(The Gist of Kurukshetra) Financial
Inclusion For Rural Youth
Financial Inclusion For Rural Youth
Globally, financial inclusion is considered as the most effective tool for
development and well-being of all sections of the society especially, the youth.
The United Nations Development Program (UNDP) recognized the role of financial
inclusion in achieving 15 out of 17 sustainable development goals (SDGs) which
include alleviation of poverty, creation of jobs, gender equality, good health,
etc. Hence, India is committed to achieve inclusive development goals (Sab Ka
Saath, Sab Ka Vikas).
One of the main goals of financial inclusion is inclusive and sustainable
economic growth, by freeing the poor sections of the society from the clutches
of the money lenders. Remunerated savings, and an easy way to make payments and
remittances. It means insurance and pensions. It means financial literacy and
consumer protection. In his opinion, there are five ‘P’s to achieve this:
“Financial Inclusion plays an important role in the process of inclusive growth
of the poorer sections of the economy by enhancing higher disposable income of
the rural households. Again it is proved that the large scale access of
financial services like credit, savings, insurance facilities and easy cash by
way of ATM facility have positive impact on household consumption, self
employment, poverty as well as overall well-being of the common people (Banerjee,
Duflo, Glennerster & kinnan, 2013).
The Pradhan Mantri Jan-dhan Yojana (PMJDY) initiated by the government is an
addition to this long term mission of financial inclusion.
The latest edition of the Global Finder (GFX), which was conducted by the World
Bank in 2017, shows that 515 million adults worldwide opened an account at a
financial institution of through a mobile money provider between 2014 and 2017.
India’s GFX was at 35 in 2011, which increased to 80 in 2017. Interestingly,
chine’s GFX too stood at 80 in 2017. This reflects a speedy improvement in
financial inclusion suggesting that relevant Indian policies in the last few
years worded well.
According to the Organization for Economic Cooperation and Development (OECD),
financial literacy is: understanding of financial products and concepts by
consumers/investors, their ability and confidence to appreciate financial risks
and opportunities, capability to make informed choices, and enable them to take
other effective action to improve their financial well-being.
Some Policy Initiatives of the Government:
There are various initiatives taken by the Government of India and the Reserve
Bank of India (RBI) in the past which include: introduction of lead scheme
(1969), nationalization of scheduled commercial banks (1669), regulation of
interest rates on the bank loans extended to weaker sections (1972),
establishment and expansion of rural credit co-operatives (1980), establishment
of regional rural banks (RRBS) in (1975), nationalization of another six banks
(1980), launching of Self Help Group Bank Linkage Program (SHG-BLP) in 1992,
issuance of licenses to new private sector banks (1993) and implementation of
PMJDY (2014) in order to achieve financial inclusion.
1. Pradhan Mantri Jan-Dhan Vojana (PMJDV):
PMJDY is a major policy initiative of the government of India in the realm of
financial inclusion, which was announced by our Hon’ble Prime Minister on August
28, 2014. The scheme offers incentives such as insurance coverage, RuPay cards,
and overdraft (OD) facility apart from Direct Benefit Transfers (DBTS).
The six pillars of the PMJDV are:
● Universal access to banking services.
● Providing basic banking accounts with OD facilities and a RuPay debit card.
● Financial literacy.
● Creation of a Credit Guarantee Fund.
● Providing micro insurance.
● Providing unorganized sector pension scheme.
Financial inclusion initiative was successful with a record of 8.76 crore
savings bank accounts opening within 100 days from the launch of PMJDY. However,
mere opening of account is not financial inclusion. There should be a continuity
and consistency in use of banking services at a reasonable cost to every citizen
of the nation.
In addition to the above, the Government of India launched Make in India, Skill
India, Startup India and Stand-up India with a view to building an ecosystem for
sustainable economic growth, promotion of entrepreneurial opportunities, and
generates large scale employment opportunities especially for the youth. The
Stand-up India provides a digital platform based on 3 pillars to support
enterprises among entrepreneurs from Scheduled Caste (SC), Scheduled Tribe (ST)
Women category through:
● Handholding support.
● Providing Information on financing.
● Credit Guarantee.
2. Micro Units Development and Refinance Agency (MUDRA) Loans:
Micro, Small and Medium Enterprises (MSME) sector is the most vibrant and
dynamic sector, promising high growth potential for the Indian economy. There
are close to 51 million MSME units in the country which employ about 11.7 crore
people across various sectors, constituting 40 percent of the total workforce.
The MSME’s share to the total non-agricultural Gross Domestic Product (GDP) is
about 37 percent and they also contribute to 43 percent of India’s exports. Most
of these MSMEs are owned by people belonging to SC, ST and Other Backward
Analysis & Discussion
The progress of pradhan mantri jan-dhan yojana (PMJDY) a flagship programme
in financial inclusion, is captured in the following table.
Debit Cards issued
As per the above table, PMJDY was instrumental in mobilizing an amount of
Rs.84,815 crore in the form of savings bank accounts (33.46 crore bank
accounts), 26.44 crore RuPay debit cards have been issued to the beneficiaries
till December 5, 2018. The Government of India’s latest initiative of issuance
of license to Payments Banks is mainly to encourage micro savings and inculcate
banking habits among the rural poor and the financially excluded. The postal
payments bank is expected to achieve the last mile in financial inclusion given
its wide office network of more than 155000 branches mainly in remote and
far-flung areas. The performance of MUDRA loans during the FY 2017-18 is given
Progress of MUDRA Loans in India
While the total number of savings bank accounts witnessed a phenomenal growth of
over 20 times, savings bank deposits increased by more than 7 times during the
period 2010-2018, thanks to PMJDY. Similarly, there is a healthy growth in KCCs
as well as well as GCCs which shows that credit to the individual farmers picked
up during the same period. Besides, banking outreach increased from 67,694
outlets to 569,547 outlets during the last 8 years, a booster dose to last mile
It is essential to achieve financial inclusion in every aspect namely savings,
credit, insurance, pension, remittances, and financial advisory services. This
is the pathway to empower the rural youth and the financially excluded. The
rural youth have to be extended proper skilling support (DDU- GKY model may
follow the BRAC, Bangladesh while extending pre-placement and post-placement
support to the youth and the unemployed in India. GRAC’s training program is
very successful in terms of placement (close to 80%) as it conducts door to door
survey, prior to commencement of the training, to identify the trades/services
which are in high demand. Similarly, Grameen Bank, Bangladesh supports the
unemployed and qualified graduates to start their own enterprise. Till date, it
is instrumental in starting more than 100,000 micro enterprises in this way
through the unemployed youth).
Financial institutions, with local control and staffed by knowledgeable local
people, could be more effective at providing financial services to the excluded.
Further, major policy thrust should be on encouraging more Business
Correspondents (deposits), Certified Credit Counsellors (loans), Trade
electronic Receivables discounting system and scope for digital lending to MSMEs,
Rural Self Employment Training institutes – RSETIs (capacity building for the
rural youth), and Farmers Producers Organizations (supply chain management for
the farmers, artisans, and the like) in the rural India.
Imparting financial literacy and ensuring consumer protection are very important
in the journey of financial inclusion since credit without skills and financial
knowledge may result in debt trap for the poor. RBI and banks should coordinate
with institutions such as state education boards (SEBs), central board of
secondary education (CBSE), University Grants Commission (UGC), AND All India
Council for technical education (AICTE), to include financial inclusion as a
mandatory subject at different educational levels right from school to higher
levels of education. Having developed infrastructure for financial inclusion,
the next milestone should be to bring about a mindset and cultural shift among
newly connected beneficiaries to derive benefits from the formal financial
system by borrowing from banks and repaying loans in time. Therefore, the
current need of the hour is more to do with educating people, disseminating
financial and digital awareness in the society, and making the beneficiaries
aware about the scope of expanding rural enterprises using their rights to
borrow and duty to repay bank loans. There should be less emphasis on
collaterals (bank side). In this way, we can achieve not just financial
inclusion but economic inclusion too.