Do we really need 100% financial inclusion (FI)? This should be a silly question since the whole point of the project I am doing in Madhya Pradesh is to determine what are the obstacles to scaling up financial inclusion in this state, what needs to be done to increase financial inclusion, and why MP is so far behind other “progressive” states?
First of all, we should establish what FI really means. Is it a no-thrill bank account with small or 0 balance, no ATM card and no checkbook (these are being generously opened by Indian banks to improve FI)? Is it a woman, who took out a loan from some financial institution, spent it on her child’s malaria treatment and now is in debt? Does it mean having a smart card (Photo-ID card with fingerprints and bank account number), which allows a villager to receive their pensions and other governmental assistance in a more efficient way? Or does it mean having life insurance to protect your family from misery in case you die in a motorcycle crash? Yes, all these things mean financial inclusion and are gaining a huge importance in India and by some are viewed as a solution for poverty reduction in rural areas.
Unfortunately, the bureaucrats in this country and others only want to see their numbers of achievement. They want to see that financial inclusion has reached 100% by 2012. They even embraced microfinance (MF) as one of the tools for reaching out to unbanked populations in the rural areas. But truly, all they care about is to be able to say that their people are financially included. But are they? And even if they are by definition FI, are they better off? Are we Americans or Europeans with easy access to credit cards (I myself have 14 accounts listed on my credit history with outstanding balance on the 4 of them) happier because now we have color TVs, nice cars, I-pods, laptops? Do we go to sleep carefree or do we think about our next minimum credit card payment due, and mortgage due and car payment due..? No matter how we feel about being in debt, we are financially included and our governments are proud of it.
Today I went to the most remote village I’ve ever been to in Rewa district in MP. First, I had to take a train for 4,5 hrs to come to Rewa from Jabalpur (the last place you can get to by public transportation). Then with generous help of the director of Samhita, first MFI in Rewa area, I traveled for over 1.5 hr to reach the village where Samhita’s furthest branch is located. Praseeda, the brave founder of Samhita, gave me her own car and a driver to get there. From the branch I had to ride the motorcycle for 13 km to get to the village where I met with few women who took their first loans ever. Even if these women walk 13 km (3 hours) to get to the closest bank, they will not be able to get a regular loan (too poor). So Samhita is making credit possible for them and is contributing to FI in the area. Samhita only targets very poor clients (not a typical MFI) and is soon planning on combining their financial services with health education and possibly livelihood programs.
When I asked Samhita’s clients if their livelihoods or standard of living have improved since they took the loans, they said no. They also added that now they feel burdened because they spent the money already and it is very difficult for them to be making weekly payments (agriculture doesn’t give you a steady stream of cash flows). One of the women purchased 5 goats with her loan, and 2 of them already died due to the heavy rains (Samhita is hoping to be able to offer cattle insurance soon, but not yet). Another one spent her loan on her mother’s medical treatment instead of investing it into the business growth as it was meant to be (Samhita may offer emergency loans soon, but not yet). So are these women better off or happier from being financially included?
I asked them what is the priority for them a) access to financial services b) infrastructure (3-hour walk to get basic necessities and to get to school is not that much fun) c) employment opportunities. The answer was infrastructure and easy access to schools for their children, and not financial services. Although, now these women are “financially included” they still don’t have electricity, roads or public transportation for their kids to get to school. But now besides being as miserable as before they are also in debt. And even though Samhita is working really hard to break even trying to get to the poor in the remote areas, these people need more than just a microfinance loan. These people need the government to provide them with the basic necessities, such as schools, roads, public transportation, employment opportunities and health facilities. They are glad to take credit because it is better than nothing and because it gives them hope that if they gamble it right they will end up with more than they started. But they don’t always do, neither do we in the developed countries.
1 comment:
I certainly hope it doesn't "lose your job" as you (hopefully tongue-in-cheek) expressed. That is exactly the sort of questioning we need and your organisation needs to help answer. And your points are valid ones. What do we mean by success? Why do we want to provide credit to the poor and is it always a good idea? And more importantly, is it always the first intervention we should be making?
Your opening point on organisations and bureaucrats wanting to bump up their numbers to the result of losing sight of the goal is spot on. It is something we wrestle with at my organisation as well and several of us feel, openly or quietly, that we do or are sometimes confuse the real goals with the targets we measure. Our adviser often smartly remarks that “what gets measured gets done.” And we parrot that mantra, but people being people, often forget to measure the right thing. So we’re slowly trying to improve what we actually measure and track, what social indicators we define so that that is what gets done. But it is slow and not a straight line. We’re getting pressure financially to be sustainable and to be profit-drive, which means cutting back our model to a more pure MFI (Microfinance Institution) that can be financially viable. But financial sustainability is all great and of course important, but at what cost? We as an industry are not being clear enough on what we will lose and what our members (the poorest of the poor) will lose if we pare down as we expand.
It is tough, certainly and being tough and with a lot of pressure, I’m glad you’re posting such thoughts of reminding your organisation and any readers to think.
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