Financial Inclusion – Are we reinventing the wheel?

Sustainable Agriculture, MSME & Green Value Chain Finance | Priority Sector Finance | Manoj Rawat, ValueFin India

Financial Inclusion – Are we reinventing the wheel?

Financial Inclusion – Are we reinventing the wheel? Can we make a serious attempt to revitalize and rejuvenate the decade old existing institutions?

Have we lost all hopes of reviving 93000 Primary Agriculture Cooperative Societies ( PACS, FSS, LAMPS) which can effectively be effective model for delivering holistic Financial Inclusion? 50000 bank branches and 93000 PACS may ensure financial access to 70% of Indian villages. They already know the local area, farmers and artisans need and do understand accounting and banking to manage. There is already a set of trained manpower. They can be enabled through technology and professional management.

The next set 10-12 new bank aspirants may open maximum 10,000 branches in next 10 years that to with a lot of crib, resistance and regulatory push. And here we already have 93000 strong established setup,  that can be rejuvenated by professional management, infusing technology, strong political will and providing institutional support.

Attempts to revitalize these decades old institutions may have not yielded required results, but if a comprehensive framework is developed which encompasses all Stakeholders Farmers, PACs, Co-operatives, PSBs and more importantly Private Sector Banks as well, it may really become an effective tool for Inclusive Growth. It may provide access for multiple activities deposit, loans, inputs, financial literacy.

Notwithstanding the fact that these institutions are riddled with own issues and strong political interferences, this needs to be given another chance through right commercials and viability benchmarks in place without doling out any capitalization program.

These farmer and artisan focused institutions meant for inclusive growth have been built over years and primarily service weaker sections, small and marginal farmers and having access to 115 Million poor members (which means 450 Million people considering households population). Unfortunately these rural centric institutions are slowly falling apart which could be great opportunity to create a strong financial network that’s truly addresses the need for inclusive banking and growth

Rebuilding such a massive infrastructure is daunting task and will be reinventing wheels. Do we need to review this framework and have measures to ensure that these institutions do not dissipate?

Can we give this a chance ?  Through setting up a robust and professional management framework which works on commercially viable and profitable lines and creates value for each of the stakeholders. Professional management seems to be the key pain point? It will also need strong political will and regulatory support.

NABARD, SIDBI, RBI , Rural and Agri Insurance companies may play an enabler. The PSL guidelines have considered this but it partly addresses the issue and there are few takers. Can we give a bigger push and participation with all stakeholders including Public and Private Banks? I firmly believe certain firm steps need to be taken with a positive outlook.

And it’s worth it as these 90000 plus network may become the most vital link for taking a bouquet of banking and financial services to Rural people especially the small and marginal farmers and artisans.

Even “INDIAN POST OFFICE” will need to get trained on financial and banking aspects even though its outreach is massive.

It would too early to assume that another 10-12 bank license aspirants are in the fray to bring inclusion to 600000 villages especially the marginal farmers and artisans.  They are required in country for banks to more competitive, innovative but are not the answer for inclusion.

It should not so happen that like MFIs, in the name of inclusion started operating in the same cities and village and it was observed that each client ended up with more than 6-7 micro loans. While most of excluded areas and villages still remain away from the outreach.

Let us resurrect the massive existing Rural Banking network (which primarily constitutes of PACS, 90000 plus network) and bring them back into mainstream with professional management, better technology, robust oversight and institutional support. It’s worth it…. if we are sincere about true Financial Inclusion and offer a holistic financial offering to unreached and excluded people especially the small and marginal farmers, wage earners and rural artisans.

Manoj Rawat

The views expressed in this article are purely personal.
Manoj Rawat |India


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