The first time I heard about Financial Inclusion was in one of my banking classes but at that time, those were just two words barely related to the subject. In my earlier life, it had never occurred to me that opening a bank account, withdrawing money from ATM or having an insurance is a privilege. Access to these financial services have been a part of my daily routine and thus, I could never look at them differently, from the perspective of being at an advantageous position in the society. The availability and affordability of these products/services never struck and the fact that banks were ready to provide it out of commercial interest, was unclear. These were like any other services available in the open market.
Having spent nearly six months in the Salumber block of Udaipur district, I am now gradually able to understand that financial inclusion is not just a term but a broad concept which has the power to elevate people from poverty and provide a sense of security. As a part of my project with Shram Sarathi here, I got an opportunity to interact with people who constitute a major part of the informal economy and share a significant portion of India’s GDP but are still denied from mainstream financial services.
People who are not visible in the eyes of tax authorities, seldom get entertained by the banking sector because of the perceived risk. Sometimes, I feel that these risks are overstated as there has been a rise in the number of corporate loans turning into Non Performing Assets (NPA) and hence, applying for debt restructuring reforms.
The risk taking capacity of someone whose livelihood is solely dependent on the informal sector is nothing in comparison to the amount of corporate loans being written off as bad debts. If RBI policies can allow banks to trust fake businesses with genuine documents then it should also allow genuine businesses with or without documents. In any other scenario, the game is not fair enough.
Mahesh Shankar* is in his mid thirties. He runs a small two-wheeler repair shop in Sabla village, and lives with his wife and two kids. The income from his shop is used to support household expenses and kids’ education. They have no alternate source of income. He started the shop by fixing bicycle punctures and over the last ten years, has successfully managed to move up the ladder where he now offers a wide range of services. It has helped improved his earnings over the years.
In the initial phase of his venture, in order to diversify, he was able to raise capital through the help of an SHG (Self-help group). As the business grew, the need for capital also increased. It was too much to be fulfilled by an SHG. As a result, he started visiting local banks. After doing that for nearly eight months, with requests of a loan worth Rupees One Lakh, it did not lead to anything. All his applications were denied. The reason he was given each time, was lack of paperwork and other such prerequisites. Even though he was denied, he did not want to take credit from local moneylenders as he was afraid to keep repaying it off throughout his lifetime. I had only met him with the purpose of gathering information but he looked at me with an optimism expecting that I would help him in getting a bank loan.
Mahesh may have been patient all this while to avail credit only through a formal channel but there are many who do not want to go through this painful process. They rather take loans from informal sources so that they can fulfill their immediate needs and sustain their livelihoods. Eventually, this leads to a fall in the vicious circle of being forever indebted with one loan after another. In absence of a formal financial institution, people have no choice but to become the victim of informal credit practices where they are charged exorbitantly high interest rates combined with exploitative terms and conditions.
I met a few women who have mortgaged their jewelry with the local moneylender for the purpose of raising funds to meet her financial needs. Luckily, with some amount of financial assistance from Miro Finance Institutions (MFIs) working in this region, they have been able to repay the loan and get back their jewelry but that’s not always the case.
Because of the stringent policies of financial institutions and the commercial interest associated with their financial services, it could be possible that access to finance cannot be compared with other basic rights. As far as my understanding is built around how strongly Financial Inclusion is associated with human rights, it is still a subject of an ongoing research to ultimately conclude whether Financial Inclusion has a direct impact or a derived impact on human rights.
*Name changed to protect identity