Women and the poor are invisible in the Crisil index of financial inclusion.
A rich man will most likely have a bank account,and a poor woman will most likely not. The Crisil Inclusix index,which measures Indias progress on financial inclusion,does not tell us that. Women and the poor remain invisible in this index,and in a deeply divided society such as ours,figures often hide the truth. Yes,the number of loans have increased,but they have gone to corporations,sometimes to small businesses and almost none to poor,self-employed women. Yes,branches have increased and so have the number of low-frill accounts,but a poor woman rarely saves her money in that account. She is still keeping her meagre savings at home,hidden in the roof,to be taken away from her when others need it,or even to be eaten by rats.
Indices such as these are designed to help policymakers and service providers improve financial inclusion,which is often defined as reaching the unreached. But if the aim is to reach the poor and to reach women,then the figures should give us a break-up by gender. Also invisible in the Crisil index are the myriad financial providers that actually do reach the poor. There may be no data on the informal sector,but there is no excuse for excluding those in the formal sector the non-scheduled co-operatives or private banks,the savings and credit societies,the micro-credit non-banking financial companies.
Recently,the Self Employed Womens Association (SEWA) conducted a study on the effectiveness of unconditional cash transfers in rural Madhya Pradesh,and another one on women in the informal economy in Bihar. Based on these we formulated five principles of genuine financial inclusion of poor women.
First,it must be recognised that a poor woman is willing to be part of the financial system. She is a natural saver,so having a safe place to save is important to her. An account of her own builds her identity and empowers her. However,banks often exclude women because they do not fulfil the KYC (know your customer) criteria. As Kamlabai,a bidi worker in rural MP,says They ask for identity proof,but I have no identity. In my house,no one uses my name,they call me bahu or ma or bhabhi. I studied till sixth class. My name was changed after marriage,so my name on the ration card is different from the name on my school certificate. And Deepali,who works as a domestic help in Delhi and rents a room for Rs 2,000,speaks of the difficulties of providing the residence proof that a bank wants.
Second,women respond much better to doorstep banking. The success of micro-finance institutions,and self-help groups (SHGs) attests to this. Going beyond their village to deposit or withdraw money requires time and money,and in such cases men take over. Doorstep banking is also more sensitive to local needs. Although more and more girls are going to school,it must be remembered that there is a high rate of illiteracy among women,and it becomes difficult for them to do the paperwork required. Women in our Madhya Pradesh study said the main difficulty that they faced in banks was their inability to fill forms. And the women who were illiterate had to rely on other customers or bring along literate family members. Others said bank staff helped them.
Third,loans are important. Most poor families are in exploitative debt,with extremely high interest rates,or in debt of goods like seeds,which require double the repayment in kind,or in debt which is to be repaid by labour at below market wages,or in debt that forces families into near-bondage. Loans at reasonable rates could break this cycle of debt and bring about structural change,reducing inequality. A Planning Commission study in Bihar says that only 4 per cent of the women have taken credit from banks and 7.6 per cent from NGOs and SHGs,61 per cent had high-interest loans from money lenders and 18.4 per cent had mortgaged their land or property. In contrast,the SEWA Bank has a portfolio of 100 per cent loans to poor women and the extremely low number of non-performing assets proves that the poor are good repayers.
Fourth,government schemes that involve direct cash transfers induce better financial inclusion,as the pressure to open accounts mounts on the financial systems,both from beneficiaries and from government. Our surveys in Madhya Pradesh and other surveys in Bihar have shown that cash transfers are perhaps the best option for both social security and financial inclusion,but only if they are unconditional or have minimal conditions.
Finally,financial literacy needs to be tailored to the poor. SEWAs experience shows that specially designed modules increase womens knowledge about financial systems,change their savings behaviour and make them responsible debtors. Bringing knowledge and awareness to poor women not only broadens their world but also enriches mainstream financial systems.
The writer is national co-ordinator,SEWA,and board director,SEWA Bank