m-Pesa in Africa).

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