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Financial inclussion


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Financial inclussion

  1. 1. Assistant Professors Taranpreet Kaur Surinder Kaur Praveen Kumar Bhatt Ginni Syal Priti Soni
  2. 2. Introduction  Financial inclusion is new paradigm of economic growth which plays a major role in driving away the poverty. Lack of access to financial services in most of rural areas due to high informative barriers and low awareness, poor functioning of financial institutions, near absence of insurance and pension service create the need and scope of financial inclusion.  Even after 70 years of independence, a large section of Indian population still remain unbanked. Fruits of development have hardly reached to nearly half of Indian population because no access to loan and insurance and this raises most pertinent issue of financial inclusion.
  3. 3.  It is a policy of involving a wider section of population deposit mobilization and credit intermediation. Financial inclusion refers to delivery banking services to masses including privileged and disadvantaged people at an affordable terms and conditions. It not only enhances overall financial intensity of agriculture but also help in increasing rural non-farm activities which lead to development of rural economy and improve economic condition of people.
  4. 4. Definitions of Financial Inclusion ADB 2000 Provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance to poor and low income households and their micro enterprises. United Nations 2006 A financial sector that provides access to credit for all ‘bankable’ people and firms, to insurance for all insurable people and firms and to savings and payment services to everyone. Inclusive finance doesn’t require that everyone who is eligible to use each of the services, but they should be able to choose to use them if desired.
  5. 5. (The Committee on Financial Inclusion, Chairman: Dr. C. Rangarajan). 2008 • Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost World Bank 2008 Broad access to financial services implies an absence of price and non price barriers in the use of financial services: it is difficult to define and measure but access has many dimensions.
  6. 6. Financial Services includes Savings Credit Insurance Remittance facilities etc.
  7. 7. Historical Perspective  1954 : All-India Rural Credit Survey Committee report - suggested Multi-agency approach for financing the rural and agricultural sector;  1963 : Formation of Agricultural Refinance Corporation  1969: Nationalization of 14 major Private Banks – The flow of agricultural and rural credit witnessed a rapid increase  1972–Mandatory system of Priority Sector Lending (PSL)  1975 : Establishment of RRBs  1980 : Nationalization of 6 more private banks  1982 : Establishment of NABARD through the transfer of RBI’s agricultural credit department Provision of bank credit under Govt. Sponsored Subsidy Schemes Linking Agricultural Credit Targets at 18% with individual bank’s net bank credit
  8. 8. Historical Perspective Cont…  1990–Implementation of the concept of Village level credit planning for 15 to 20 villages allotted to each of rural, semi-urban and urban branches of PSBs and RRBs under Service Area Approach  Formulation of potential linked credit plan for each district annually by NABARD  Agricultural Debt Relief Scheme and Financial Sector Reforms  SHG-Bank Linkage as the most suitable model in Indian context a/c to NABARD  2000-Reforms sharply focused on Agricultural credit  Doubling the flow of agricultural credit – implementation of agricultural credit package
  9. 9. Why Financial Inclusion  Directive Principles – equal opportunities  Inclusive growth  Economic development  Social development and  Business opportunity
  10. 10. Review of Literature  Tejani Rachana(2010) in the article titled “Financial inclusion and performance of rural cooperative banks in Gujrat” evaluated in the group of 23 states for which three dimensional index of financial inclusion has been estimated that led to Kerala with highest value of IFI followed by Maharashtra and Karnataka. Gujarat was lagging behind at 11th place.  There is a significance impact of occupation on having the bank accounts. But those who are land laborers and are doing low level jobs do not have account.  The researcher finally concluded that through RRB’s and PACC’s have a good coverage but most of them are running into losses. The wide penetration of PACC’s across the nation as well as villages would act like a catalyst while pursuing the objective of 100% financial inclusion.
  11. 11. Cont……  Rao, Maruti, N. & Talwar, Vishwanath (2010) in their paper titled “Financial Inclusion in India - A Case Study of Belagavi City” took five vulneravle areas of Belgaun City and 25 respondents from each vulnerable areas to access the level of financial inclusion among the rural section of the society. Further they also intended to understand the difficulties faced by banks in the area of financial inclusion. • The study found that majority have not opened their bank accounts due to lack of awareness and those who have opened are unaware of financial services offered by the banks. • The study highlighted financial inclusion as delivery of banking services atr an affordable prices in a fair and transparent manner to the vulnerable sections of the society.
  12. 12. Cont… Thimmaiah, Navitha. & Anitha, C.V (2010) in their article titled, “Financial Inclusion and the Road Ahead”, has taken secondary data to examine the strategies of financial inclusion in other developing countries and its relevance to India.  The study concluded that still 100% financial inclusion is not achieved in India. They found that a concerted and structural effort by all stake-holders multi-sector strategy and the ICT are necessary in order to achieve 100% financial inclusion.
  13. 13. Cont…. Gowda, Kempe, G.N. & Nadeesha, H.K. (2010) in their research paper titled, “Role of Banks in Achieving Financial Inclusion: A Case Study of State Bank of Mysore in Mysore District” took primary and secondary data from a sample of 200. Two taluks of Mysore district were taken.  Their aim was to analyze different dimension of financial inclusion and measures taken by banks for financial inclusion in Mysore district.  The study concluded that the state bank of Mysore extending financial services to all the taluks in the district but has not achieved the target to a large extent. Financial illiteracy, time consumption, high cost, distance etc continue to be a road block financial inclusion in many areas.
  14. 14. Cont… Bhatia, Shivangi & Singh, Seema (2015) in their article titled, :Financial Inclusion: A Path to Sustainable Growth”.  its objective of targets of banking facilities for all by the end of 2018. Just framing the policies won’t do needful rather supervising their implementation and devising such mechanism which are for the ease of excluded people will suffice the action and help in achieving the set goals.  They concluded that India is at moderate level of financial inclusion and thus it need to implement its policies more efficiently and effectively so as to achieve
  15. 15. Need for Financial Inclusion Economic Objectives Social and Political Objectives Equitable Growth Poverty eradication Mobilization of savings Sustainable livelihood Larger market for financial system Wider inclusion in society Effective direction of good programmes
  16. 16. Theoretical Frame Work  Financial Services or products provided by banks, finance companies, postal saving banks, credit unions, Insurance Companies, Micro Finance Institutions and other formal Financial Institutions generally form the basis for Financial Inclusion.  The financial services rendered by the informal sources such as money lenders, traders etc. Do not come under the preview of Financial Inclusion as they are limited in supply and exploitative in nature.  The formal financial institutions help in mobilizing savings and efficient allocation of funds for development. Efficient and well-functioning financial institutions are crucial in channeling funds to the most productive uses and thereby boost economic growth.
  17. 17. Theoretical Frame Work Cont….  There are supply and demand side factors driving inclusive growth. Banks and other financial services player largely are expected to mitigate the supply side processes that prevent poor and disadvantage social group from gaining access to financial system.  Access to financial products is constrained by several factors which include lack of awareness about the financial products, unaffordable products, high transaction costs and products which are not convenient, in flexible , not customized and are of low quality.  Financial inclusion promotes thrifts and develops culture of saving and also enables efficient payment mechanism strengthening the resource base of financial institutions which benefits the economy as a whole.
  18. 18. Dimension of Financial Inclusion 1. Penetration - Per cent of all households that use services - Per cent of households living in rural with no banking facilities 2. Affordability - Costs to use service - Minimum requirement (for opening account) -fees associated with service 3. Convenience - Days to complete transaction. - Documents required.
  19. 19. Rationale of Study  Majority of world population do not have access to formal financial services. The policy makers recognized the fact that the potential of rural India should not be under estimated.  The banks have to play dual role in rural areas to institutionalize the rural savings for development activities as a part of commercial banking. Then the help in the social up-liftment of the poor as a part of social banking.  The present study is an attempt to study the extent of financial inclusion among the people of Village Majri.
  20. 20. Research Methodology The main instrument for the collection of primary data was set of structures questionnaires. Door to door survey was conducted from 72 individual household members. Information on age, sex, marital status, relationship to the head of the household and education was collected. Information was also collected on religion, caste and ownership of land and the main occupation. The questionnaire was mainly designed to collect information on the status of deposit bank accounts of the family and also the cost associated in accessing the banking services outside the village. Further, questions were asked on the core banking services availed by the people of village Majri. The sample was selected by administering convenience sampling technique.
  21. 21. Majri Village Majri is a village panchayat located in the Rupnagar district of Punjab state,India. Chandigarh is the state capital for Majri village. It comprises of 116 villages . The total population of this village is 111,598 as per 2001 census. The population in rural area is 88551, out of which 47,892 are males and 40,659 are female. The Scheduled Caste population in rural area is 25,531.
  22. 22. Majri Village Cont….. Kurali is the only town in the block and has population of 23,047. All the villages numbering 116 have been allocated among 8 branches of commercial banks and one branch of Punjab Gramin Bank. There are 16 branches operating in this block which comprises 9 branches of commercial banks. 1 Pvt. Sector Bank, One branch of PGB and SAS Nagar central co-operative bank is having 5 branches. Due to certain incentives being initiated by the Govt. many large and small-scale industrial units have been established around Kurali. The native language of Majri is Punjabi.. Majri people use Punjabi language for communication.
  23. 23. Objectives of the study  To assess the socio-economic status of the respondents of Majri village.  To identify the factors affecting the extent of financial inclusion among vulnerable section of majri village.  To check the association between economic category and type of bank account opened by people of village majri.
  24. 24. Techniques Applied  The first objective socio economic status is analyzed with the help of Frequency distribution Tables.  The factor analyses technique has been applied to met the second objective .  Chi square test has been applied to met the third objective.  The hypothesis framed is as follows Ho: There is an insignificant association between economic category and opening of bank account among people of majri village.
  25. 25. Analysis of the Data The tables below shows the frequency distribution of socio-economic status of majri village
  26. 26. Table below shows the frequency tabulation of various categories Category Frequency percentage Category Frequency percentag e Gender Religion Male 28 38.9 Hindu 31 43.1 Female 44 61.1 Sikh 36 50.0 Education Muslim 5 6.9 illiterate 19 26.4 Category primary 15 20.8 General 33 45.8 Upto matric 24 33.3 SC 34 47.2 graduation &pg 14 19.4 OBC 5 6.9 Occupation Economic Category agri&allied 11 15.3 APL 42 58.3 services 21 29.2 BPL 24 33.3 nonworkers 24 33.3 AAY 6 8.3 household 16 22.2
  27. 27. Type of Account Frequency Percent Valid saving 67 93.1 no frill 2 2.8 FD 3 4.2 Total 72 100.0 67 2 3 72 93.1 2.8 4.2 100.0 saving no frill FD Total Valid Chart Title Type of Account Frequency Type of Account Percent
  28. 28. The table below shows the awareness of Direct Bank Transfer(DBT) and benefit received from DBT.
  29. 29. Direct Benefit Transfers Frequency Percent Valid yes 56 77.8 no 16 22.2 Total 72 100.0 56 16 72 77.8 22.2 100.0 yes no Total Chart Title dbt Frequency dbt Percent
  30. 30. GAS Subsidy Frequency Percent yes 37 51.4 no 35 48.6 Total 72 100.0 37 35 72 51.4 48.6 100.0 yes no Total Chart Title gas Frequency gas Percent
  31. 31. pension Frequency Percent yes 20 27.8 no 52 72.2 Total 72 100.0 20 52 72 27.8 72.2 100.0 yes no Total Chart Title pension Frequency pension Percent
  32. 32. MGNREGA Frequency Percent yes 8 11.1 no 64 88.9 Total 72 100.0 8 64 72 11.1 88.9 100.0 yes no Total Chart Title mgnrega Frequency mgnrega Percent
  33. 33. Factor Analysis  To identify the factors affecting the extent of financial inclusion among vulnerable section of majri village  KMO has been computed to measure sampling adequacy. KMO with .633value, showed data has been sufficient to proceed with the factor analysis
  34. 34. Factor table Component Socio-Economic Status Support System Obstacles Use of Account Type of Account Economic Category .797 Religion .776 Caste .612 Occupation .560 Education -.546 Who Facilitates .880 Purpose .707 Problems .841 Distance .503 .528 Purpose Of Saving Account .795 DBT .469 .539 Type of Account .864
  35. 35. Interpretation..  The five factors have been identified which affect the extent of financial inclusion among people of majri village. These factors are named as Socio-economic Factors, Support System, Obstacles, Use of accounts and type of accounts.  The first factor variance of 21.56%, which shows that this factor highly affect the extent of financial inclusion in the village majri, followed by factor 2 support system with variance explaining 14.14% influence, factor 3 Obstacles with variance 9.92%, factor 4 Use of accounts with variance 9.48% and factor 5 with variance 8.496%.
  36. 36. Contd…  Soci0-Economic status factor comprise of variables economic category, occupation, religion, caste and education. It has been observed that government has given various aids to the rural people like MNREGA, SHG in collaboration with banks. This would encourage people to open accounts in bank and avail the facilities and services provided by the banks.  Second factor named Support System explains that people get motivated if they have help of their known who help them in opening a bank account.  Third factor named obstacles also determines the extent of financial inclusion. Hurdles like distance, time, financial literacy hinders the growth of banking services in the rural areas. Obstacles have negative influence on the growth of financial inclusion in the vulnerable section of village.
  37. 37. Contd…  Use of account forms the fourth factor. People can get the benefit of direct benefit transfer to there account the money of pension gas subsidy and MGNREGA wages. It has led to transparent transfers of money.  Last factor type of account opened also helps in increasing the access of financial services provided by banks. People can easily avail loans from the banks for commercial purpose and creating assets.
  38. 38. Chi Square- the table below shows us that people of all economic categories prefer to open bank account. Economic Category * Type of Account Crosstabulation Type of Account Totalsaving no frill FD Economic Category APL Count 39 1 2 42 % within Economic Category .9 .0 .0 1.0 % within Type of Account .6 .5 .7 .6 % of Total .5 .0 .0 .6 BPL Count 22 1 1 24 % within Economic Category .9 .0 .0 1.0 % within Type of Account .3 .5 .3 .3 % of Total .3 .0 .0 .3 AAY Count 6 0 0 6 % within Economic Category 1.0 .0 .0 1.0 % within Type of Account .1 .0 .0 .1 % of Total .1 .0 .0 .1 Total Count 67 2 3 72 % within Economic Category .9 .0 .0 1.0 % within Type of Account 1.0 1.0 1.0 1.0 % of Total .9 .0 .0 1.0
  39. 39. this table shows the results of the "Pearson Chi-Square" row. We can see here that χ(1) = 0.679, p = .954. This tells us that there is no statistically significant association between Gender and Preferred Learning Medium; that is, both Males and Females equally prefer online learning versus books. Chi-Square Tests Value df Asymp. Sig. (2- sided) Pearson Chi-Square .679 4 .954 Likelihood Ratio 1.072 4 .899 Linear-by-Linear Association .195 1 .659 N of Valid Cases 72
  40. 40. Phi and Cramer's V are both tests of the strength of association. We can see that the strength of association between the variables is very weak. Symmetric Measures Value Approx. Sig. Nominal by Nominal Phi .097 .954 Cramer's V .069 .954 N of Valid Cases 72
  41. 41. The results of chi square shows that there is an insignificant association between economic category and opening of bank account among people of majri village as value of pearson chi square has found to be insignificant. This shows that the income of people has no influence on opening of account. People open account as a result of saving, pension, gas subsidy and availing services of direct benefit transfers.
  42. 42. Finding of the study  As majority of the respondents have opened bank accounts but are not aware about the financial services provided by banks. Majority of respondents who have opened bank accounts but are unaware of the core banking services offered by the banks such as ATM cum debit card, Credit card, net banking, insurance schemes, bill payments and SMS facility.
  43. 43. Findings cont…..  The accessibility of banking services has been poor on account of various constraints such as distance, no money to save and difficult to understand banking services.
  44. 44. Suggestions and Policy Recommendations  The need of the hour is therefore the banks in majri village should organize financial literacy programmes for the benefit of vulnerable sections of the society. This may help in creating awareness among the vulnerable groups.  Bank should appoint business correspondent to disseminate its service to the unreached area.
  45. 45.  It is suggested that financial literacy can be organized to educate bank -holders.  The government should include financial literacy in the curriculum of school and colleges.  Government should pay all the social security payments through the bank of the beneficiary.
  46. 46. Conclusions  Financial inclusion and infrastructure should go hand in hand for all round development of vulnerable section of the society in order to ensure that they should have access to education information and insurances apart from financial services.  Financial services should channelize through increasing marketing operations thereby, increasing banking habits among rural household.  Financial literacy, time consumption, high cost, distance etc continue to be a road block to financial inclusion in many areas.
  47. 47. TOGETHER WE CAN AND WE WILL - - -!