80% Of indians now have a bank account. so why is financial inclusion low business standard news gas density units


Compare this to sub-Saharan Africa, where 21% of adults had a mobile money account in 2017, the highest anywhere in the world and a 50% increase since 2014. Digital payments are also more widespread, with 97% of adults in Kenya making a digital payment in 2017 and 60% in South Africa, compared to 29% in India.

Despite addressing problems around access to physical bank branches and the need to present specific documentation, often cited as barriers to financial inclusion, the majority of Indians are not yet experiencing the benefits of mobile banking.

“Generally people are still not entirely comfortable with using their phones for banking,” said Nishanth K., senior research associate at Dvara Research, a financial systems policy research institution. “There is a fundamental mis-trust in using phones or digital modes to transact, particularly in rural areas.”

Digital India, a government initiative launched in 2015 to improve internet connectivity, digital literacy and the nation’s technology infrastructure, aims to increase participation in the digital economy. Through mobile banking platforms, cashless government benefit transfers and also increased awareness of these services, it believes financial inclusion can be improved.

Internet penetration currently faces a rural-urban divide. In December 2017, 65% of urban households had an internet connection compared to 20% in rural india, according to a 2017 report released by the Internet and Mobile Association of India.

The Bharat Net Programme, a government scheme committed to spending $5.07 billion (Rs 34,000 crore) to provide high-speed internet in 150,000 villages by 2019, must double its efforts in the next year in order to reach its target. Currently 67,271 villages have been connected, Your Story reported in March 2018.

As many as 31 million households currently do not have electricity, despite the 99.8% village electrification claims made by the Rural Electrification Corporation Ltd (REC)–the agency appointed to execute the Deen Dayal Upadhyaya Grameen Jyoti Yojana or ‘Power For All’ programme.

An education gap persists regarding mobile account access and digital payments. For example, 2% of those with a primary education or less have used a mobile phone or the internet to access an account in 2017, compared to 9% of those with a secondary education or less, the Global Findex data show.

“Access isn’t necessarily synonymous with the use of financial services,” he said. “While Global Findex data suggest access to financial services might be high, consumers may decide not to use them–either voluntarily or because opportunity costs are too high. While there is clearly a need for insurance and pensions, we are still yet to see viable products for low-income rural households.”

Low levels of engagement with the formal banking sector beyond simple withdrawals and deposits by women and marginalised sections of society suggest that universal account ownership does not necessarily equate to financial inclusion or the ability to use banking services effectively.

Knowledge of core banking services, online banking and banks’ credit facilities had the lowest levels of understanding, according to this 2017 study of rural women in Tamil Nadu. The women surveyed understood better the different bank account types available and the interest they offer; most were likely to invest in gold than any other saving or investment product due to a lack of understanding of these commercial services.

“Currently, 8% of banking agents are women and three quarters work in rural areas; this perhaps indicates that they are better able to reduce the gender imbalance around participation in financial services,” said Nishanth K., quoting this May 2018 study by MicroSave, a financial inclusion consulting firm.

Several indicators have shown a decline, suggesting levels of women’s empowerment have not improved. Only 53.5% women in the reproductive age-group used modern methods of contraception in 2015-16, a decline from 56.3% in 2005-06, according to data from the National Family Health Survey, 2015-16, IndiaSpend reported in January 2018. In 2015-16, 28.8% of married women faced spousal violence; in rural areas the figure is 31.1%.