Taking banking services to last mile: Women self-help groups driving financial inclusion in India

The incorporation of SHG members as BC Sakhis helps in ensuring financial inclusion, timely capitalization, digitalization of SHG transactions, and overall development of the community.

BC Sakhi, financial inclusion, last mile banking, banking system
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Manoj Kumar Singh

India’s policy towards financial inclusion as a propeller of economic growth is at the forefront of the Government’s considerations for some time now. In January 2020, the Reserve Bank of India published the National Strategy for Financial Inclusion 2019-2024 in a bid to integrate the country’s existing 190 million unbanked population into the financial mainstream. As part of the strategic objectives identified, the RBI laid out certain milestones, the foremost of which is to provide banking access to every village. Easier said than done for a country as vast and populous as India.

To achieve this objective, the more effective model that has been identified and being adopted is the Banking or Business Correspondent model. While this model’s merit was acknowledged way back in 2007, its complex economics and logistics require the support of the Federal Government, the Banking System, and the States.
While India’s banking sector is witnessing a paradigm shift led by technological evolution, infrastructure remains a veritable constraint, which limits access to financial services for poor people living in remote areas.

The Business Correspondent model, known as the BC Sakhi program, due to its ability to provide doorstep services and supported by technology, is a more sustainable alternative to a banking channel, for areas where the business is yet to reach an acceptable scale for banks to open a branch. The SHG platform has proven to be pivotal in this task, because of its comprehensive reach and influence at the community level.

At the same time, the scheme also provides the SHGs timely capitalisation to be able to support entrepreneurial efforts at the micro-level. Given the efficacy of the Business Correspondent model, the UP State Government is now leveraging its vast SHG platform to take banking services to unbanked and under-banked areas and increase financial inclusion at the grassroots level.

Nurturing the BC Sakhi initiative

In Uttar Pradesh, where the Government has taken the responsibility of implementing the ‘Deendayal Antyodaya Yojana-National Rural Livelihood Mission’ (DAY-NRLM), efforts are afoot to establish a robust network of Banking Correspondents who will become the harbingers of the state’s financial inclusion endeavour. And the state has identified the women associated with SHGs as the soldiers of its Business Correspondent Sakhi (BC Sakhi) program.

The incorporation of SHG members as BC Sakhis helps in ensuring financial inclusion, timely capitalization, digitalization of SHG transactions, and overall development of the community. It further strengthens the objective of building the entrepreneurial abilities of women. These Sakhis belong to the same communities where they provide service, making them easily accessible. Importantly, with the SHG members having the basic financial literacy and the experience of handling money, these Sakhis are fundamentally inclined to grasp the basic executive functions and better suited to orient faster to institutional practices required for the banking correspondent’s role. In all, they emerge well equipped to bridge the financial services divide that exists in the system.

Giving shape to a plan

On 21st May, the Uttar Pradesh Government announced a proposal to induct 58,000 BC Sakhis, one for every existing Gram Panchayat. This is expected to create an enormous effect by virtually establishing a one-stop solution for all banking needs of every local household at its doorstep.  At present, the Department of Rural Development is conducting a thorough selection and recruitment process based on a robust mobile app-based mechanism. The selection process has been designed keeping in mind the ubiquitous notions of merit such as leadership traits, courage to take the first step, the ability to deal with the new, and the potential to breach social barriers along with an entrepreneurial instinct.

Existing readiness shows promise

The Government is also trying to leverage the potential of Payment Banks and Fintechs in anchoring the BC Sakhis, besides PSU Banks. Attention is also being given to the potential candidate’s affinity towards technology and the ability to adapt to an ecosystem that demands integration with technology. In this regard, contrary to the Department of Rural Development’s apprehension, it has been noted that more than 70% of the total 2.17 lakh applicants have access to smartphones and on its possible use, 68% of candidates were found to believe that it will provide access to information or news and create awareness.

Furthermore, 1.13 lakh responders said that mobile apps can aid in keeping books and maintain a digital record of all financial transactions, and unprecedentedly, 1.32 lakh applicants expressed that smartphone app will enable them to “remain in touch” with other SHG members and create ease of operations.

These findings not only speak of the readiness of the women of rural Uttar Pradesh but essentially reaffirm their entrepreneurial aspirations. The BC Sakhi program has unearthed a new and untapped potential of rural Uttar Pradesh to forge a way out of poverty, economise the region through enterprising efforts, spur growth for the state, and lead India towards greater financial inclusion.

Manoj Kumar Singh is Additional Chief Secretary, Rural Development and Panchayati Raj, Government of Uttar Pradesh. Views expressed are the author’s personal. 

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