Business Correspondent Model For Financial Inclusion-20
Business Correspondent Model For Financial Inclusion-20
Business Correspondent Model For Financial Inclusion-20
“Access to banking is a fundamental aspect of financial “Financial exclusion is the lack of access by certain consumers
inclusion and can act as a gateway to further products to appropriate low cost, fair and safe financial products
and services. Inability to access a basic bank account can and services from mainstream providers. Financial exclusion
have significant impact on both individuals and economies. becomes of more concern in the community when it applies
However, simply having a bank account is not in itself to lower income consumers and/or those in financial hardship.
sufficient. The ultimate goal is to provide the account Financial exclusion is observable at individual, family, or
holder with access to the facilities that bank accounts can household level, but can also be heavily concentrated in
offer, such as storing money safely, receiving electronic suburbs or regions, and sometimes among ethnic minorities
payment of wages (which increases employment in a suburb or region.”10
opportunities), the ability to cash cheques without paying fees All of the definitions mentioned above primarily advocate the
to intermediaries, accessing the savings that can be made by need for covering the poor and vulnerable group in to
paying for services directly, and by purchasing goods online.”4 the credit delivery system. However time has arrived that
“FI means providing access for individuals to appropriate they be brought in to the gamut of larger financial system
financial products and services. This includes people having covering all kinds of financial services.Simply put FI is
the skills, knowledge and understanding to make best use of not just about people having ‘access’ per se to a basic
those products and services. Financial exclusion is often a bank account, or being provided with the opportunity to open
symptom of poverty as well as a cause.”5 an account. Public can only be properly ‘included’ if
they have access to fair, affordable products and services
“The stark reality is that most poor people in the world (financial) that meet their needs, they are treated fairly,
still lack access to sustainable financial services, whether it ethically, and with integrity by the financial institutions that
is savings, credit or insurance. The great challenge before us provide those products and services and there is evidence
is to address the constraints that exclude people from full that they use those products and services effectively. A narrow
participation in the financial sector. definition of inclusion can have the effect of disguising the
scale of financial exclusion and exaggerate the success of
Together, we can and must build inclusive financial
initiatives undertaken.
sectors that help people improve their lives.”6
Any economy can claim of complete FI only when financial
“Financial inclusion has generally been defined in terms of
services like insurance (life, health and property) are
exclusion from the financial system. Broadly, financial
availed of by larger sections of the society. They must be
exclusion is construed as the inability to access necessary
comfortable while using banking services with the help of
financial services in an appropriate form due to problems
latest technology. Financial literacy about availability of
associated with access, conditions, prices, marketing or self-
credit, methods of repayment, new financial products and
exclusion. The working or operational definitions of financial their availability, etc., must be on the higher side. By bringing
exclusion generally focus on ownership or access to particular the vulnerable group into the peripheral of the existing system
financial products and services. There is no single growth can be achieved with social justice.
comprehensive measure that can be used to indicate the extent
of financial inclusion across economies. Specific indicators
such as number of bank accounts, number of bank branches, 1.2 INCLUSIVE GROWTH AND
that are generally used as measures of financial inclusion, IMPORTANCE OF FI
can provide only partial information on the level of financial The approach paper of eleventh plan brought into foray the
inclusion in an economy.”7 concept of ‘inclusive growth’ in India.11 The role of FI in
Financial inclusion could be defined “as a process that fostering inclusive growth could never be over emphasized.
ensures the ease of access, availability and usage of the formal The fact that the level of FI is very high in developed countries
financial system for all members of an economy.”8 in comparison with emerging economies is a sufficient
condition for working towards FI. Apparently, finance is the
The Government of India’s ‘Committee on Financial life blood of any human or economic activity. Finance gives
Inclusion in India’ begins its report by defining Financial the much needed motivation and functions as a lubricant
inclusion “as the process of ensuring access to financial to make the wheel of any economy to rotate. Any objective
services and timely and adequate credit where needed by of inclusive growth could be made possible only when
vulnerable groups such as the weaker sections and low sufficient attention is given to the level of FI. The following
income groups at an affordable cost”9 table gives an overview of the position of India vis-à-vis
Chapter 1: Introduction 427
Note : Dimensions used in the Survey are Banking Penetration, Spain is leading the list with higher levels of FI under both
Availability of Banking Facility, and usage of Banking. the heads. India has been pushed down in the ranking well
Source : Adapted from working paper # 215 by Mandira Sharma, below Malaysia, China, Thailand, Japan and Korea. The size
IICEIR. and the spread of the countries do matter in order to have
Table 1.2.2 Index of Financial Inclusion (IFI) (Two Dimension)
comparisons of the like. However, as the parameters were
(Availability and usage) based on per capita, the comparisons need to be addressed
with required level of seriousness. India, tipped to become
Name of the IFI Name of the IFI
super power in South East Asia and the whole of Asia should
country Rank country Rank
find out ways and means to improve its performance. A score
Spain(0.792) 1 Finland 33 of 0.5 and above should be aimed by the policy makers. An
Canada 2 Hungary 34
assessment about the position in India on the three factors
Portugal 3 Bahrain 35
namely, BP - Banking penetration (Number of bank accounts
Germany 4 Belize 36
divided by total population), BS – Banking Services (Number
Austria 5 Morroco 37
of bank branches per thousand population), BU – Usage of
Switzerland 6 Kuwait 38
banking system(volume of credit and deposit as a proportion
Belgium 7 Chile 39
Netherlands 8 Kenya 40
of GDP) with the help the available data indicate the need for
Denmark 9 Egypt 41 strengthening all the three. Reference to Table 1.2.3 reiterates
Malta 10 West Bank Gaza 42 the need for conscious efforts on the part of Indian
France 11 South Africa 43 Government and policy makers in order to move vertically
Italy 12 Brazil 44 above the present position that India holds. Developed
Iceland 13 Guyana 45 countries also have problem of FE as no country could achieve
Newzealand 14 Czech Republic 46 the perfect score of 1 as per the study mentioned above.
Lebanon 15 Estonia 47 However, the level of exclusion appears to be not as severe
Australia 16 Bulgaria 48 as it is found in India. The current statistics about the various
United Kingdom 17 Slovenia Republic 49 parameters used for the study would further emphasize the
Greece 18 India (0.170) 50 need for strengthening FI in India.
428 Suitability of Business Correspondent Model for Financial Inclusion in Slums in Mumbai
Table No. 1.2.3 Progress of Commercial Banks in India
June March March March March March March March March March March
IMPORTANT 1969 1999 2001 2002 2003 2004 2005 2006 2007 2008 2009
INDICATORS 1 2 3 4 5 6 7 81 9 10 11
†
Banks-Branches 8262 64939 65919 66190 66535 67188 68355 69471 71839 74326 79056
Rural 1833 32857 32562 32380 32303 32121 32082 30579 30551 30732 31489
Semi Urban 3342 14168 14597 14747 14859 15091 15403 15556 16361 17212 18764
Urban 1584 9898 10293 10477 10693 11000 11500 12032 12970 13944 15325
Metroplitan 1503 8016 8467 8586 8680 8976 9370 11304 11957 12438 13478
Population per office 64 15 15 16 16 16 16 16 15 16 15*
(in thousands)
Deposits of SCB (Rs.Cr.) 4646 714025 989141 1131187 1311761 1542284 1732858 21090491 2608309 3196940 3937336
Credit of SCB (Rs.Cr.) 3599 368837 529272 609053 746432 865594 1124300 1507077 1928913 2361913 2857525
Deposits of SCB (Rs.Lakh) 56 1100 1501 1709 1972 2295 2535 3036 3631 NA NA
Credit of SCB (Rs.Lakh) †44 568 694 920 1122 1288 1645 2169 2685 NA NA
Per Capita Deposits SCB Rs 88 8498 9758 10994 12554 14550 16091 19276 23468 28610 NA
Per Capita Credit SCB Rs †68 4531 5221 59191 7143 8166 10440 13774 17355 21218 NA
Bank Deposit of SCB
as percentage of NI †5.5 53.5 58.9 60.7 65.3 68.5 68.5 73.8 79.1 74.7 NA
Credit Deposit Ratio 77.5 53.3 53.5 53.8 56.9 56.1 64.9 71.5 74.0 74.6 72.6
Source: Adapted from various tables. RBI annual publications op banking statistics
NA – not available
*Projected mid year population from census office divided by no. of offices.
The banking statistics given above indicate the level of banking Following may be the direct outcome of complete
penetration. Branch per thousand people work out to be financial inclusion.
15,000 at the end of March 2009. It is quite surprising that
z Uniform growth in all sectors of the economy
the figure seems to be around the same for several years
z Equal opportunities for all the segments in society
earlier. The bank branches has increased to 79056, at the end
z Stability of the financial system
of March 2009. The deposit ratio and the credit ratio seem to
z Smooth mobility of factors of production within the
move positively but appears to be largely inadequate country
considering the requirements. There is a definite need for z Eradication of poverty and improvement in the standard
improvement for moving ahead in the IFI rankings. Systematic living of the individuals
and disciplined banking habit is one sure way for enhancing z Overall improvement in the quality of life
FI. z Better distribution of wealth (prevents concentration of
The IFI study has identified and considered only the banking wealth in few hands)
habit of people for measuring FI. On the contrary FE/FI z Discourage, and in the long run prevents the growth of
needs to be examined with a broader perspective. Twentieth parallel economy
century has ushered in a variety of new financial products z Better image for the country
and programmes designed and developed for optimizing the z Better utilization of the resources
use of financial resources. These new products must reach z More employment opportunities
the masses. Innovative financial products enter the market z Empowerment of vulnerable group in the society
with the primary intention of maximum reach. These products Efforts, therefore, must be in place for spreading awareness
have several unique features that they may help in the about the new developments in the field of banking and
betterment of the social and economic life of the users. By finance in terms of products and processes such that the
making the potential users aware of the benefits of these desired benefit is achieved at the national level. Currently
innovative products, the very purpose of financial innovation the reach is rather restricted to a small segment of the
can be achieved. population who voluntarily takes interest in knowing and
Chapter 1: Introduction 429
understanding the developments in these areas. What is encroaching on the unused tracks of land. This denies them
required is a large-scale financial literacy initiative so that access to civic amenities like water, sanitation and electricity.
the inclusive growth can be achieved by the end of the However, with the passage of time they regularize their
eleventh plan period, i.e. year 2012. tenements with the help of political or social pressure and
establish their position. Once settled, they have option to
Complete financial inclusion may not be a sufficient condition
enhance their occupational skills to become financially better
for the economic development of a country but definitely it
off. (Slums in Mumbai, Dharavi – Annexure – 3.I and 3.III).
is a necessary condition.
Besides these slum dwellers, there are pavement dwellers,
construction workers and contract labourers who constitute
1.2 NATURE OF FE IN INDIA the group identified as urban poor. They are vulnerable not
Financial inclusion or exclusion is a subject of interest for all because they have low income but because of their fear and
those who are interested in finance. The concept could be anxiety about the financial activities which are organized. If
discussed at different levels, viz., district, city, state, national proper measures are worked out to alleviate their fear and
as well as international. However, a focused study will give anxiety, they would willingly join the mainstream and contribute
adequate analytical support ,thereby the interpretation of the positively towards ‘inclusive growth’
results give proper direction. The study proposes to
concentrate on the FI or FE in India with special reference to NOTES AND REFERENCES
the vulnerable group in the urban areas. It is imperative to
point out that the level of FE in urban India is as comparable Mandira Sharma,2008, “Index of Financial Inclusion”,
as in the case of rural India. As rural urban migration is on ICRIER working paper 215.
the rise, FE gets spread to urban centres also. Usha Thorat “Financial Inclusion and Information
Technology”, RBI bulletin, October 2008, p.1643
Migrants from rural areas migrate to urban centres in search
of jobs and employment. The mismatch between the skills RBI Quarterly Report on currency and Finance 2006-08 Vol
they possess and what is required by the potential employers II Chapter VII.
leave them with very few alternatives to survive. Some of United Kingdom was one of the first countries to realize the
them start business of their own. Majority of them become importance of Financial Inclusion. A task force was set
helpers, drivers, servants, cleaners, launderer and the like. up to deliberate on the issue continuously. Launched in
Some indulge in setting up tea stalls, farsan shops, etc. Those Feb 2005, the members meet to discuss issues on FI.
who are good in certain artwork or craft, make pieces of art This definition is an extract from the proceedings.
and market them. Irrespective of the occupation or vocation, (Extracted from official website.)
their income levels are low. It is just sufficient to sustain with Malcolm Chisholm, MSP (Minister for Communities) quoted
the basic necessities. Major problem faced by these migrants as a part of the Scottish Executive’s “closing the
is affordable housing, as housing is highly expensive in urban opportunity gap- Approach to tackling poverty”, Scottish
areas especially metropolitan cities (migration is found to be Executive, Edinburgh, 2005. As quoted in the official
maximum in metropolitan areas),12 they choose to settle website.
down in slum areas. Annexure 1.I gives an idea about the Kofi Annan, UN Secretary-General as quoted in Blue Book.
rate of urbanization all over the world with special reference ‘Building Inclusive Financial Sectors for Development’.
to India. Blue Book is the result of discussion by experts in micro
A detailed study on the nature and the characteristic features finance. It is brought out under UNCDF. UN declared
of urban agglomeration reveals certain pattern world over. 2005 as the year of micro credit.
As per the report, urbanization rate is showing an upward Usha Thorat “Financial Inclusion and Information
trend. Alarmingly, the growth rate of population in urban areas Technology”, RBI bulletin,October 2008
is greater than the population growth rate. (Annexure I.1 for
Mandira Sharma,2008, “ Index of Financial Inclusion”,
statistical details of the urban agglomeration.) The study also
ICRIER working paper 215.
made a reference to the growth of slums. As per the available
statistics, if the growth rate of slum population continue to Report by the committee on Financial Inclusion – Rangarajan
remain the same, fifty percent of the world urban population committee 2008.
will stay in slum areas. Details about the slum settlements Report on Financial Exclusion in Australia, ANZ, Nov. 2004.
and the rate at which they proliferate are visible from the XI th Plan approach paper, Elevan Five Year Plan 2007 - 12
data given. Proliferation of slums is a matter of serious volume - I Inclusive Growth.
concern for the civic bodies.
Statistical year book for Asia and Pacific2007, p.15,
They (slum settlers) start setting up their tenements by UNESCAP (United Nations Economic and Social
commission for Asia and Pacific)
ANNEXURE-1.I
URBANISATION – A GLANCE
Urbanization rate Urban population growth rate Slum population
% of total population Per cent per annum % of urban
population
1990 1995 2000 2005 2007 90-95 95-00 00-05 2007 1990 2005
East and North-East Asia 33.0 36.6 40.4 44.5 46.1 3.1 2.9 2.6 2.3 46.0 33.2
China 274 314 358 404 422 39 36 32 28 436 32.9
DPR Korea 584 591 602 616 623 18 15 10 09 – –1
Hong Kong, China 995 1000 1000 100o 1000 18 14 12 10 †– –1
Japan 631 646 652 658 662 0.8 0.4 0.3 03 †– –1
Macao, China 998 999 1000 loo o 1000 2.1 1.4 1.4 0.8 †– –1
Mongolia 570 568 566 567 569 1.4 0.6 0.9 12 685 57.9
Republic of Korea 738 782 796 808 81.3 2.2 1.1 0.8 0.6 68.5 1
South-East Asia 31.6 35.3 39.7 44.0 45.7 4.0 4.0 3.5 3.2 39.4 34.1
Brunei Darussalam 65.8 68.6 71.1 73.5 74.4 3.7 3.2 3.0 2.7 † 1
Cambodia 12.6 14.2 16.9 19.7 20.9 5.7 6.0 5.0 4.8 71.7 78.9
Indonesia 30.6 35.6 42.0 48.1 50.4 4.6 4.8 4.1 3.5 32.2 26.3
Lao PDR 15.4 17.2 18.9 20.6 21.4 5.1 4.1 3.5 3.6 66.1 79.3
Malaysia 49.8 55.6 61.8 67.3 69.3 4.9 4.7 3.7 3.2 † 1
Myanmar 24.9 26.1 28.0 30.6 31.9 2.4 2.7 2.7 3.0 31.1 45.6
Philippines 48.8 54.0 58.5 62.7 64.2 4.4 3.8 3.5 3.2 54.9 43.7
Singapore 100.0 100.0 100.0 100.0 100.0 2.9 2.9 1.5 1.2 † 1
Thailand 29.4 30.3 31.1 32.3 32.9 1.7 1.6 1.5 1.7 195 26.0
Timor-Leste 20.8 22.7 24.5 26.5 27.3 4.5 0.8 7.1 5.3 † 1
Vietnam 20.3 22.2 24.3 26.4 27.3 4.0 3.4 3.2 3.1 60.5 41.3
South and South-West Asia 28.0 29.2 30.5 31.8 32.4 3.1 2.8 2.5 2.5 59.9 37.3
Afghanistan 183 197 213 229 236 9.2 4.1 5.4 5.7 985 1
Bangladesh 19.8 21.5 23.2 25.1 25.9 4.0 3.6 3.5 3.4 87.3 70.8
Bhutan 7.2 8.3 9.6 11.1 11.8 1.4 5.0 5.7 4.4 70.0 1
India 25.5 26.6 27.7 28.7 29.2 2.9 2.7 2.4 2.4 60.8 34.8
Iran (Islamic Rep. of) 56.3 60.2 64.2 66.9 68.0 3.3 2.5 1.8 21.5 1.9 30.3
Maldives 25.8 25.6 27.5 29.6 30.5 2.7 3.4 3.1 3.4 † 1
Nepal 8.9 10.9 13.4 15.8 16.7 6.9 6.8 5.4 5.0 96.9 60.7
Pakistan 30.6 31.8 33.1 34.9 35.7 3.3 3.3 2.9 3.0 78.7 47.5
Sri Lanka 17.2 16.4 15.7 15.1 15.1 0.2 -0.2 -0.3 0.3 24.8 1
Turkey 59.2 62.1 64.7 67.3 68.2 2.8 2.5 2.2 2.0 23.3 15.5
Asia and the Pacific 33.3 35.5 37.9 40.4 41.4 2.8 2.7 2.4 2.3 50.9 35.0
LLDC 34.8 33.3 32.8 33.0 33.2 1.4 1.1 1.9 2.3 88.0 79.1
LDC 19.2 20.7 22.5 24.5 25.4 4.1 3.7 3.7 3.7 72.9 67.5
ASEAN 31.6 35.3 39.7 44.0 45.7 4.0 4.0 3.5 3.2 39.4 34.1
ECO 43.4 44.4 45.8 47.1 47.7 2.7 2.4 2.2 2.4 52.5 34.2
SAARC 25.0 26.1 27.3 28.5 29.1 3.1 2.8 2.6 2.6 65.2 40.6
Central Asia 47.7 45.8 44.4 44.1 44.2 0.0 -0.1 0.7 1.1 –† –1
Pacific island dev. econ. 21.5 21.7 21.7 21.9 22.1 2.6 2.3 2.3 2.3 –† –1
Low-income 25.4 26.6 28.0 29.6 30.4 –† –† –† 30 733 55.8
Middle-income 31.9 34.5 37.3 40.1 41.3 –† –† –† 2.4 –† –1
High-income 69.4 71.7 72.7 73.6 74.1 –† –† –† 0.6 68.5 37.0
Other world regions Africa 32.0 34.2 36.3 38.4 39.2 4.0 3.7 3.5 3.4 62.8 51.9
Europe 70.2 71.0 71.6 72.4 72.7 0.5 0.2 0.4 0.4 –† –1
Latin America & Carib. 70.9 73.2 75.4 77.4 78.1 2.4 2.2 1.8 1.7 37.0 25.4
North America 75.4 77.3 79.1 80.7 81.3 1.6 1.5 1.4 1.3 –† –1
Other countries/areas 63.1 63.8 64.2 64.6 64.8 3.4 3.0 2.7 2.5 37.0 35.7
World 43.0 44.7 46.6 48.6 49.4 2.4 2.2 2.1 2.0 49.2 36.0
Source: Statistical year book for Asia and the Pacific 2007
2
FINANCIAL EXCLUSION – CAUSES, CONSEQUENCES
AND CORRECTIVE MEASURES
2.0 INTRODUCTION An attempt was however made with the help of the available
literature for isolating the causes for FE. The committee on
Financial inclusion and financial exclusion are complimentary
FI3 has done pioneering work with reference to the above.
to each other. FE, in fact is a hurdle in improving FI in any
Along with their findings, the recommendations of other
country. It is apt to point out here that the best way to achieve
committees such as khan committee4, and Raghuram Rajan
Financial inclusion is by removing those factors that
committee5 were consulted. The outcome is presented below.
contribute towards Financial exclusion. One of the early
definitions by Leyshon and Thrift (1993)1 defined FE as
referring to those processes that serve to prevent certain social 2.1.1 Demand Side Factors
groups and individuals from gaining access to the formal
financial system. Inability to access necessary financial FE many a time is found to be the choice of an individual.
services in an appropriate form brings about FE according to For variety of reasons individuals would like to exclude,
Sinclair (2001).2 Few other experts opine that exclusion from themselves from the formal financial system. In the present
financial system is many times self motivated. Access study also when question was asked (Q.10th Annexure 3.VI)
problems, prices, lack of awareness are few other things that about the reason for not opening a bank account the
respondents answered by saying ‘I don’t like banks’, I am
contribute towards FE. Efforts were made to find out the major
afraid of banks’ etc. Thus, self motivated exclusion is a
causes of FE. Available literature was consulted for the
major factor. In addition the following also prevent people
purpose. Causational factors of FE in general are covered in
from participating in the regular and systematic financial setup.
2.1 paragraph in this chapter. The impact of such exclusion
and its manifestation is given in paragraph 2.2. 2.3 paragraph z Low disposable income.
outline the measures undertaken by the GOI. The measures z Locational aspects (lack of permanent address etc.)
adopted by various other agencies under the guidance of GOI z Wrong perception of financial products.
and RBI is also mentioned. An overview of the BUSINESS z Possibility of transparency thereby a kind of suspicion.
CORRESPONDENT MODELS that are currently followed z Proximity to money lenders.
in India are given in paragraph 2.4. It also explains the need z Complicated procedure and formalities
for examining the suitability of BC for FI in urban slum areas. z Lack of awareness about financial products and services
z Shyness and embarrassment.
z Illiteracy(financial) and misunderstanding about financial
2.1 FINANCIAL EXCLUSION – CAUSES products.
Financial exclusion is a generic term. It covers the group of z Lack of timely assistance (delay)
population who are excluded from the mainstream of formal z Superstitious thinking about insurance products.
z Expensive. (High transaction cost).
financial system. As referred earlier the causes of FE is
multiple and diverse. It may differ according to gender, age It appears that people opt out of financial system due to their
group and occupation. Reasons for FE, therefore, require to own limitations. In any market, ‘demand pull’ is a necessary
be studied and analysed by evaluating the group under study. condition for adequate coverage.
432 Suitability of Business Correspondent Model for Financial Inclusion in Slums in Mumbai
Market for financial services seems to be lagging behind in powerful informal system which has penetrated deep in the
this aspect. Indian Society. This group popularly known as money lenders
and pawn brokers wield enormous power on the poor and
2.1.2 Supply Side Factors vulnerable group. While conducting this research the
researcher came across a social worker who narrated the
This comprises of all those agencies and institutions that are growth of pawn brokers in Dharavi area. (See Box.2.1)
responsible for designing, developing and marketing financial
products and services. These products and services are Box 2.1
marketed as per their marketing plan. “It can be said that
A particular pawn broking family took a place on rent
these supply side agencies seem to have missed a great
by giving a deposit of RS10,000 for a 3x3 shop in
opportunity of tapping the urban poor.” the then managing
Dharavi with great difficulty in 1989. Today that family
director of Indian bank (2007)6 made an observation to this
owns 12 shops in Dharavi each valued at a price not
effect at the time of inaugurating the first bank branch at
less than 60 lakhs which are large enough to
Dharavi. Banks, financial institutions, NBFCs have been
accommodate 3 shops of the original size they started
concentrating on enhancing the FI of the farmers and artisans
with. They provide loan virtually on anything that is
of the rural segment .They have been turned myopic as far as
being pledged by the poor and needy.
urban groups are concerned. However, with respect to rural
coverage these agencies have done a commendable job. They
These moneylenders have the tendency of luring the
have successfully created suitable channels for credit
customers by simplifying the procedure for borrowing. Since
distribution. Alongside, they have developed new insurance
the pawn brokers can give money any time, the poor and
products also. However, reports of various committees and
needy approach them. Quite unfortunately, it is found that
the current situation exemplify the inability of the efforts in
these moneylenders guide the poor towards wrong habits
achieving the complete financial inclusion. There seems to
because of their vested interest and make them remain
be more scope for concerted action in these pockets also.
indebted to them permanently. Cash transactions always have
Following are the supply side related factors which hinder
an edge over cheque based transactions. As dealings are in
the process of FI in India.
cash, this informal system thrives. What the borrowers fail to
z Standardised financial products which are beyond the understand is that the transactions in the formal set up will
comprehension of the poor and the downtrodden. be much cheaper and easier.
z Complicated procedure and multiple formalities.
z Unfriendly attitude of the service providers. 2.1.4 Existence of Other Systems
z Use of foreign language other than the ones which the
customers are familiar and comfortable with. Habit to save is Indian Culture. This is found among the poor
z Highly priced financial products beyond the reach of and vulnerable too. Culturally, Indians have the tendency to
people below poverty line. keep some money for lean time. It is found that they have
z Stringent rules which act as a barrier. their own system of fund management. ‘Pat Pedhi’ is one
z Lack of connectivity with the community. such system where in a group brings in money every month
z Absence of awareness programme and proper and is withdrawn by a needy member. Interest is computed
advertisements. and distributed. ‘Chit Funds, Bhisi, Mahila Milan’7 are few
of such arrangements which keep a section of the population
Few of the factors listed above have already been addressed away from the formal system of finance.
by the RBI and other banks. KYC norms has been simplified.
Credit cards are made available at an affordable price.
Similarly, the community – bank linkage programme also has 2.1.5 Financial Illiteracy
been initiated. However, in order to bring the economy This point has been referred indirectly in paragraph 2.1.1.
completely out of FE, more thought process and Owing to the need of the hour, this point is given due
brainstorming is required. weightage in this part of the report. Financial illiteracy seems
to be a major cause of FE in both rural and urban areas.
2.1.3 Strong Unorganised Sector Financial Literacy8 is to be given utmost priority in the efforts
towards FI. Financial literacy does not mean computational
One of the interesting factor which keeps the poor and skill. Simple arithmetic is not the point referred here. By
vulnerable group out of the formal financial system is the literacy, it is expected that everyone is given the required
Chapter 2: Financial Exclusion – Causes, Consequences and Corrective Measures 433
Inefficient use of
Poor Social, Economic & Health Outcomes Money Financial
exclusion
Poor Education
Social & Economic Factors Personal Characteristics Demand Side Factors Supply Side Factors
Fig. 2.1
knowledge of the financial world in India. It is not expected farmers in various parts of the country can be attributed to
that the entire population get the skill to deal in foreign the condition of FE of those individuals and communities.
exchange. But the basic idea about interest rate, lending rate, The often quoted reason for this suicide rampage is the
types of loans, benefits of calculated credit, EMI, housing permanent indebtedness of the individual at the hands of
loan, health insurance, life insurance, fund management, informal group of lenders. Had they remained in the safe net
budgeting etc. are required to be imparted so that they become of formal financial system, they would have been adequately
financially literate. taken care of.
Figure 2.1 gives a bird’s eye view of the various causational Financial exclusion in urban areas bring out yet another social
factors responsible for financial exclusion in India. The two problem. It directly affects the law and order situation as the
way arrows describe the cause and effect relationship between nexus between borrowers and lenders take the shape of
financial exclusion and poverty. bonded labour. Slums in urban centres have the typical lending
community who controls several borrowers due to their
permanent indebtedness. It is said that there is a powerful
2.2 CONSEQUENCES OF FE
lobby in the established slums in India, particularly in Mumbai
Financial exclusion at macro level indeed is quite harmful to that impacts the attitudinal aspect of the slum dwellers.
the economic development of any economy. Growth Although there is no documented empirical study linking the
parameters will automatically get affected with the gap in crime rate in slums and the financial exclusion ,conventional
the financial system. These gaps allow the resources to leak wisdom provides scope for such kind of linkage.
and get lost. Growth of parallel economy due to heavy cash
(Also see importance of FI in (Chap.1, 1.2)
transactions not only harms the economy but also affect the
cultural heritage of our country. Secondly, the developmental
programmes and the budgetary allocation for the same 2.3 CORRECTIVE MEASURES
designed by the Government of India to make India a force
The Indian financial system which is effectively controlled
to reckon, may not reach the target group due to FE. The
by the GOI and RBI has been reacting positively in order to
time and energy spent on strengthening the financial system
solve the problem of FE. As observed in paragraph 2.1 many
by all the constituent members of the system would be wasted
committees have been appointed in order to study the reasons
if it does not achieve the objective of complete FI.
for FE. They have come out with detailed study of this aspect
At the micro level the community and society gets affected and have suggested various steps to be taken as
both directly and indirectly. The reports about suicide of recommendations. These recommendations got manifested
434 Suitability of Business Correspondent Model for Financial Inclusion in Slums in Mumbai
in the form of steps taken by both GOI and RBI. Branch This model has been working successfully in the rural districts
expansion programme was given the necessary thrust. of Andhra Pradesh, Tamil Nadu, Karnataka, Orissa and other
Incentives were given for those who willingly managed the north-eastern States.
rural branches. Innovative ideas were introduced. They
There have been many success stories of SHG-BANK-
include Self Help Group (SHG)-Bank linkage programme,
LINKAGE Model. The model given in Fig. 2.2 is a structural
support to Micro Finance Institutions (MFI), establishing
framework describing the process.9 In practice there are
kiosks in rural locations, kisan credit card, GCC amongst
several activities which must preceed and succeed the actual
others. SBI has been very active in introducing tiny cards
implementation. The experience of the Indian Bank in
and other related benefits.
achieving FI in a Village called ‘Mangalam’ in Puducherry is
Government of India, as a member of international bodies worth to be mentioned here. The procedure clearly underlines
deputed experts to participate in conferences and conventions the choice of right people as BC in order to achieve FI.
in order to keep track over the global developments in the
field. This enabled to be proactive as far as FI measures are BOX 2.2
concerned. These programmes definitely enhanced knowledge Rural Financial Inclusion – Mangalam Model.
transfer from developed countries. Initiatives undertaken by
the Government and RBI are given in chronological order in Objectives : (i) Open no frills /zero balance
Annexure 2.I. By acknowledging and recognizing the role of Savings bank account
business correspondents and business facilitators in fostering (ii) Deliver Pass book at door step
financial inclusion , the RBI gave a boost to the drive for
(iii) Simple procedure for KYC
complete FI in India. Initially introduced by RBI, the concept
Target Population :
was quickly accepted by many practicing banks including
744 households- 45 SHGs.
Indian Bank, HDFC Bank, Canara Bank and Union Bank of
India. The model suggested by RBI has been suitably modified People involved : Bank
by the respective banks as per the location and area covered Officials/SHG members/Student
by them. Except Indian Bank which has adapted the model /Volunteers
by orienting the requirement of rural and urban , other banks Methodology : 1 Collection of basic details by
catered to the requirements for rural financial inclusion. ICICI field survey
bank has designed a model which can be applied to both 2 Verification of ration card/
rural and urban population. Voter identity cards
3 Photograph taken on the spot
2.3.1 Models for Financial Inclusion
4 Account opening Forms filled
The most popular model for financial inclusion in rural India on the spot with the help of BCs
is MFI-SHG-Bank linkage model. As the concept of SHG
5 Open account
has picked up in the rural part of India as a convenient method
of forming a group and leveraging the benefits, it has been 6 Deliver Pass book, GCC
successfully adopted in many states in India. The model is 7 Delivery of low cost health and
presented below. life insurance policy. Result:
100 % FI
LOAN CONTRACT
At interest rate >Bank rate Source: CAB calling sep 2007
LOAN DISBURSEMENT
LOAN DISBURSEMENT
BANK MFI SHG Indian Bank, after completing this pilot project has
INTEREST and PRINCIPAL
INTEREST and PRINCIPAL successfully extended it to the other sectors of the union
territory of Puducherry. UT Puducherry has the distinction
Loan contract at Bank Interest rate (negotiable with respect to purpose) of being first State/UT in the entire country where all the
Source: Report on Rural programme
households are provided with a bank a/c. By providing low
Fig. 2.2 MFI – SHG – Bank Linkage Model cost life and health insurance,
Indian Bank has definitely enlarged the scope of FI. In all
Loan contract at Bank Interest rate ( negotiable
1,41,24510 no frills accounts were opened through Mangalam
With respect to purpose) source: Report on Rural programme model.
Chapter 2: Financial Exclusion – Causes, Consequences and Corrective Measures 435
The experience of MYRADA also reaffirms the SHG-BANK could succeed in mobilizing savings and spreading awarness
Linkage as a successful model in bringing FI in rural areas. about insurance. The bank has successfully trained their BCs
MYRADA is of the opinion that CMRC and CBO alongwith so that they go beyond banking function by providing
SAG has been able to bring in as many as 1,53,490 members financial advice to the local population.
across six States in India since 1985. SAGs under the
According to HDFC model, BCs perform certain social
guidance of MYRADA has common funds worth Rs.1525
oriented function by advising the members/clients about
million out which Rs.727 million is their savings.
social problems such as Child Labour, Solid Waste
Cumulatively, they have extended 1.03 million loans worth
Management etc. The ‘Branch Hub and Spoke’ model12
Rs.3934 million. Around 98,457 people have taken life
advocated by HDFC appear to be more suitable for urban
insurance at the end of 2008.11
FI. Under this, branch ‘Hub’ will be stationed at a particular
It is , therefore ,obvious that intermediaries either in the form location and ‘Spoke’ will be the location from where BC
of SHG, NGO or individuals are of great help in bringing the would operate. This model seem to have been successful as
financial system close to the people who need it. Experience the bank has 19 hubs and 46 spokes spread over Maharashtra,
indicate that the formation of groups like SHG and SAG is Gujrat, Andhra Pradesh and Tamilnadu within a short period
possible only in the rural environment. This may be due to of time.
the commonality of the geographic region to which they
The review of existing finance literature to find a suitable
belong to along with the long term relationship of being
model for urban poor and vulnerable group led the researcher
together. This model if is applied in urban centres, perhaps
to one and only model proposed by Indian Bank. The literature
its results may not be as exciting as mentioned above. The
related to rural areas and the methodology for bringing FI is
question did not arise as none of the banks including NABARD
rich in the Indian context. However, there appears to be a
made an attempt to think of urban poor as a target group for
visible gap in the literature related to urban financial inclusion.
FI except Indian Bank.
The committee on FI in para 7.5613 has made an obvious
remark about how the urban poor were left out of focus by
2.3.2 Business Correspondent Model the studies undertaken in the past.
This model proposed by RBI (as quoted in the report)9 also The urban model tried by Indian Bank at Dharavi was initiated
appear to concentrate only on the credit disbursement function by Indian Bank officials by conducting door-to-door
of the banks. One has to include few more parameters such campaign about the bank. Unlike mangalam model, Indian
as all other regular functions of banks like accepting deposits, Bank at Dharavi directly approached the migrant workers
remittances, money transfers etc. This would help in spreading and labourers without the help of any intermediaries.In other
the awareness of financial products also. ‘BC’ should not words the bank officials performed the role of facilitators
remain a loan facilitator only, but should be made to perform and correspondents. The bank branch opened with core
the role of an ‘advisor’,‘counsellor’ as well as a professional banking solution as they identified ‘remittances’ as the major
guide. area of concern for the migrant population. The Bank in
association with FINO introduced smart card based banking.
LOAN CONTRACT at PLR
living there are highly enterprising that it is aptly described friendly group of people working in the same place. It is
as‘mini Japan’. Given the number of households at Dharavi absolutely voluntary. Anybody who prefers to join is free
and the size of population residing ,more pronounced to join with the consent of other members. There are
measures are required to be taken. The existing four branches many advantages in such a set up .Since the members
of different banks may not be sufficient to achieve complete pull their resources and extend financial help to colleagues
FI in this vast land mass. at the time of their need a kind of personal bondage
The branches may be in a position to outreach the entire develops. This eliminates the possibility of default or delay
population by trying BC / BF model .There is an urgent need in repaying money borrowed. This system is very
to design a suitable slum centric BC model to suit the popular in Mumbai. Many co-operative banks willingly
requirement of Dharavi population. become an active partner and deposit holder for the fund.
‘Mahila Milan’ originally started by few women in Byculla,
Business correspondents for the purpose of this study means
Mumbai in order to assist pavement dwellers for getting
and include those individuals and institutions (intermediaries)
decent housing. The collective power of women could
who willlingly or voluntarily share the responsibility of the
banking and financial system byapproaching the vulnerable be well understood if one could read through the growth
groups of the society with the sole aim of motivating them of this co-operative group’. They extended their scope
to become a part of the formal system. of operations to cover credit related requirements of the
underprivileged. Under ‘Mahila Milan Credit Crisis
The research aims to collect primary data across the section Scheme’, they have been promoting savings on much
of this slum popularly described as Asia’s largest slum and similar lines like ‘pat pethi’. However the rules are different
analyse the readiness or willingness on their part for having and their reach is not restricted. With the help of SPARC,
an intermediary to enable them to join the formal financial
they are filling the credit disbursement gap in the slums
system in India. By mustering and analysing opinions from
in Mumbai. For more interesting reading on the
the branch managers operating in and around Dharavi ,the
operational aspects of Mahila Milan visit their official
suitability of BC model for financial inclusion of slums in
website.
Mumbai can be studied.
“Financial Literacy can broadly be defined as providing the
familiarity with and understanding of financial market
NOTES AND REFERENCES products, especially, rewards and risks, in order to make
Andrew Leyshon and Nigel J. Thrift (1993), Money Space, informed choices. It empowers individuals so that
Geographies of Monetary T ransformation, Part II, personal financial management including savings, credit,
Chapter 7, pp 225-228, Routledge, New York. investments, customer protection etc. are effectively
Stephen P. Sinclair, (2001) Financial Exclusion- An handled. Financial literacy is very important and
introductory Survey, CRSIS, Edinburgh College of Art, indispensable for better financial discipline.
Heriot watt University. “Challenges and potential for Indian Banks to implement
Report on the committee on Financial Inclusion, Rangarajan Business facilitator and Business correspondent models”,
Committee A Status Report, October 2006, jointly undertaken by
RBI committee on rural credit and micro finance and popularly Micro Credit Innovation Department, NABARD and Rural
known as Khan committee, 2004. Review in mid term Finance Programme.
policy report 05-06. M. S. Sundara Rajan, ‘Replication of financial Inclusion:
Report of Raghuram Rajan Committee on Financial Sector Opportunities and challenges - Indian Bank Experience’,
Reforms. Chapter 3- A Hundred Small Steps, Planning CAB Calling, July Sep-2007, p. 22.
Commission, GOI, 2009. Official website of MYRADA.
While inaugurating the first branch at the heart of ‘ Dharavi’, Aditya Puri, ‘Revolutionsing Banking Through Financial
this observation was made. As reported by the press. Inclusion & Literacy: The HDFC Bank way’, CAB Calling,
Pat pethi, Bhisi are the common terms used in groups of July- Sep 2007, pp. 39-43.
urban population in the city of Mumbai. They are typically Report by the Rangarajan Committee on Financial inclusion,
informal funds created and set up for the convenience 2008.
of the members. Ideally ‘pat pethi’ emerges amongst
ANNEXURE 2.I
2008-09 Declared as a year of financial inclusion. Source:Compiled from government announcements,press reorts,RBI
bulletin, various issues.
3
RESEARCH METHODOLOGY
Fig. 3.1
Mumbai, Maharashtra emerged as the geographic region for selection, method of enumeration, designing the required
the purpose of study for obvious reasons. A detailed reading tools for data collection, tabulation, collection of data, method
about the evolution of slums in Mumbai has been quite an of analysis and method of presentation. The following
eye opener for the researcher. (Annexure 3-I for details of paragraphs give an insight into the planning process.
slums in Mumbai) .A map showing the spread of slums in
Mumbai is also annexed to this chapter.( Annexure 3-II) The 3.3.1 Sample Selection
map referred follow the municipal wards and drawn on the
basis of municipal boundaries. A quick reference to the map The target population for each of the data sets mentioned
indicates heavy concentration of slums in G north ward. above was different given the nature, kind and purpose of
Mumbai ‘G’ north ward has the privilege of housing Asia’s data. Data set I required collection of data from the residents
largest slum. It is popularly known as DHARAVI. of the identified slum area i.e. Dharavi. With an estimated
population of 7,00,000 it was not possible to have a census
Dharavi with its diversity and the size has the distinction of study.
being chosen as the representative slum for the purposes of
academic research by both Indian and foreign students. A It was decided to choose a representative sample. SPARC
note on the nature characteristic features of this slum pocket and NSDF were consulted for the purpose. These NGOs
(Appendix 3-III) illustrates how the findings would adequately conduct field surveys on an ongoing basis for various
represent any slum pocket in India. purposes. The researcher with the help of the research design
followed by them could arrive at the appropriate sampling
BOX 3.1 method and sample size for the purpose of data collection.
According to leading social researcher at Tata Institute The sector wise population of Dharavi which was made
of Social Sciences, minimum 300 families migrate to available by MASHAL was consulted for the purpose. From
Mumbai everyday. By force or by choice they get each of the sector, the notified areas as per BMC classification
attracted to Dharavi. Once the migrants become a was identified and a list was prepared. The sectoral
resident of Dharavi, they become permanent resident distribution and the areas covered by the respective sectors
of the area. Since they could manage their livelihood are given in Annexure 3.IV.
by involving themselves in petty activities they earn their It was decided to combine the divisional parameters used by
living and continue to remain there. various studies (see Box.3.2) so that the randomness of the
sample could be maintained. Random sampling is the accepted
3.3 RESEARCH PLAN representative sampling method in statistical estimations.
Simple random sampling based on clusters was the method
In all three sets of data was required in order to achieve the
followed while selecting the respondents for the purpose of
ojectives and validate the stated hypotheses. Data from the
conducting the field survey.
residents of the identified slum area formed data set I. This
was required mainly to find out the socio economic conditions
BOX 3.2
vis- a vis the banking habit of the slum dwellers. Data
pertaining to the knowledge of the innovative financial Different classification of sectors was followed by
products also formed part of this data set. different agencies to suit the purpose of their research.
The opinion of the branch managers of various bank branches At any given point of time some agency or the other
around Dharavi area was required to assess the sensitivity on seem to be collecting data of Dharavi, observed one
the part of bankers in fostering FI in slum areas. The data social worker from the area. With the enhanced interest
collected through opinion survey formed data set II. amongst the developers (The value of land in Dharavi
has escalated in recent times due to its location. see
The four bank branches currently operating at Dharavi deal Annexure 3.I) from India and abroad, some survey or
with the customers from the area on day to day basis. data enumeration is undertaken by them on a
Documenting their experience was found to be necessary. continuous basis, he added.
The lessons learnt by them through their actual experience
would be a definite contribution to the study of this kind. Keeping pace with the trend and after due discussions with
Data based on observation made data set III. the social workers who were helping, 22 areas were identified
A plan was made to set the premise for the collection of three by the researcher. (Annexure 3.V) The areas nearby the
sets of data mentioned. It covered sample size, sample existing bank branches and those which are interior formed
Chapter 3: Research Methodology 441
the cluster for the purpose of data collection. Occupational simple language. During the pilot study, efforts were made
and social aspects were also given due consideration, as the to find out the need for preparing multi lingual questionnaire.
main objective of the study was to find the relational aspect The composition of the population at Dharavi posed
of the financial inclusion. In the same way, the sample size difficulties in segregating groups with linguistic preference.
also was determined. Further the social workers advised not to give preference to
language as it may lead to rifts when the field investigation
The number of respondents (sample size) also was determined
gets done. English language was used for collecting data.
in the same way as the figures quoted by different agencies
were different. On the basis of the approximate estimation of
the population (7,00,000) the number of respondents to be 3.3.2.2 Pretesting the Questionnaire
contacted was 1456. The actual number of respondents The questionnaire was duly pre tested with select group of
contacted after giving scope for non co-operation and non people. The non- teaching staff of R.A. Podar College
availability was 1520. However after cleaning the data the volunteered for the purpose. Pre testing was also done on
number stood at 1490.The data analysis was done by field. Valuable feedback obtained was incorporated in the
considering N = 1490. questionnaire by modifying the questions.
Data set II comprised of the opinions collected from the bank In all, there were 17 questions {Annexure 3. VII (A)}. Closed
branch managers about the urban financial inclusion in ended multiple choice questions were the type of questions
general and the suitability of Business correspondent model preferred while drafting the questionnaire. However questions
in particular. Proximity of the bank branch to Dharavi was which were asked to find out the awareness about the
the determining factor for choosing the bank. Around 41 innovative financial products gave option for the respondents
banks were chosen mainly on the basis of convenience and to give free responses. Identification related questions were
connectivity. The list of banks approached is annexed to the kept to the minimum. On the whole, questionnaire gave a
chapter. (Annexure 3.VI) fair chance to the respondents to choose between the
Data set III technically does not contain any data. However alternatives and also to express their view point freely.
on the basis of unstructured interviews conducted by the The questionnaire meant for collecting opinion based data
researcher, it was used to understand the experience of the was also prepared with due diligence and care. Questions
bankers while dealing with Dharavi customers. The branches focused on the level of financial inclusion, reasons there of
of scheduled commercial bank branches were contacted for and about the BC model.
the purpose.
An indicative list of questions which was used while
conducting the unstructured interview is also appended along
3.3.2 Collection of Data
with.
The three types of data required for the research purpose led
to the next logical step of preparing the required tool. 3.3.3 Training the Field Investigators
Descriptive primary research was found to be the suitable
method for collecting the data from all the three primary The field investigators were given the required orientation
sources identified. Field survey was required to be conducted. before the actual survey started. They were briefed about the
Selection of field investigators was done simultaneously while meaning of the various terms used in the questionnaire. There
designing the questionnaire. was an interactive session where the team exchanged views
and opinions about the research, about the target population
and about financial inclusion, etc.
3.3.2.1 Designing the Questionnaire
The field investigators were assisted by the social workers
Two sets of structured questionnaire and one unstructured
of the area. As students of graduate and post graduate courses
were prepared. Format of the structured questionnaire is
performed the role of field investigators, necessary guidance
appended. {Annexure 3. VII (A) (B)}
steps in contacting the respondents were taken.
While designing the questionnaire for collecting the data from
the respondents from the slum area identified, sufficient care 3.3.4 Coding, Editing and Cleaning of Data
was taken to keep the questions simple and easy to understand.
The questionnaire was to be administered by the field The collected data was then was coded and entered. SPSS
investigators personally. However attempt was made to use PC + was the recommended computer package for entering
442 Suitability of Business Correspondent Model for Financial Inclusion in Slums in Mumbai
and analysing the data on social oriented research activity system becomes stronger. Hence the impact is not factored
like this. Technical assistance for data entry and analysis was in the study. Besides the researcher felt that the responses
extended by TISS, Deonar, Mumbai. about alternate sources of finance may not generate required
level of accurate responses.
3.3.5 Choice of Tools for Data Analysis The presence/absence of other forms of financial arrangements
Frequency tables and chi-square tests were the analytical tools like ‘Patpethi’ ‘Bhisi’ and ‘ Mahila Milan’ was not covered in
used for the research. ‘P’ values were calculated and were detail. Efforts were however made to assess the familiarity
duly interpreted. Thus statistical validation of the data helped and association of the respondents to the arrangements
in proper interpretation. Suitable conclusions were drawn on mentioned above. The responses were just enumerated and
the basis of the interpretation. not analysed.
Descriptive study of this kind also suffers from non co-
3.4 LIMITATIONS OF THE STUDY operation and indifference on the part of the respondents.
Although adequate care was taken by training the field
The findings of the study are limited to the objectives stated investigators, yet variety of problems related to reluctance in
and the scope defined. However adequate steps were taken answering certain questions were faced. Efforts were,
in order to preserve the objective analysis of the research and however, taken while editing and cleaning the data. The level
its out put. It must be pointed out here that the results of accuracy and reliability was maintained.
emanating out of any study which involves the sociology and
Note: Slum related details alongwith statistical information
psychology of individuals gets altered with changes in the
were drawn mainly from the following reports.
social set up and social reforms. The existence of parallel
system of banking can not be denied in any financial system. 1. Poverty Estimates for 2004-5, Govenment of India:
Report of the eleventh plan working group on Povery
The impact of such a system requires a detailed study on
Alleviation, 2006.
how the members of the society depend on alternate sources.
2. Human Development Report 2007/2008, United Nation
The study, instead concentrated on the formal system of
Development Programme, 2007.
banking and finance. It is generally believed that any such
parallel system needs to be discouraged so that the formal
ANNEXURE 3.I
SLUMS IN MUMBAI
Housing options for poor in Mumbai are
Chawls and Patra Chawls Zopadpattis and
Pavement dwellings. Although pavement
dwellings and chawls have conditions like in
slums, these do not fall under the legal
definition of ‘slum’.
Slum settlements began in Mumbai even
before independence. The first official census
of slums, however, was carried out in 1976
by the Government of Maharashtra. In that
census 9,02,015 huts and 2335 slum pockets
were identified. A more detailed profile on
slums was taken by census survey of 2001.
This survey gives the latest information on
slums in Mumbai. This survey identified 1959
slum settlements with a total population of
6.25 million. This is about 54% of the total
population, of Mumbai. The island city area
houses about 17% of the slum population
whereas western suburbs had 58% and the
rest were housed in eastern suburbs.
Average household size in slums is 4.5 to 6.
13% of households are women headed. 27%
of slums have semi-permanent structures.
The level of education affects the
occupational status of slum families. A
limited survey of families conducted under
the MUTP showed that about one third are
working. Home based economic activities are
common. Of the working class, about 30%
were self-employed, 40% worked in private
establishment, and about 17% worked as
casual laborers. Most women worked as
housemaids. Average monthly household
income was reported to be about Rs.3,000
and about 40% were considered below
poverty line.
NATURE AND CHARACTERISTICS OF 1. Dharavi is first an industrial estate and then a residential
DHARAVI slum,
2. Dharavi is enterprise personified-it forces people to
Dharavi is located between the Western line and the central survive, due to lack of a safety net.
line, in what could be called the heart of greater Mumbai. It 3. 80% residents of Dharavi work in Dharavi itself.
is situated at G North ward of BMC. 4. Majority residents of Dharavi are dalits.
It is located between Bandra and Kurla on the North, Sion on 5. Dharavi is a reserved constituency.
the East, Mahim on the West, and Matunga and Dadar on the 6. Dharavi has 11 mosques,28 temples,6churches.
South. It cover a total area of 223 hectares and has an 7. It has six (municipal corporation)wards each with a voters
estimated population of 700,000 people, however ,no recent numbering 30,000 to 45,000.
and reliable data is available for the population. A recent Dharavi’s businesses include leather tanneries, heavy metal
survey established that in a central neighborhood of Dharavi, work, wood work, manufactured goods such as cloth, shoes,
Chambda Baazar has the density of 336,643 people per square luggage, jewelry, and so on. Many products are directly
kilometer! If we take the 700,000 population figure, the targeted to the global markets and are directly shipped from
population density of Dharavi would be around 314,887/km². Dharavi to cities around the world.
This compares with a density of 29,500/km² for Mumbai as a
whole (the most densely populated city in the world), 55,077/ These industries account for a large share of employment in
km² for Kwun Tong, the densest area of Hong Kong and Dharavi but smaller businesses producing for the local market
25,845.7/km² for Manhattan in New York and 16,710/km² might account for an even largest share. Interestingly, many
for Shinjuku, Tokyo. Dharavi is more than 6 times denser high-end goods produced in Dharavi are the result of a
that daytime Manhattan (which is about 50,000 people/km²). decentralized production process relying on a vast network
of small home production units.
Virtually all the regions of India are represented in Dharavi.
Its largest communities are Tamils and Marathi. Dozens of The United Nation estimates that the city will reach 25.97
languages are spoken in Dharavi. The native population million residents by year 2020, up from 13.5 in 2006. The
represents about a third of the total population. relative scarcity of developable land makes Dharavi a very
attractive location despite the fact that it is already
The following basic facts about Dharavi strengthens the overcrowded .
researcher’s idea of identifying Dharavi for the purpose of
conducted this study. Source: compiled from various reports.
ANNEXURE 3.III
SECTOR (V)
Kumbharwada, Bharat Nagar, Walkcet Chawl, Shahid Bhagat
Singh Nagar, Kamala Nehru Nagar, Chandrakant Niwas,
Holkar Chawl, V.O.C., Bldg, Lal Chawl, Transit Camp, Vijay
R (IV)
SECTO Nagar,Social Nagar, Tata Power, Laxmi Baug, Saibaba Nagar
I)
OR (II
SECT Sector (Ill) 17250 + (2000) = 19250
Indira Nagr, A.K.G. Nagar, KUllchi Koor Nagar, Muslim
SE
(II)
OR
I)
CT
IDENTIFIED AREAS FOR DATA COLLECTION 10. Nityanand Chawl- Service and selfemployed.
For the purpose of collecting data the sector base map of 11. Dharavi Koliwada, Mostly self employed, laundry,
dharavi was consulted. Out of the five sectors individual areas Chamda Bazar, etc.
were identified so that the representation from all strata of
12. 13th compound- Plastic recycling, waste
the identified area could be achieved. In all, 22 areas were
recycling, wood recycling,
identified. Efforts were made to maintain balance in terms of
scrap dealers
gender, age group and income group. Following paragraphs
provide a short description about the areas chosen for 13. P.E. Chawal Service.
collecting data. The sectors were as per the identification of 14. Kamladevi Road Mostly Middle class, shop
B.M.C. owners
1. Balaji Nagar- Redeveloped 15. Sahu Nagar- Shop owners and
2. Kala Kille- Leather industries worker/ Laboureres.lower class
owners
3. Mukund Nagar- Combination of workers 16. Social Nagar- Low level income, servant,
leather, dealers, fish sellers house maid, driver, loaders and
4. Transit Camp- Salaried, Businessmen, Small cleaners.
scale shop owners, snacks 17. Mukund Nagar service
sellers, zari workers,
Government dealers. 18. 90 feet Road selfemployed, plumbers,
5. K.N. Nagar- Grocery shop- migrant electrician, technician.
entrepreneurs 19. Shree Ganesh service
6. Rajiv Nagar – Labourers, migrant workers,
low income 20. Labour Camp self employed and services
7. VOC building – Redeveloped- Salaried. 21. Rajabhai Chawl self employed
8. Thevar Nagar- Service. 22. Dharavi (dhobi ghat) Drivers, helpers and other
9. 60 feet road- Mostly service services
ANNEXURE 3.V
The informal interview with the branch managers of z The classification of Bank
scheduled commercial banks having branches at Dharavi was z Year of establishment.
conducted to get first hand information about their experience z Nature of staff, staff strength etc.
in handling customers from the slum area. Besides, the z Nature of the customers
research team also wanted to assess the growth pattern in z Any special problems faced.
terms of deposits and credit oftake. z Facilities offered.
z Future plans
The information was collected through informal conversation.
z Their assessment about the the growth of banking in
Details on the following lines were collected during the course Dharavi
of conversation in order to obtain the opinion of the managers. z Their opinion about the BC model
4
RESEARCH IMPLICATIONS – I
S.No AGE No. of respondents PERCENT S.No Education Level No.of Respondents Percent
1 18-25 361 24.2 1 School Drop out 424 28.5%
2 26-35 526 35.3 2 Finished School 525 35.3%
3 36-45 379 25.4 3 College Educated 352 23.7%
4 46-55 175 11.7 4 Post Graduate 71 4.8%
5 55 and above 49 3.3 5 No formal Schooling 54 3.6%
Total 1490 100 6 Donít want to say 62 4.2%
Source: Reports generated out of data set 1 Source: Reports generated out of data set 1
*In few tables the total figure may not add to 1490as there was Understanding the level of financial literacy was required for
missing data. (see 3.4) In such events the number of available analysis of the research. However, the literacy level of the
responses was taken for the purpose of computation. normal kind is also a matter of concern. There may be
452 Suitability of Business Correspondent Model for Financial Inclusion in Slums in Mumbai
chances that respondents who have undergone college Table 4.2.1 Frquency Table : Bank Account Holders
education, may be receptive to ideas related to FI. Simply
Sr.No. Possession No.of Percent Valid Cumulative
stated, such an input is absolutely necessary in order to find of bank account respon- percent percent
out the methodology for enhancing the levels of FI in slums. dents
Table 4.1.4(a) Frequency Table-employment 1 Yes 816 54.8 54.8 54.8
2 No. 674 45.2 45.2 100.0
S.No Employment No.of Percent
Respondents Total 1490 100.0 100.0
Source: Reports generated out of data set 1
1 Employed 723 48.5
2 Un employed 348 23.4 FI related studies have been emphasizing on the banking habits
3 Self employed 419 28.1 of the people of a country. The computation of FI , relied
Total 1490 100 heavily on the banking penetration, banking services and the
usage of banking system (Chapter 1). The banking habits as
Source: Reports generated out of data set 1
interpreted by the research team formed the basis of question
48.5% of the group were employed. Others were either self no.10 of the questionnaire. Question 10 had the option of
employed or unemployed. The financial dependence or ‘Yes’ or ‘No’. i.e. the respondents were expected to have a
independence is determined by the employment and the nature bank account or not . Once the option chosen is ‘Yes’, then
probing questions were asked. Q.10a to 10e tried to collect
of employment of individuals. By virtue of certain occupation,
data on the frequency of banking operations, duration of
people sometimes become more aware of the financial products
owning an account and the awareness about the facilities.
and services. Employment and employability has a definite
The findings of the same as compared with the demographic
role to play in moulding the mind set of people towards FI.
profile of the respondents are presented in the form of tables.
Table 4.1.4(A) and 4.1.4(B) throw more light on this criterion.
Table 4.2.2 Bank Account Holders at different Age Range
Table 4.1.4(b) Frequency Table-employment
Q.10.Bank
S.No. Type of No.of Percent Account
Employment Respondents Yes No
Age (Q2) Total
1 Helper 131 15.2 1 18-28 years Count 130 231 361
2 Skilled 160 18.5 % within q2 Age 36.0% 64.0% 100.0%
3 Semiskilled 39 4.5 % within q10 15.9% 34.3% 24.2%
4 Factory 54 6.3 2 26-35 years Count 302 224 526
5 Service 479 55.5 % within q2 Age 57.4% 42.6% 100.0%
Total 863 100.0 % within q10 37.0% 33.2% 35.3%
3 36-45 years Count 247 132 379
Source: Reports generated out of data set 1
% within q2 Age 65.2% 34.8% 100.0%
Out of the 1142 employed respondents (employed and self % within q10 30.3% 19.6% 25.4%
employed), only 863 responded to the question on the type 4 46-55 years Count 106 69 175
of work they do. 55.5% of them were in service. Attempt % within q2 Age 60.6% 39.4% 100.0%
was made to collect data on the type the of service that they % within q10 13.0% 10.2% 11.7%
provided. However, the variation in respect of the service 5 55 above Count 31 18 49
provided discouraged from analyzing the data. years % within q2 Age 63.3% 36.7% 100.0%
% within q10 3.8% 2.7% 3.3%
possessed a bank account. Out of the total number of bank for working towards urban FI. The chances were bright
account holders (816) barely 3.8% are above 55 years of age. that few of the respondents were unemployed at the time of
It is quite surprising that 40% in the age group of 46-55 do interview. This group must have answered can’t say’ as
not have bank account. With higher levels of significance, the response.
statistical validation of this parameter is significant at 0.00 Table 4.2.4 Education level of Bank account Holders
level. Following graph illustrates the variation in the banking
habits of the target population in terms of age. Bank Account
20%
Level of Education Yes No Total
20% Age 1 School dropout Count 182 242 424
18-28 years
17% % within q6 42.9% 57.1% 100.0%
16% 26-35 years
15% 36-45 years % within q10 22.3% 36.0% 28.5%
15% 46-55 years 2 Finish School Count 315 210 525
55 above years % within q6 60.0% 40.0% 100.0%
% within q10 38.6% 31.3% 35.3%
Bars show percents
3 College Count 215 137 352
Percent
9% 9%
10%
education % within q6 61.1% 38.9% 100.0%
7%
% within q10 26.3% 20.4% 23.7%
5% 4 Post graduation Count 57 14 71
5% % within q6 80.3% 19.7% 100.0%
2%
1% % within q10 7.0% 2.1% 4.8%
5 No formal Count 16 38 54
schooling % within q6 29.6% 70.4% 100.0%
0%
Yes No % within q10 2.0% 5.7% 3.6%
Table 4.2.3 Bank Account Holders at different Income Levels 6 Donít want Count 31 31 62
to say
% within q6 50.0% 50.0% 100.0%
Q.10. Bank Account % within q10 3.8% 4.6% 4.2%
Income Range Q7 Yes No Total Total Count 816 672 1488
1 < 5000 Count 81 238 319 % within q6 54.8% 45.2% 100.0%
% within rq7 25.4% 74.6% 100.0% % within q10 100.0% 100.0% 100.0%
% within q10 12.0% 50.9% 27.9% Source: Reports generated out of data set 1
2 5000-8000 Count 284 163 447
% within rq7 63.5% 36.5% 100.0% 22.3% of bank accounts holders were school dropouts.
% within q10 42.1% 34.8% 39.1%
Maximum penetration was seen with those respondents who
3 >8000 Count 298 37 335
had finished school. As per the Chi-Square test the P values
% within rq7 89.0% 11.0% 100.0%
were highly significant at 0.00 level.
% within q10 44.2% 7.9% 29.3%
4 Can’t say Count 11 30 41 21%
9%
Bars show percents
At rising income levels, not only does the number of bank 10%
account holders increase but there is also an increase in
proportion of Bank account holders in each income level.
89% of the respondents earning greater that Rs. 8000 p.m. 5%
4%
3%
possessed a bank account. With P values showing high levels 2% 2%
1% 1%
of significance, the variation observed is a matter of concern.
The purpose of the FI drive is to enlarge the circle of FI in 0%
order to encompass the poor and people with low income. Yes No
Table 4.2.3 is quite an indicator which highlights the urgency Fig 4.2
454 Suitability of Business Correspondent Model for Financial Inclusion in Slums in Mumbai
Table 4.2.5 Bank Account Holding Genderwise Comparison of the information in Table 4.2.6 and 4.2.7
Q.10. Bank Account indicates the casual attitude towards savings. Only 46.4% of
the respondents could recall as to how much they save. As
Income Range Q7 Yes No Total
many as 798 respondents i.e more than fifty percent did not
q4 1 Male Count 688 495 1183 respond to the question. Even those who regularly save, could
% within q4 58.2% 41.8% 100.0% not provide convincing responses to questions related to
% within q10 84.3% 73.4% 79.4% saving pattern.
2 Female Count 128 179 307
Table 4.2.8 Usage of Bank Account
% within q4 41.7% 58.3% 100.0%
% within q10 15.7% 26.6% 20.6% Frequency of Bank Account Usage No.of Account Holders Percent
Total Count 816 674 1490 1 Once in month 417 51.1%
% within q4 54.8% 45.2% 100.0%
% within q10 100.0% 100.0% 100.0% 2 Twice in a month 29 3.6%
Source: Reports generated out of data set 1
3 Regulary 202 24.8%
Out of the 1183 males who were surveyed, 58.2% had bank
account . Out of the 179 females surveyed, 58.3% did not 4 Twice in a year 13 1.6%
possess bank account . As per the Chi-Square test the P
values were highly significant at 0.00 level. Possession of 5 Rarely 93 11.4%
bank accounts by the male members of the society is not
peculiar to Indian conditions. But with the rural experience 6 No response 62 7.6%
where most of the SHGs were organized and conducted by
TOTAL 816 100
women group, the urban womanhood need to be revitalized.
The mumbai urban initiative of ‘ Mahila Milan’(see Chapter Source: Reports generated out of data set 1
2) clearly brings to the forefront the power of women. They
will have to be given adequate support and inducement to Barely fifty percent of all bank holders accessed their account
understand newer financial products. If a woman is educated once a month. 11.4% accessed their account rarely, while
(financially), then the entire family gets educated. 7.6% were unable to accurately say the frequency at which
they accessed their bank account. Innovative banking
Table 4.2.6 Savingattitude
products, special seasonal announcements about certain
Sr. No. Saving Habit No. of Respondents Percent incentives etc., are generally publicized through notices
1 Yes 692 46.4 displayed in bank branches. When bank account holders visit
2 No 500 33.6 banks once in six months, the possibility of their becoming
3 Total 1192 80.0 aware of these announcements is almost nil. This further
4 No Response 298 20.0 aggravates the problem of financial exclusion.
TOTAL 1490 100.0 Table 4.2.9 Holders of Bank Account-area Wise
11 Nithyanand Chawl 22 2.7 The responses to the probe question was tabulated under
12 Dharavi Koliwada 44 5.4 three categories viz. recalling the name of any one insurance
13 13th compound P.E. 02 0.2 company, any one benefit of insurance and others. The results
14 Chawl Kambadevi 11 1.3 were tabulated in the following manner.
15 Road (III) Sahee Nagar 35 4.3 Table 4.3.1 Awareness About Insurance
16 Social Nagar 82 10.0
17 Mukund Nagar (IV) 87 10.7 S. Nature of Response No. of Percent
No. Respondents
18 90 Feet Road 15 1.8
19. Shree Ganesh* 82 10.0 1 Name of insurance company 203 40.9 (13.6)
20 Labour camp 19S 1.23 2 Mention of any one benefit 135 27.2 (9.1)
21 Rajabhai Chawl 40 4.9 3 Unclear response 158 31.9 (10.6)
22 Vijay Nagar 06 0.7 Source: Reports generated out of data set 1
Source: Reports generated out of data set 1 Figures in brackets in column 4 is percent out of N = 1490
*Areas nearby the existing bank branches. 326 Male respondents and 61 female respondents who
possessed a Bank account, were aware of the concept of
From the table given above, a kind of pattern in banking insurance. Awareness was lower among respondents who
habit may be derived. Out of the total number of bank account did NOT possess a bank account. As per the Chi-Square
holders reported, 14.8% belonged to one particular area. test, the P values were highly significant at 0.00 level.
This area along with other areas marked* are situated nearby
Out of the total number of respondents, as many as 1205
the existing bank branches. Conversely the bank branches
could not recognize a credit card. This number works to be
must have been opened in nearby areas after estimating the
out 80.9% of the total. In other words close to 81% of the
potential by conducting survey. (see urban financial inclusion
target population remain out of the credit card system which
model of Indian Bank,Ch.2).After two years of the
appears to have generated tremendous degree of acceptance
commencement of the Indian bank branch this area seems to
elsewhere in the city of Mumbai. Those respondents who
have more number of people with bank account.
could recognize credit cards could mention few benefits which
Penetration of banks and banking habits are related to each again generated difficulty for tabulation. Many appeared to
other. The absence of banking network must have been the have confused between ATM card and credit card. Out of
primary reason for inadequate banking habits in most of the 285 respondents who could recognise a card, 130 could not
other areas identified under this study. A kind of private provide clear answers. The difficulty in recognizing the plastic
banking which is operational in the Kamala Nehru Nagar money is quite evident. 8.7% of the target population felt
(K.N.Nagar) and Anna Nagar areas of Dharavi is worth to be that credit cards help in taking loans.
considered as a case study. (see Annexure 4.I)
In contrast, awareness about ATM appears to be higher
amongst the respondents.47.9% of the target were aware of
4.3 FINANCIAL LITERACY the ATM facility. This definitely is an evidence to the claim
made by SBI and Indian Bank that ATMs at Dharavi has
Questions which were asked to assess the financial literacy
maximum hits. Out of the 714 who responded by saying
of the target population generated expected responses. The
‘yes’ to Q. no.13, 270 were using the ATM card regularly.
responses were given by both kind of respondents i.e.
37.8% of the target population using the ATM card leads to
respondents having bank account and those who did not. As
the possibility of bringing the remaining 62.2% into the net.
many as 992 respondents (66.6%) of the total number did
This eventually lead one to believe that technology based
not know about insurance. The 33% respondents who had
methods for fostering FI may have better acceptance (See
heard of insurance, appeared confused between banking and
Chapter 1, Ref. 2).
insurance. The responses to the probe question generated
such kind of responses that tabulation was quite difficult. It is very interesting to note that as many as 1215 respondents
Only one out of the total number of respondents was already (81.5%) possessed mobile phone. The figure is no surprise
insured. 0.00037% is the insurance coverage in the target to anybody as the number of mobile phone users are
population. Few taxi drivers owning taxis responded by increasing by leaps and bounds in India. India is being
making reference to the vehicle insurance. However, they projected as a country which will have maximum number of
were quick in adding that the agents take care of these things. mobile users across the globe.
456 Suitability of Business Correspondent Model for Financial Inclusion in Slums in Mumbai
BOX 4.1 Responses to Q. No.15 was examined with Q no.10 i.e. the
reaction of respondents having bank account towards an
“Mobile telephony has made significant impact in India, intermediary. The results of the test of validation is also given
with India now adding 100 million mobile phones a along.
year. The total number of mobile phones is likely to Table 4.4.1 Perception About BCs
touch 500 million by 2010 or 2011. It is likely that most
Indian families would atleast own one mobile phone.” S.No. Nature of Response No. of Respondents Percent
Nachiket More and Bindu Ananth,. Inclusive Financial 1 Useful 773 51.9
Systems, Economic and political weekly,March 31,2007, 2 Maybe 494 33.2
PP1121-1126 3 Waste 170 11.4
4 Don’t Know 53 3.6
5 TOTAL 1490 100
As observed by the authors (Box 4.1), mobile phones have
brought in a new order in the field of communication. With Source: Reports generated out of data set 1
the enhanced communication net work due to innovations Note: The questionnaire did not mention the word ‘BC’. It was
in the field of technology, they may be put into better use. referred indirectly as ‘somebody’.
With the kind of ownership of mobile phones and the usage
Table 4.4.1 (A) Perception About BC (Bank Account Holders)
of the same amongst the respondents throws multiple
opportunities to the promoters of financial inclusion. (see S.No. BC No. of Respondents Percent
Chapter 1, Ref. 2)
1 Useful 485 59.4
The probing question about the mode of payment for the 2 Maybe 242 29.7
mobile phone generated anticipated replies. The premise that 3 Waste 67 8.2
the target population relied more on cash transaction and 4 Don’t Know 22 2.7
thus remain out of the formal system of receipts and payments
TOTAL 816 100
gained ground as 1053 respondents out of 1215 i.e. 85.7%
had prepaid cards. 128 had post paid connections. Around Source: Reports generated out of data set 1
47 of them did not respond to the question. This may be due Note: The questionnaire did not mention the word ‘BC’. It was
to the prevailing practice amongst few employers who provide referred indirectly as ‘somebody’.
facilities of mobile phones to maid servants, drivers and other Those who have bank account also require the help of a BC.
helpers so that they remain in contact. Hardly 3.7% of the It can be recalled that Q10e could not generate enough
target population paid the bills through cheque. responses, as the respondents could not remember any two
of the wide range of financial services offered by banks.
Many of them do not visit banks on a regular basis (Table
4.4 SUITABILITY OF BC MODEL
4.2.8). Out of 674 respondents who have bank accounts,
The main thrust of the study was to explore the suitability of hardly 29% operate by themselves. When close to 60% bank
BC model for the FI in slums at the back drop of banking account holders showing interest in having somebody to
habits and financial literacy. The responses to the questions advise them on financial matters, conclusively reflect on the
Q no. 15 and Q no.16 (see annexure 3.VI ) convincingly interest of the respondents to enter the formal financial system.
brought the concept into the centre stage as a viable option Table 4.4.1(B) gives details of the view point of respondents
to be considered. More than half of the respondents felt that who did not have bank account with reference to BC. It is
they would find it very useful if somebody advises about relevant to point out that the responses to the probe question
banks insurance and other financial products on a regular (10i) was also consulted while interpreting the responses for
basis. They felt that the ‘advice’ in respect to budgeting, Q. No. 15.
investment, savings of their money by an informed person
Table 4.4.1(B) gives further insight into the issue. 42.7% of
would be quite useful to them.
the respondents felt that the services of an advisor would be
Responses like ‘May be’, ‘Don’t know’, express a sort of much appreciated by them. Hardly 4% of the respondents
indecisiveness. Therefore those responses also could be were not in a position to give any concrete opinion. It is quite
considered as a receptive response by the respondents about natural that the respondents who do not have bank account
the possibility of some ‘informed person’ advising them on may not be in a position to express confidently their opinion
their financial management. about the possible help from an intermediary. However, around
Chapter 4: Research Implications – I 457
288 respondents expressed strong positive opinion about underlined. Interestingly out of 816 respondents having bank
the role of an intermediary. This has to be noted and acted accounts, 632 respondents felt the need for an external help.
upon. The cross tabulation of the responses to Q.Nos.10 Thus it emerges very clearly that the banking habits is not a
and Q.15 revealed that the chi square statistic is significant at sufficient condition for evaluating the FI. People with bank
0.05 level. The results lead to meaningful conclusions and accounts also require some kind of assistance in order to use
suggestions about the urgency of designing and developing a the banking services better. Out of 674 respondents having no
suitable system for intermediation for financial inclusion. bank accounts also expressed the need for an intermediary.
Table 4.4.1(b) Perception About Bc (Unbanked Respondents) 59.4% of bank account holders stated that they would find
bank advisory services useful while only 8.2% stated that it
S.No. BC No. of Respondents Percent would be a waste of their time. 77.7% of all respondents felt
1 Useful 288 42.7 that they would appreciate banking and investment assistance.
2 Maybe 252 37.4 These results were highly significant statistically at 0.00 level.
3 Waste 103 15.3 Table 4.4.2 Acceptance of BC as a Helper /Advisor
4 Don’t Know 31 4.6
Sr.No. BC Banked Unbanked Total
TOTAL 674 100
1 Yes 632 441 1073
Source: Reports generated out of data set 1 Row N% 58.9% 41.1% 00%
Note: The questionnaire did not mention the word ‘BC’. It was Column N% 82.6% 71.6% 77.7%
referred indirectly as ‘somebody’.
2 No 133 175 308
Respondents were further probed to find out their readiness
Row N% 43.2% 56.8% 100%
to accept any ‘help’ to handle their financial decision making.
Column N% 17.4% 28.4% 22.3%
This question also generated responses which confirmed
the readiness of the respondents to allow an informed person Total 765 616 1381
to help them, in drafting their financial plan. Row N% 55.4 44.6 100
Negative responses from around 240 respondents (16%) Column N% 100% 100% 100%
were recorded. However, the respondents could not assign Source: Reports generated out of data set 1
any specific reason for the same. Perhaps ignorance about Note: The questionnaire did not mention the word ‘BC’. It was
the possible role of an intermediary would have cast some mentioned indirectly as ‘somebody’.
doubts in the mind set of these respondents.
It is pertinent to highlight that the chi square test with reference
In all 1073 respondents expressed their willingess. In fact to Cross tabulations was statistically significant for the purpose
they felt that such an arrangement would help them to plan of generalization.
their resources better with almost 77.7% of the total
respondents surveyed expressing their willingness to allow Financial Exclusion in the identified area emerged stronger
an intermediary. A qualified and knowledgeable(intermediary) when as many as 71.7% of the target population was found
BC may bring the kind of changes that are required in the life to be out from any other informal institutional system
style of the urban poor and under privileged. identified. The literature review led to the idea that the urban
poor many times organized themselves as members of pat-
Responses to Q. No.16 was cross tabulated with the pethi ,Bhisi or like. Although the scope of the study did not
responses to Q. No. 10 to establish whether the results were permit a detailed investigation of the participation in the
statistically significant. The tables given below explain the informal system, an attempt was made to figure out the
spread of the data. Pattern that emerges conclusively support probability of the semi-formal access to finance in the forms
the need of an informed source to help or intermediate the mentioned. The responses, i.e. 1068 respondents out of 1247
financial operations in a slum area. who chose to answer the question, is indicative enough about
As many as 100 respondents refrained from answering the the FE in Dharavi.
question. There is a fundamental difference between ‘taking
advice’ and ‘seeking help’. There must have been some inherent
4.5 FINANCIAL INCLUSION AT DHARAVI
fear amongst these respondents about seeking help from an
unknown person. With 59% of the 1381 respondents showing The analysis based on the responses of the residents of
readiness to accept help, the need for such an help gets Dharavi point towards the low levels of financial inclusion at
458 Suitability of Business Correspondent Model for Financial Inclusion in Slums in Mumbai
Dharavi. There also emerges a need for a serious thought specialised and sensitive, just a campaign for financial literacy
process related to BUSINESS CORRESPONDENT (referred will not serve the purpose. Branch expansion of the scale that
as an intermediary).With four branches catering to the seven is required, again may prove to be an impractical solution
lakh population of Dharavi clearly brings out the anamoly in given the viability of the banking business operations. The
the bank penetration parameter of financial inclusion (see better suited option may be to consider a BC model.
IFI in Chapter 1, 1.2). An action plan may be chalked out for
An attempt was made to explore the perceptions of the banking
branch expansion, financial literacy programme or any other
community about the suitability of the BC model.
measure that deem fit. However, the concept of finance being
ANNEXURE 4.1
CASE STUDY – PRIVATE BANKING The initial investment by the originator (shopkeeper ) is
AT DHARAVI recorded and a sort of pass book is maintained by him.
There is a group of capitalists!!!!! at the center of Dharavi After business hours, everyday the borrower remits a
who readily help the enterprising migrant population. Migrants percentage of his day’s income. Sometimes it may go to the
who are capable of running small scale business activities extent of 90% of his income. This private banker calculate
are their clients. The modus operandi is narrated below: EDI (Equated daily Instalment). The calcuation of EDI (Not
EMI) is worked out by considering the initial amount
The originator (Private Banker) is generally a shopkeeper +interest+ and the value of materials supplied by the shop
(himself a migrant decades earlier). These people when keeper everyday. During the annual visit to their native place
approached by the migrant entrepreneurs conduct a feasibility the person is given a lump sum amount after adjusting the
study on the same lines of SCBs, but in a very short period of payment to be received. The transactions remain open for a
time. Once satisfied, they invest to the tune of Rs. 50,000/– continued period of time. Interestingly, the original seed
(Amount varies from person to person and from business to money is adjusted over a period of time. If the originator and
business). The person remains attached to the shopkeeper borrower belong to the same region, money remittances are
for all his requirements. For example, an Idli Vyapari should made through certain contact persons commonly known to
purchase all the ingredients required from the shop on credit. both.
5
RESEARCH IMPLICATIONS – II
5.0 INTRODUCTION managers of public sector banks, foreign banks, urban co-
operative banks, as well as private sector banks form the
Primary data collected from the bankers operating in the
basis of the analysis given below. The names of the banks
nearby vicinity of the identified area helped in understanding
approached is annexed. (Annexure 3.VI)
another dimensional aspect of financial inclusion. The efforts
made to contact the branch managers presently operating at
Dharavi also helped in understanding the view point of the 5.1.1
supply side of the financial services. Para 5.1 brings out the
There seems to be a complete union of thought about the FI
results of the analysis based on the data collected from the
policy of RBI. Excepting few, all were of the opinion that the
bank managers with the help of a structured questionnaire.
FI policy requires to be given all the due importance. Few
Para 5.2 gives the essence of four different unstructured were of the opinion that the policy, would enable India to
interview conducted with the four branch managers of banks face the worldwide recession. Out of the four alternatives
operating at Dharavi. The views expressed by these officials provided, most of them felt that a well orchestrated FI policy
are absolutely personal. The researcher would like to place is the ‘need of the hour’.
on record a deep sense of gratitude for the time they have
given. Para 5.3. gives the customer profile of typical banking
5.1.2
customer in a bank branch in the slum area on the basis of
the observation made by the research team. The requirements When question about the reasons for high FE in slums was
of an ideal BC model as visualised by the researcher based asked the managers were quick to point out the infrastructure
on the inputs of the research work is presented in para 5.4. or the lack of it. Few of them felt that the branches in slum
area may not be commercially viable. There has been a
5.1 FINANCIAL INCLUSION – BANKERS’ tendency to open branches in areas where conduct of banking
operations may be simple and easy. In other words,
VIEWPOINT I
conducting banking operations in slum areas require more
As mentioned in para 2.2 (Chapter-2), one of the major time and efforts of the bank officials as they may be required
contributory factor for FE is the supply side. This sector to explain step by step the operational and procedural aspects.
comprises of bankers and financial institutions. To keep in
line with the research plan, the branch managers of the various
5.1.3
banks situated in the ‘G north’ ward of BMC (which are
located close to the target slum) were contacted by the More than 50% of the bank managers agreed that BC/BF
research team. With the help of structured questionnaire, model may be suitable for FI in slum areas. There has been
opinion from as many as forty branch managers (excluding a clear co-relation between the opinion on the difficulty level
the bank branches at Dharavi) was gathered. The bank of handling the customers and the possible role of a BC.
branches were chosen primarily on the basis of their location. Those who disagreed with the BC model, were of the opinion
However as a matter of co-incidence (or may be due to the that the bank staff or officials must be encouraged to function
policy of branch expansion) the chosen banks included the as BC/BF. It is interesting to note that this opinion partially
variety of banks operating in India. The opinion from the reflect on the readiness of the bank managers to take up
Chapter 5: Research Implications – II 461
additional responsibility to function as BC. Perhaps this may about this phenomenon which is quoted below, ‘Look, you
reduce the cost involved in appointing and training people to have a plasma TV. There are multiple functions that can be
function as BC. performed by operating the remote keys. Many a times we
don’t use the remote keys to the optimum extent as we are
5.1.4 not aware of their functionalities. Financial services are similar.
General opinion about rural urban financial exclusion could Many people who possess multiple bank accounts are not
not generate enthusiastic responses. Probably the technical aware of the facilities introduced from time to time.’ This
and statistical information about FE in rural areas and urban brings into the foray the problem of spreading awareness
centers was not sufficient to make a committed response. about the financial products and services. Here they agreed
However, the responses were quite indicative of their concern that an intermediary would be of great help. Majority votes
towards urban financial inclusion. All of them were of the were mustered by SHG as a suitable BC. Few of them felt
opinion that there exists a need for proper distribution of that both SHG and NGO may function successfully as BC.
wealth generated by the economy. In their opinion enhancing Some Managers felt that the job of intermediation may be
the financial inclusion through proper intermediation would better performed by the bankers (see 5.1.3).
help in bringing balanced growth.
5.1.7
5.1.5 The results of the opinion survey illustrate the concern of the
There has been a general agreement about the role of bank officials towards FI. They showed keen interest in the
nationalized banks in bringing out complete FI. It is objective of the study and were as concerned as (if not more)
imperative to point out here that the basic objective behind the members of the research team. The observation and
the nationalization way back in 1969 was to ensure complete conclusion about the need for finding a suitable solution for
FI through branch expansion in rural areas. However, forty solving the problem of FE in urban slums was unanimous
years later the objective needs to be reviewed to cover the amongst the bankers approached by the research team.
unbanked areas in the urban centre. Opening branches may
not be a sufficient step to motivate the people of the 21st
5.2 FINANCIAL INCLUSION – BANKERS’
century. One of the managers very strongly felt that the
branches managers of such branches operating in slum areas, VIEWPOINT II
may be granted some special status so that they have the Following Paragraph partially describe if not fully the
discretion of deciding on certain matters which may not fit experiences of the bank branch managers who have their
in the existing policy framework. Few of them opined that offices at Dharavi. In all there are four bank branches that
need may arise to customize the financial product to suit are operational in Dharavi area at the time of this research.
the requirement of the nature of customers. The type of They are Development Credit Bank, Indian Bank, State Bank
loan required at the fisherman’s colony will be completely of India and Union Bank of India.
different from the requirement of an ‘ Idli Vyapari’ in Dharavi,
The branches of these banks were established at Dharavi
they opined. The H.O. administration should provide them
barely two years ago. (SBI’s claim that they were the first
with decision making authority and also make them one to start a branch a Dharavi is still under debate as the
accountable. Certain products that are common to all the postal address of SBI branch is Mahim).
customers, also require frequent revision or review so that
more features can be added. According to them, even a simple Indian Bank’s branch is situated at the heart of Dharavi
product like ‘educational loan’ can be packaged in multiple popularly known as 90 feet road. The bank established its
ways to suit the requirement of the different client segments. branch under the financial inclusion policy of RBI. After the
bank’s success in fostering FI in rural area with the help of
5.1.6 mangalam model ( see Box 2.1 chapter 2), they made an
entry in the urban slum through Dharavi. With the collaboration
All the respondents felt the need for better publicity of the of FINO, they have started providing credit cards to the
banking services not only in the urban slum but also as a customers. Their ATM has 700 hits per day, which experts
general practice. A note worthy point emerged out of the say is the highest by any standards. They have chalked out
opinion survey conducted, is the observation about high plans for enlarging their activities for enhancing FI in Dharavi.
valued customers having banking habit spanning over a long To quote Mr. Veeraraghavan the manager of the branch ‘There
period of time, but not aware of the new financial products are no beggars in Dharavi. The perception of the rest of the
and services. One of the managers remarked in a lighter way world is wrong that Dharavi is poor.” Whatever you eat and
462 Suitability of Business Correspondent Model for Financial Inclusion in Slums in Mumbai
wear have lot of chances of being made at Dharavi. They sell The customer profile at Dharavi branches seem to explain
things in their own brand names. They will never sell duplicate the reason for FE in this vast slum area. Motivating illiterate
products.’ people to get included in the banking system requires a lot of
Currently, they (Indian Bank) are not using any BC for planning and execution. It is just not an action but a mission.
conducting business. However, Mr. Veeraraghavan says that
the bank officials are highly motivated and perform the role 5.3.2 Problems of Customers
of a BC. Within two years of operations they have procured
25,000 bank accounts. However,the awareness about Those who have opened bank account at the bank branches
insurance products and loan facilities is very poor which referred in para 5.2 and have become regular customers,
needs to be addressed, according to him. (Less than ten people also have some problems and difficulties. An informal talk
have availed of the insurance facility offered so far.) with few customers enabled the research team to identify
their problems which inter-alia include the following:
Branch manager Mr. Vyas (Union Bank of India) and the
Manager of Development Credit Bank shares the similar view. z They are afraid to enter the bank after opening an account.
All of them were unanimous in identifying the untapped z This fear is not about people but about the procedure.
potential of Dharavi. The discussion with the managers which z They get confused about the system of withdrawing and
was unstructured and informal helped the researcher in depositing
identifying the nature of the customers, the problems they z Adults and grown up customers are so self conscious
face and the problems faced by the bankers. that they are reluctant to ask for help.
z There is no one to attend to the queries especially on a
5.3 SELECTIVE FEEDBACK day when the branch is crowded.
The inputs from the opinion survey alongwith the observations z They find it difficult sometimes to understand the entries
made on site by the research team helped in arriving at the made in the pass book.
following conclusion: Besides the behavioral problems, the customers are often
The banker – customer interaction in the slum branches intimidated by procedural difficulty and lack of knowledge
appears to be strange and unique. Bank officials are sometimes about the procedure. There has been a general feeling that
expected to help the customers even for filling in the forms. they are used for glorifying the performance of a bank and
The nature of customers and the problems faced by them according to them there is no true spirit behind the banking
are presented in the following paragraphs: service rendered. The major problem is that they consider
‘bank’ as a government department and they are ignorant
about its organizational details.
5.3.1 Nature of Customers (with special reference
to slum areas)
5.3.3 Problems Faced by the Bankers
z They are basically illiterate barring very few exceptions.
z They belong to different communities. The problems faced by the bank branches are mainly
z They speak different languages and are generally not organizational. There seems to a complete apathy on the part
comfortable with English language. of the policy makers about the branches which operate in
z Most of them are daily wage earners and have no regular slum areas. The type of customers in slum areas are largely
income. ignorant but inquisitive. Dealing with them requires a great
z Majority businessmen in informal sector do not follow deal of patience and perseverance. The staff requires special
any labour rules or regulations. training to handle different situations. Rotating staff and
z Those customers who have bank account use ATM inflexible rules dampen the spirit of the people working in
without any difficulty slum branches. Few problems are mentioned below.
z They are curious and are willing to learn new things if z The branches in slum areas are not treated as special
communicated properly. branches.
z They by any standard, are good customers z They are grossly understaffed.
z They would like to use the facility according to their z The managers are not given any freedom to modify the
convenience. In other words, they find it difficult to stuck existing procedure.
to the fixed time of banking hours. z The staff is required to work beyond the stipulated office
z Most of the customers are men. hours, but are not compensated enough.
Chapter 5: Research Implications – II 463
z Lack of suitable training programmes z The budget may include the remuneration that is payable
z Improper infrastructure to them
z They must be available to the customers at any time i.e.
The staff at these branches often faces certain conflicting
they must stay linked to their mobile phone.
situations as they may have to address the emotional outburst
z Along with the budget, they should spell out target about
of the customers. As seasoned bankers bound by the rules
the number of new customers to be brought in to the FI
and regulations, they find the situations difficult to handle.
framework.
z They must submit monthly returns to a designated
5.4 BUSINESS CORRESPONDENT authority to which they are attached.
MODEL – BASIC REQUIREMENTS z Must meet once in a quarter to discuss the progress.
z RBI and the concerned bank can prepare a list of people
The experience of the bank managers and the results of the
interested in becoming a BC*, and appoint them for the
empirical study about the nature of the target population point
purpose.
towards the need for a powerful intermediary in order to
enhance the FI in slum areas. An intermediary who can be *RBI can follow the ‘ Teach India model’ followed by TOI
identified as BC, may be in a position to influence and motivate so that financial literacy can be brought by active
the people in the slum areas to use the available banking and participation of the learned members of the society. Colleges
financial products. They will be in a position to supplement and Universities also may be contacted for this purpose.
the bank staff by reducing their work related to the fulfillment
of banking and insurance procedure. In short, a kind of institutional arrangement specially designed
with the sole objective of urban financial inclusion is required.
The BC model, therefore, should possess the following features As institutions are established for enhancing the literacy level
to address the identified problems: in the field of stock market, mutual fund etc., RBI may think
z The BC may be an individual or a small group preferably of setting up an exclusive autonomous body with the singular
with business outlook. agenda of working towards financial inclusion in the slum
z They should possess complete knowledge about banking area.
and insurance products. The time has come to adopt serious thought process by the
z They must have willingness to give quality time. policy makers so that complete Financial Inclusion can be
z They must be given a designated place. achieved.
z They should be permanently identified with one bank.
z They will have to work independently Working towards Financial Inclusion in slum areas should
z They must possess sufficient knowledge in various not be simply put as an activity, but must be taken with zeal
Indian languages, especially the language which is widely of achieving a mission.
spoken in the area of the operation.
z They must be given a budget which may be decided at
the commencement of the financial year.
6
CONCLUSIONS
6.0 INTRODUCTION the level. Considering the objectives, the observations made
are presented below:
The conclusions in the form of recommendations and
suggestions are given in this part. The research activity z The socio- economic status of slum dwellers
involved data collection and the empirical analysis that demonstrates high levels of diversity.
followed led to certain definite observations and z The formal financial system made available to the slum
generalizations. The literature review also gave the necessary dwellers is largely inadequate.
input in finding out the modifications which could be tried in z There seems to be a tendency to shy away from the
the BC model followed currently. Para 6.1 summarises the formal agencies of finance.
observations borne out of the study. It also brings out the z After forty years of government’s decisive role in banking
contrasting issues which distinguishes the slum population system, these areas still remained neglected and without
in urban areas from the rural population. Recommendations banking services.
in the form of suggestions are given in para 6.2 An attempt z There is a huge awareness gap (leave alone knowledge)
is made to present a viable BC model which, in the opinion of about the innovative financial products and services.
the researcher, may be adopted to take the ‘MISSION FI’ a z FE in slum areas is visible and conclusive
step further. FE in slum areas has remained out of the box z Better financial management as a method of poverty
for quite sometime. Slums that showcase the level of urban alleviation is not understood by slum dwellers.
misery, requires a much closer observation. Concerted action z There is a tremendous scope for encouraging them to
on the part of GOI, RBI and other policy makers is required become part of the formal banking/financial system.
to eradicate urban poverty through proactive measures. By z The transition from informal system to formal system
addressing the problems of the people at the BOP ( Bottom may be quicker and faster, as there seems to be readiness
of the Pyramid), national goals shall remain better achieved. amongst the people for entering the formal system.
Para 6.3 presents a few areas that give scope for further z Urban slum dwellers, unlike the rural poor, possess and
research . Para 6.4 covers concluding remarks. retain their individuality. In other words community
oriented consciousness appears to be less pronounced
6.1 FEW OBSERVATIONS in slum areas.
z Due to the absence of strong community linkages, the
The descriptive research activity undertaken by the research steps for FI tried in rural India, may not help in achieving
team lends adequate support to the observation mentioned FI in urban slums.
below. The focus of research was to understand the z Newer and innovative mechanism, tailor made to suit
behavioural aspects of the slum population in Mumbai with the urban poor is the need of the hour.
special reference to financial products and services. The level z Such steps need to be taken with utmost levels of urgency
of FI in slum areas and the possible steps to be taken to if the goal of inclusive growth is to be achieved.
enhance its level was the basic premise of the research. The
study undertaken and the subsequent analysis illustrate These observations lead one to the conclusion that the level
conclusively the low levels of FI and the need for enhancing of FE in slums is reaching a level which should be taken as
Chapter 6: Conclusions 465
a signal for immediate action. The results with reference to (iv) It should be simple and at the same time it should
banking habits, financial literacy support the urgency to have built in checks and controls.
address these issues in slum areas. The fact that it is unviable (v) The model should give fair, equitable and balanced
to open or expand branches, initiates one to explore how approach to address various issues.
banks can multiply in slum areas without facing organizational (vi) Spread awareness about products and processes on an
constraints. Adoption of the much discussed BC model ongoing basis.
appears to be the viable alternative. An attempt is made for presenting a model for Financial
Inclusion of slums. The model is a preliminary effort of the
6.2 AN URBAN-CENTRIC (SLUM-CENTRIC) researcher which if required can be modified. The model
BUSINESS CORRESPONDENT MODEL suggests intermediation at two levels. Tier 1includes the policy
makers and the participating bankers along with a Business
Considering the nature of slums, profile of slum dwellers, Correspondent Leader (BCL). Tier 2 brings in a battery of
policies related to banking in India and the past experience, Business correspondents who will be coordinating with the
the following BC model is suggested. The model is set on the public and the BCL. They will be given freedom to workout
following premise. means and methods without any prejudice for enhancing the
(i) The model for fostering FI should result in FI designated to him/her. This area based approach would
intermediation and not intimidation. enable the BCL to collect valuable feed back which in turn
(ii) It should address the problems of individuals as urban may be communicated to the participants in Tier 1.The
slum dwellers. iii) An ‘apolitical model’ is required. communication channels will remain open so that the flow
of information remains simple and smooth.
TIER I
Autonomous
Government of India - RBI
Body
Regulatory, Guidance & Advice can be made
d
en
Redressal of
s
mm
gie
Supervision complaints in
co
ate
Str
Selective
Interference
Assesses Excluded
Appoints, Compensates,
Rewards and Awards Business Population
BANKS Correspondent
AND FINANCIAL Absorbs
Recommend Leader Explores
INSTITUTIONS (BCL)
Strategies Recommends
Individuals, Institutions
Citizens groups, Student Leaders,
TIER II NGOs
AGGREGATE Intermediate
ATM
TARGET Appoints Individual
REPORT Initiate
Financial
BC
Manage Boutique
BC
BC
BCL BC Control
BC Lead
BC
Facilitate
Remunerates
Provides incentives EDUCATE
Motivates Financial Literacy
Fig. 6.1
466 Suitability of Business Correspondent Model for Financial Inclusion in Slums in Mumbai
Autonomous body can be established occupational group may help the policy makers to formulate
specific policies. For example FI amongst taxi drivers, FI
The model is based on the basic fabric of the urban population.
amongst maid servants, FI amongst garbage pickers, FI
An urban centric model necessarily requires to be different
amongst slum entrepreneurs etc. would help in providing
from a rural oriented programme. The nature of employment
various dimensional aspects of the FE amongst urban poor.
and the exposure of the urban population is distinctly different
from the rural counterparts. For example, with as many as Besides these focused studies, research can be initiated at
macro level also. There seems to be unconnected links such
77% of the respondents covered by the study owning a mobile
as measures of FI in different states in India. Methods for
phone, mobile technology can be used to the maximum possible
spreading awareness about financial literacy may be taken
extent. The ease with which the ATM concept has been
up so that the better, if not the best, may be recommended
accepted by the group, opens up another avenue for reaching
on all India basis. Research as to who may be performing as
the masses. By utilising the space just outside (or inside as
an effective BC, may also be examined.
the case maybe) ATM centres and converting them into
‘Financial Boutiques’ the same will be modelled as ‘one point Financial Inclusion/Financial Exclusion as a canvas for
solutions’ or ‘one point contacts’, for promoting financial research has enormous scope.
literacy. BCs may be given a designated location by giving
them a place at ATM centres.
6.4 CONCLUSION
Savings and credit are two basic elements in any developmental
6.3 SCOPE FOR FURTHER RESEARCH. strategy.
The pathway in the process of the research undertaken,
‘Mission FI’ should address the impediments in achieving
brought into limelight the milestones in achieving the ‘Mission
both. People irrespective of their position, should be
FI’. All along the study, one glaring reality felt by the research
encouraged to save and must be given safe and profitable
team was the insensitivity on the part of concerned authorities
options to save. Similarly they must be given sufficient and
towards the problem chosen. Right from the availability of
protected access to credit. By institutionalizing the savings
the data about the urban FE to the kind of steps taken for
and credit system the coverage and reach may expand so
reducing FE in India the research team had to struggle .It is
that the situation of complete FI can be achieved. Time is
said and believed that this void can be effectively filled only
now ripe that the policy makers and practitioners swing into
by active academic research. Students of banking and
action so that they do not miss the opportunity. By addressing
finance, research institutions and Government departments
the problems in the present delivery system of various
need to pay sufficient attention to the addressed problem on
financial products and services through appropriate
a much larger scale. For example, the present study could
measures, the process of FI could be accelerated. ‘Stitch in
break the myth about the most popular slum in Mumbai. Every
time saves nine’ goes a popular proverb. The GOI, RBI and
metropolitan city suffer from similar kind of problem of
other responsible agencies need to work out an action plan
varying nature. Studies focusing on specific community, or
for complete FI before it becomes too late.
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