BY SUDARSHAN CHHOTORAY in Bhubaneswar, June 12, 2016 : In this new millennium, bank has become as important as the other basic necessities of life. Access to finance by the poor and vulnerable groups is a prerequisite for poverty reduction and social cohesion. This has to become an integral part of the government’s efforts to promote inclusive growth.

Financial inclusion denotes delivery of financial services at an affordable cost to the vast sections of the disadvantaged and low-income groups. The various financial services include credit, savings, insurance and payments and remittance facilities. The objective of financial inclusion is to extend the scope of activities of the organized financial system to include within its ambit people with low incomes. Through graduated credit, the attempt must be to lift the poor from one level to another so that they come out of poverty.

The Narendra Modi Government’s Pradhanmantri Janadhan Programmee primarily aims to reaching out to millions in the country who still were un-bankable but we need to go miles to make them accessible to formal financial services.

According to the Industry report, Banks have opened 19.21 crore accounts under the government’s ambitious financial inclusion scheme Pradhan Mantri Jan Dhan Yojana (PMJDY) with deposits of more than Rs 26,819 crore till November 2015. These Zero balance Bank accounts have been accompanied by 16.51 crore debit cards, a life insurance cover of Rs 30,000 and an accidental insurance of Rs 1 lakh.
More than Rs 4,273 crore has been routed through these accounts towards payment of wages on a scheme under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and transfer of cooking gas subsidy worth of Rs 17,446 crore. The Government is pushing financial Inclusion through the Jan Dhan Aadhar and Mobile (JAM) trinity and use of innovative delivery channels such as mobile wallets. RBI has also granted as an “in principle” approval to 10 small banks and 11 payment banks, which is expected to deepen the inclusion process.

By the end of 2015, 78.47 lakh savings bank deposit accounts have been opened under the Prdhan Mantri Jan Dhan Yojana. Total deposit balance in PMJDY is pegged at Rs. 857.70 crore as on 31st December 2015. Percentage of Zero balance account to total number of accounts opened is 32.46%, official report said.

Similarly as on 31st December 2015, total of 31.74 lakh Pradhan Mantri Surakhya Bima Yojana, 8.41 lakh lakh Pradhan Mantri Jeevan Jyoti Bima Yojana and 63.16 thousand Atal Pension Yojana enrollments have been done by Banks in Odisha. (SLBC Report)

However, banks in Odisha have failed to reach inaccessible areas. Out of 87,000 Bank Branches in the country 30% are in the rural areas, 70 lakh SHGs linked to 2070 crore finance, Micro Finance Institutions(MFI) industry is growing with Rs 18,200 crores business. Nevertheless, there is a need to include rural population.

With increasing number of suicide of farmers’, where government agencies and Banks departing from their primary responsibilities; MFIs bringing more women in their fold are lending them on their need to develop their small business with low interest rates. Though MFIs have suffered a temporary setback after the Andhra crisis post 2010, the New Micro Finance Regulation Bill proposed by Union Government and successive guidelines by RBI have brought cheers to the ailing sector.

Earlier people were running after village land lords and money lenders during financial crises, family urgency, marriages, for medical expenses, education of children, to run a petty business and even for consumption. Sometimes interests were high and unbearable and in many a time people had to mortgage their land, gold ornaments, household instruments etc. Now government sponsored SHGs formed in villages and slums and Microfinance Institutions have come to the rescue of the poor and vulnerable section of the society. Even though the same old practices are still going on in many places by money lenders in the other hand ; poor, downtrodden and economically backward class, small traders and artisans are getting benefits from micro-loans provided by the new age small Banks called micro finance organizations.

However, the contentious issue that still remains unresolved is the rate of interest. Where MFIs have claimed they are charging 19 to 25%, allegation against them is that they are charging not less than 30-60% whereas government has asked them to limit within 28%. Incidentally, RBI has recommended bringing it within 24%.

On the contrary, studies have found that the impact of such micro finance services to the individual borrowers and community as whole is far exceeding than the price. There has been a lot of small enterprise boom; borrowers are free from the clutches of money lenders and options to choose from multiple service providers and products etc.

Moreover, another aspect of micro lending debate has been the increasing number of farmer’s suicide Reacting to the allegations, MFI Representatives have charged politicians and government for shifting responsibility as the government has failed to provide social security measures, farmers are more indebted to Banks and government run Cooperatives than MFIs.

But things now have changed due to realization by Banks and Governments; Banks who had stopped lending to MFIs now are increasingly realizing that Micro Credit is the only option left to include a large section of people who were out of the ambit of banking reach. As a result of which, some MFIs in the state who had partially suspended or had squeezed their operation now working in new vigour.

When asked a senior industry specialist said, “poor people remain poor not because of any fault of their own, but because of we have designed institutions and policies that keep them poor. No matter how hard they try or hard they work, they remain trapped in poverty because of these institutions and policies. By providing financial services to the very poor or poorest on terms that are suited to them i.e. micro credit, in its essence, challenges this unjust system “.

Md. N. Amin, President, ADHIKAR Micro Finance said, “It is unfortunate that as per the figure available more than 50% of the populations are still outside the purview of the banking infrastructure. In the name of priority sector lending a large amount of credit and subsidy is channelized to the big farmers or the mechanization of agriculture. And the poor continue to suffer”.

“The SHG movement has been successful in bringing drinking water, improvement in health conditions increasing the status of poor as a whole. I would like to say that this is the only programme where almost all money reaches to the targeted poor. There are efforts to address the very poor. Here the role of the government and the NGO is very important. The role of the RBI is very encouraging. Number of steps has been taken so that the poor staying in the remote corner of the state can avail the banking facilities. But the mindset of the bankers takes a long time to change. Some of the example is No frill account, relaxation in KYC norms, OTS for below Rs. 25000/ general purpose Credit cards and the Business facilitator and the Business correspondent. In order to avail this facility there is a strong and committed local leadership required”, Amin observed.

Microfinance sector in Odisha has achieved incredible growth in terms of both outreach and sustainability. Importantly, the mainstream financial sector has increasingly recognized the microfinance sector as an important ally in expanding financial inclusion to the unreached and under reached segment of the population. Odisha MFIs are also operating in most poverty stricken and high risky areas like Malkangiri, Koraput, Rayagada and Nowarangpur districts. The total turnover of MFI based loan disbursement will be the tune of Rs 1500 crore in the state. At least 50 leading MFIs are operating in the state with 10,000 staff and out of them 3000 are women employees.

Sources close to the sector said MFIs have roped in about 20, lakh women as members of their lending groups. They have covered all most all 30 districts in the state working in at least 198 Blocs. MFIs offer various loan products like income generating loans, housing loans, sanitation loans, mobile loan, crop/agriculture loan, dairy/livestock loan, education loan, festival loan and consumption loan etc. Both loanee and spouse are covered with insurance.

Some of the leading MFIs in the state have the with loan disbursement to the tune of Rs 100 crore are Adhikar with Rs 238 crore with outstanding of Rs 55 crore, People’s Forum Rs 88 crore with outstanding of Rs 24 crore, Gram Utthan Rs 221 crore with outstanding of Rs 40 crore, SMCS 120 crore with outstanding of Rs 22 crore and others have more than Rs 100 crore. Other than these agencies national level MFIs like SKS, Spandana, Janalakshmi, Ujjivan, Share, Asmita and few others also working in the state.