On a field trip to the outskirts of Delhi earlier this year, I met a group of women—micro-entrepreneurs, home-makers, daily-wage workers—who were part of our financial literacy project. Salma Bano, a 30-year-old mother of two, was one of them. Salma runs a small shop near her home, selling food items and snacks. She opened her first bank account in September 2013, but carried out only one transaction over six months. She lacked the know-how and confidence to access her account, and was unaware of financial benefits available to her.
There are many women like Salma among the low-income population. Statistics show that while the number of women who opened bank accounts increased significantly within one year of the launch of the Pradhan Mantri Jan-Dhan Yojana, only 57% were actively using their accounts. This suggests that an uptake of financial product may not automatically translate into adoption. If India is to advance along the road of financial inclusion, we need to empower the end-users by building their financial capability, taking into account their specific needs.
But it’s easier said than done.
A big challenge to achieving this objective is the existing information gap between channels that deliver financial services and products, and the clients. This gap includes lack of clarity among clients on various offerings and options, which can lead to unsound financial decisions. For example, due to the lack of relevant information, a client seeking a loan may go to a moneylender instead of approaching a bank. This gap can be bridged if we focus on the needs and capacity of the client.
Imparting financial literacy and hand-holding the client is the first step. Field-level workers (FLW), who are the first point of contact for clients, play a crucial role here. From providing information on basic products and services, to assisting them in navigating through new technology, FLWs form a critical link between clients and their ability to access financial services. It was with the guidance of an FLW that Salma became aware of the benefits of saving in a financial institution, and today she has not only opened a recurring deposit account for herself, but also for her daughter. Considering the significance of their role in influencing clients’ financial behaviour, it’s crucial to invest in building the capacity of FLWs.
At Grameen, we are empowering the frontline workers of our partner financial institutions by providing technical training with a human-centric approach that focuses on hand-holding the client rather than inundating them with information. The training is provided through an Android-based mobile app G-LEAP, where workers can access learning material any time.
But imparting financial literacy may not be enough if it is not aligned with the client’s financial goals. In most cases, clients are concerned about their immediate needs and lack the mind space to plan for the long term. Hence, it’s important that FLWs facilitate the clients to set long-term financial goals and track their progress on a regular basis.
Another step towards making clients financially included is by giving them access to the right channels. A large segment of low-income people live in rural, peri-urban areas. They are reluctant to travel long distances for financial transactions. For a daily wage earner, going to a bank means not only spending money on transportation, but also missing out on a day’s wage. The solution is creating access points closer to their homes so that performing routine transactions becomes convenient, leading to long-term behavioural change. As part of our initiative, we set up Aadhaar-enabled terminals for basic transactions that are available at their doorstep or nearby kirana shops.
Finally, today most financial institutions are keener on selling products they already have instead of spending time on understanding the specific needs of clients. Instead of focusing on short-term gains, we need to design solutions customised according to the client’s capability and requirements.
India is undergoing a digital transformation, with technology being used incrementally across financial products and services. This, coupled with the government’s emphasis on creating a strong digital ecosystem, has provided the right impetus to build and scale up financial capability. But to achieve that, we need a shift in the cultural mindset, putting the client first and creating better products that meet their goals and aspirations.