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Panel 2: Financial Inclusion: Will a Good Mission Meet a Good Market




Amitabh Verma

Commissioner, General Administration, Government of Bihar


‘Moneylenders as the BCs would be the best choice’
Second panel discussion
FINANCIAL INCLUSION: WILL A GOOD MISSION MEET A GOOD MARKET.


There is need to internalise moneylenders in our financial inclusion model, Amitabh Verma, commissioner, general administration, said. “We should look at the employing this huge workforce of moneylenders as business correspondents,” he said. Elaborating further on it, he said the moneylenders, who are the much demonised people in our country, have the training and knowledge for the purpose. “They are the ones who know the nitty-gritty of the lending and borrowing mechanism,” he said.  On the need to look at this alternative, he said, the formal institutionalised banking structure has not been able to deliver to the 65 percent of the population even after 65 years of independence. Hence the need to chart a different course. “Even the 35 percent of those who have been connected to the banking network, all that they can boast of, is having a bank account. So the question arises: are we correct in depending on the same formal structure? There is need, therefore, to look at the alternatives,” he said.

The introduction of the BCs as important component of the financial inclusion model was one of the alternatives; however, it has not worked as efficiently as it should have, he argued.

“It has been hijacked by the section 25 companies that have no understanding of the local needs and demands. To give you an example, suppose SBI advertises for BC positions in Bihar. A section 25 company sitting in Bangalore applies for it and wins the bid. It then selects a state coordinator, district coordinator, and then the BCs at the ground level. The BCs selected are the local guys who take up the job as a stopgap arrangement and move on once they get a better job. Also without any formal training the BCs have no idea who to lend how much to lend. There is no liaison between the local branch manager and the BC,” he said.

Arguing for banks taking control of the appointments of the BCs, he said if he were the branch manager, he would have employed the moneylender in his area as his BCs.      

“I would have gone to the village and enquired who the local moneylender was and asked him if he would take up the role of a BC. I would give him a credit of two lakh and ask him to operate with this amount. I would then ask him to bring down the rate of interest from 100 percent to 60 percent. The next year I would increase his credit amount to five lakh and ask him to bring down the rate of interest to 40 or 35 percent. The third year I would again increase his credit limit to ten lakh and ask him further to reduce the rate of interest to 25 percent. And that’s the rate of interest that an MFI can operate with.  This is one of the models we could have come up with,” he said.
 

 


Dr S Sidharth

Secretary to the Chief Minister


‘Moneylenders as the BCs would be the best choice’
Second panel discussion
FINANCIAL INCLUSION: WILL A GOOD MISSION MEET A GOOD MARKET.


Community information centres could be seen as agents and channels of financial inclusion, S Sidhartha, secretary to the chief minister, said. “When we talk about the financial inclusion, we tend to limit it primarily to credit lending and borrowing. But today, when the economy is growing, and with it the aspirations of the people, we need to look at financial inclusion beyond the credit lending and borrowing stereotype,” he said. Community information centres, he pointed out, provide whole lot of services these days to the rural population and could be seen as agents and channels of financial inclusion.  Also self-help groups that see a lot of economic activities like borrowing for seeds, fertilizers, setting up a poultry and dairy farm could be another important component of financial inclusion, he added.

 


AS Sekhawat

Chairman, Bihar Kshetriya Gramin Bank


‘Moneylenders as the BCs would be the best choice’
Second panel discussion
FINANCIAL INCLUSION: WILL A GOOD MISSION MEET A GOOD MARKET.


There is a huge gap between the demand and supply in the financial inclusion model, and the way to fill this gap is imparting financial literacy to the people in the rural areas, AS Shekhawat, chairman, Kshetriya Gramin Bank, said.

“While there is no problem at the supply side, there is no demand for it at all. Those who want to avail of the services do not know what kinds of services are there and how to access them. This gap can be filled by providing financial literacy to the people,” he said.

Financial literacy, he added, could be provided through media or through schools. “Schools can have chapters on financial inclusion. It could be incorporated in the curriculum of the schools,” he said.

Talking about the bright future of microfinance, he said while at present it would seem like expenditure, in future it would be considered an investment. 
 

 


RB Gupta

General Manager, Priority Sector, Central Bank of India


‘Moneylenders as the BCs would be the best choice’
Second panel discussion
FINANCIAL INCLUSION: WILL A GOOD MISSION MEET A GOOD MARKET.


Financial inclusion is definitely a good mission, and it will be a good market too if it’s done properly and in a systematic manner, RB Gupta, general manager, Central Bank of India, said. “Opening bank accounts is not the solution. Credits should be made easily available for it to work,” he said. The problem of the huge gap between the demand and supply side is the lack of financial literacy among a large section of the population, he pointed out.
 

 


Irfan Alam

Founder of Sammaan


‘Moneylenders as the BCs would be the best choice’
Second panel discussion
FINANCIAL INCLUSION: WILL A GOOD MISSION MEET A GOOD MARKET.


For the success of financial inclusion, it is necessary that it is taken very seriously,” said Irfan Alam, founder, Sammaan Foundation. There is a need to look at it from a strategist’s point of view, he said. Citing the example of automated teller machines (ATM), he said when it was launched, people were sceptical that the machine would not work. However, today one cannot do without it. Similarly financial inclusion or microfinance, which is looked at sceptically would find its market soon. “It has to be seriously looked at as a market,” he said. “Till now it has only been seen as a mission or rather a mandate. And the moment it is seen as a market, things are going to change.”

 


R S K Jaiswal

Chairman, Vananchal Gramin Bank


‘Moneylenders as the BCs would be the best choice’
Second panel discussion
FINANCIAL INCLUSION: WILL A GOOD MISSION MEET A GOOD MARKET.


Microfinance is the answer to the exorbitant rate of interest the moneylenders charge in villages, BK Mishra, chairman, Vananchal Gramin Bank, said. “Moneylenders charge as much 10 percent per day of interest for the money they lend. And despite the high rate of interest why are they are much sought after in villages? It is because of the flexibility and ease with which the money is available with the moneylenders,” he said. The only way to reduce the control of the moneylenders in the rural areas is to make available credit to them easily and at affordable rate of interest, he added.   

 

 

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