Missing the bigger picture

The title Towards Financial Inclusion in India took me a few years back in time when I had heard someone say, “Water anywhere on land always attempts to reach the sea... it either follows a straight path like a canal or meanders like a river. Ultimately, both reach the sea. The Indian approach has always been the latter.” As I have since discovered, the approach to financial inclusion is no exception to this. 

In the book, although the authors KG Karmakar, GD Banerjee and NP Mohapatra mention the core elements of financial inclusion such as savings, loans, remittance and insurance, the data is ambiguous and will fail to excite practitioners. On the one hand, it has some compelling points. For example, ‘Analysis of a moneylender’s diary’ (Reddy, 2007) gives important cues about the pattern of informal borrowings by excluded populations from the organised money market in rural villages. The study concludes that about 76% of the loans were within ₹300 per person and nearly a third of the total loans were within ₹50. This shows the untapped potential of the loan market in rural India. But, at the same time, it talks about a complicated index on financial inclusion for rural India, which concludes that financial inclusion is improving in all geographies except Jammu & Kashmir. Moreover, according to the index, the unemployed are financially included or at least have no negative impact. This shows an incorrect picture on the state of financial inclusion in the country.

Also, as one reads the book, the flow is disrupted by the mention of non-relevant initiatives, circulars and documents that could have been part of the bibliography. There are also statements that may not hold true or could be impractical. For instance: “not for profit business correspondent (BC) must attract top quality talent and pay outcome based bonuses to employees” and “recommendation for rural credit bureaus: numeric based signatures are better than fingerprint biometrics”. 

As a part of the fraternity that’s working towards enabling financial inclusion in India, I found it difficult to correlate some of the content with the topic. The book lists five risks to the micro-finance industry, none of which seem relevant to the industry’s scenario last year. It also documents issues on myriad events in India without any regard to their scale or impact and the many things that policy-makers have done in the past. 

The key shortcoming of the book is the gap between the recommendations and the road ahead in terms of their implementation. As a reader, I was unhappy with the examples of small experiments like micro-insurance and inclusion initiatives in tribal areas in a huge and diverse country like India. It completely misses the opportunity to highlight the commendable work done by key players in the financial inclusion space ever since the Reserve Bank of India announced its policy on the BC model in 2006. The change brought about by these players, the challenges they face and the support they need to take financial inclusion to the next level finds no mention. 

Other than Nabard, which has been supporting financial inclusion initiatives for the past three years through two funds of ₹500 crore each, the Financial Inclusion Fund and the Financial Inclusion Technology Fund have also not been recognised adequately. Nevertheless, considering the scarcity of reference material on financial inclusion in India, this book may come in handy.