Undp - Nabard Financial Inclusion Project: State Level Financial Literacy Strategies Summary Report For 7 States

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State level Financial Literacy Strategies Summary Report for 7 States

Under
UNDP NABARD Financial Inclusion Project

Submitted to
UNDP
March 2011
Compiled by Gopala Krishna Ayitam

Management Consultant
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Say, the soil of India is my highest heaven; the good of India is my good. Forget not that the lower classes, the ignorant, the poor, the illiterate, the cobbler, the sweeper, are thy flesh and blood, thy brother. The only service to be done is to give them education, to develop the lost individuality.
- Swami Vivekananda
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CONTENTS Particulars Page No.
Acknowledgements.....................................................................................................................................4 Abbreviations..............................................................................................................................................5 I. Introduction.........................................................................................................................................7
II. SuggestedFLStrategy..........................................................................................................................8 III.FLandFIinRajasthan.........................................................................................................................13 IV.FLandFIinUttarPradesh..................................................................................................................15 V. FLandFIinBihar................................................................................................................................18 VI.FLandFIinJharkhand........................................................................................................................21 VII.FLandFIinMadhyaPradesh.............................................................................................................23 VIII.FLandFIinChattisgarh......................................................................................................................25 IX.FLandFIinOdisha .............................................................................................................................27 . X. ConsultantsWord..............................................................................................................................29 AnnexI:EffortstoexpandthereachofRuralBanking.............................................................................32 AnnexII:WorkshopsScheduleandSuggestedInstitutionalParticipation...........................................35 AnnexIII:AFrameworkforFL...................................................................................................................37 AnnexIV:CommonRecommendations.....................................................................................................38 AnnexV:DefinitionsofFinancialLiteracy/Education ..............................................................................39 .
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Acknowledgements The Consultant - is grateful to UNDP - for having been entrusted with this important task of formulating the Financial Literacy Strategy for the seven UN focus States in India, based on the interactions held with the representatives of key stakeholders of Financial Literacy/Inclusion and the Financial Literacy Assessment Study Report prepared by BASIX. The Consultant is also grateful to the Financial Inclusion Department of National Bank for Agriculture and Rural Development (NABARD), Mumbai and the Regional Offices of NABARD, in Jaipur, Lucknow, Patna, Ranchi, Bhopal, Raipur and Bhubaneswar for the excellent support extended in the conduct of the workshops and coordinating the appointments with the representatives of key stakeholders, attracting participation in the workshop and the arrangements for the conduct of interactions and workshop. The Consultant is also grateful to the representatives of key stakeholders who have spared their valuable time to interact with the Consultant and sharing their views, suggestions and recommendations that have significantly contributed in the preparation of this FL Strategy document. The Consultant acknowledges the support received from all those who contributed for the success of this mandate including Mr. Ratnesh, Programme Analyst, UNDP, New Delhi; Mr. R K Garg, Deputy General Manager, FID, NABARD; Mumbai, the respective CGMs in all the seven ROs and members of Financial Inclusion Teams at the seven ROs of NABARD,
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Abbreviations
BC Business Correspondent BCA BC Agent BCO BC Operator BF Business Facilitator CBS Core Banking Solution CSO Civil Society Organizations DCCB District Central Cooperative Banks DWCD Department of Women & Child Development EDP Entrepreneurship Development Program FBC Field BC FBOs Field Based Organisations FC Farmers Club FD Fixed Deposit account FI Financial Inclusion FIF Financial Inclusion Fund FITF Financial Inclusion Technology Fund FL Financial Literacy FLCC Financial Literacy and Credit Counseling Centers FLP Financial Literacy Program GoO Government of Odisha IBA Indian Banks Association ICT Information and Communication Technology IDBRT Institute for Development and Research in Banking Technology IEC Information, Education and Communication IIBF Indian Institute of Banking and Finance ISMW Indian School of Microfinance for Women JLG Joint Liability Group KVIC Khadi and Village Industries Commission KYC Know Your Customer MGNREGS Mahatma Gandhi National Rural Employment Guarantee Act/Scheme MoU Memorandum of Understanding NABARD National Bank for Agriculture and Rural Development NGO Non Government Organizations NREGS National Rural Employment Guarantee Scheme PACS Primary Agriculture Credit Cooperative Societies PO Post Offices POS Point of Service PwD People with Disability
PwHA RBI RO RRB RSETI RUDSETI SB SBI SCB SHG SLBC STCCS ToT TSP UID UNDP
People with HIV/AIDS Reserve Bank of India Regional Office Regional Rural Banks Rural Self Employment Training Institute Rural Development and Self Employment Training Institute Saving Bank account State bank of India Scheduled Commercial Banks Self Help Group State Level Bankers Committee Short Term Credit Cooperative Structure Training of Trainers Technology Service Provider Unique Identification United Nations Development Programme
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I.
Introduction
we have to ensure inclusive and equitable growth, we need to knit and integrate our rural areas. We cannot allow India to be divided into two distinct zones. Dr. Manmohan Singh, Prime Minister, India (2004 to date)
Financial Inclusion (FI) aims at Efforts on financial inclusion are not new; both the Government providing access to comprehensive and Reserve Bank have been pursuing this goal over the last several decades through building of the rural cooperative structure financial services at affordable in the 1950s, the social contract with banks in the 1960s and cost. It can be sustainable only expansion of bank branch networks in the 1970s and 1980s. These when the target population makes initiatives have paid off in terms of a network of branches across use of such services on a sustained the country. (Source: Financial Inclusion; Challenges and Opportunities, Dr. D Subba Rao, RBI Bulletin, January 2010) basis. For any financial inclusion initiative to be successful, both the supply of and demand for financial services have to be strengthened. The supply side initiatives are primarily driven by the financial services providers, the efforts on strengthening the demand side are led by the RBI. The UNDP-NABARD Financial Inclusion project works on strengthening demand for financial services, by supporting the financial literacy (FL) programs. UNDP, under the poverty reduction program, partnered with NABARD to design and strengthen implementation of financial inclusion project focusing on people belonging to disadvantaged groups and regions. It supports programs, policies and partnerships that promote income opportunities for the poor people and help them access financial products to protect these gains. Under the Financial Inclusion project a 7-state Financial Literacy (FL) Assessment Study was conducted and detailed state-wise reports were prepared. A series of state level stakeholders consultations in each of the seven project states (Rajasthan, Uttar Pradesh, Bihar, Jharkhand, Madhya Pradesh, Chattisgarh and Orissa) were held to share the findings of the FL assessment study and prepare a Financial Literacy Strategy document for each State. The FL Assessment Study was undertaken to ascertain the perceptions of respondents drawn through purposive sampling wherein majority of the respondents are those who participated in a FL program, either formal or informal but not a representative. The list of invitees and design of the workshop were finalized by the respective Regional Offices of NABARD with inputs from the Consultant. In each State, the Consultant held interactions with representatives of the key stakeholders of FL/FI on the first day and the workshop was held on the second day. The findings of the FL Assessment Study were shared in each workshop. The Consultant developed a Financial Literacy Strategy document based on the interactions, proceedings of the workshop and secondary research. The list of invitees and schedule of interactions/workshops are presented vide Annex II.
II.
SuggestedFLStrategy
The spirit of FL or FI is to achieve inclusive development; to provide better access to financial products or services, to reduce risk, to enhance livelihood for the poor and ultimately towards inclusive growth. The NABARD-UNDP initiatives are focused on Financial Literacy; Innovative Processes; Knowledge Sharing and Capacity Building. Based on the interactions with the representatives of the key stakeholders in the Capitals of the Seven States this document presents the Vision, Mission, suggested FL Strategy and its components, summary of common observations, state specific observations, suggestions and key learnings for the perusal of UNDP, NABARD and the respective State. Vision: Socio-economic empowerment of the poor and vulnerable sections of the community Mission: Enhance the financial literacy of the poor and vulnerable sections of the community through structured financial literacy programs (FLPs) with stated roles and responsibilities for all the key stakeholders associated with FL/FI. Goal: Total financial inclusion of all sections of the society including poor and vulnerable on a sustainable inclusion by March 2015. Strategy: The informed stakeholders of Financial Literacy, on the strengths of institutional network upto field level, work on a Mission mode, in a cohesive and concerted manner; with defined roles, responsibilities and expectations; on a sustainable model; under defined leadership and direction; with focus on the target group and in a conducive environment; to strengthen the design and delivery of FL with initial focus on attracting attention through increased awareness of the target population and on need-based pilots; and with structured project management approach including periodic review/monitoring/follow-up and assessment of impact/outcome. Integrate FL into FI and other key initiatives of Governments and development agencies/regulators including those under NRLM and MGNREGS etc. The specifics for vulnerable groups like PwD, PwHA, Women and others and FL/FI being woven around economic activity are of desired focus.
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With emphasis on the point that Financial Literacy (FL) enables sustained Financial Inclusion (FI) and both are complimentary to each other, the Components of Financial Literacy Strategy for the State of Odisha are detailed as under: Component 1 Enabling environment Component 2 Stakeholders awareness Component 3 Awareness about financial literacy Component 4 Design and deliver FL Component 5 Periodic review and monitoring
Common Observations, Suggestions and Learnings In most of the seven States significant progress has been made on the FL/FI with reference to the following (Annex IV contains the summary recommendations): Interactions among the stakeholders are being held. Various models of FL/FI are being experienced while most institutions are still to evolve sustainable models. Field level work on FL and FI is at various stages with experiencing of FI still to be at significant levels even when some of the districts are declared as included. NABARD has been engaged more with RRBs. The engagement with SCBs is still to be intensive. NGOs/CBOs are considered as most preferred and important for field level work on FL/FI. Based on the interactions with the stakeholders and the proceedings in the workshops the following are shared as common The High Level Committee to review the Lead observations, suggestions and learnings Bank Scheme, inter-alia, had envisaged a greater from across all seven States. i. State has to play an active role as an enabler and the support from the State Administration is essential at the field level for the success of any initiative on FL or FI. Examples cited include the success of SHG in Andhra Pradesh and the project on Women FI in Rajasthan by name Bhamashah Financial Women 1 Empowerment Scheme .
role for the state governments to support the initiatives of banks for greater financial inclusion and flow of credit to the priority sectors. In this regard it recommended that, among others, the state governments support the financial literacy and credit counseling initiatives, adopt IT solutions for disbursal of payments under NREGA and social security payments such as National Old Age Pension Scheme, bring in participation of private sector banks in various government sponsored schemes at the state/district levels.
Implementation was suspended after completion of enrolment.
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ii.
One the lines of successful spread and reach of SHG movement in some of the States, it is observed that the FL/FI shall also be undertaken on a Mission mode while such initiative is driven with an objective and with a time-bound project management approach. NABARD teams in some of the ROs, who have been People should have an urge to know about associated with the SHG programs in the initial and urge to access financial services. This stages, are particularly keen on this approach. is a primary driver of demand for any A parallel can as well be drawn from the product or service. This is as well may be the reason for the success of mobile success of Technology Missions instituted by penetration in India. Hence it is important Government of India in the mid-eighties, to understand how any FLP can create particularly the successful Technology Mission such urge or desire for financial services. on Telecommunications and Technology Mission on Oilseeds and such others. In the context of various projects on FL/FI, the responsibility for FL/FI is vested with State, SLBC and NABARD and implemented by State Government, Banks and various other agencies2. However, based on the accepted principles of project management, while working on such a project on Mission mode, it is desired that the responsibility is assigned to one agency or entity. One important observation was whether to undertake FL as a program? Or as an Action Program? For an initiative like FL/FI to be successful, the initiative has to be institutionalized as an Action Program Working on models like BC (branchless banking or rather than being undertaken as another extended branch arms) are essential as otherwise the bank branch with the present resources will not be able program. The FL/FI, to be undertaken on a Mission mode and as an Action Program, requires some preparatory work as under: Collaborative approach by various stakeholders associated with FL/FI would be effective and also helps in optimizing the resources being used. Development of a database of NGOs working at field level in each village/ block. Structured TNA and Baseline Survey Integrating FL modules into the ICT based applications being used for FI.
to service the added accounts. Additionally some of the bank branch managers are apprehensive that, if the branches are crowded with these account holders brought through FI initiatives, the regular customers of the bank branch would be put to inconvenience and may even opt out of the bank. An example cited as followed. A bank branch had about 7,000 accounts and an additional 5,000 accounts were to be opened under MGNREGS. However, the bank branch did not open these MGNREGS accounts as they felt that the bank branch would get crowded and the other 7,000 account holders may not continue to do business with the bank branch. (ISMW representative in Ranchi workshop)
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Financial Service Providers other than Banks are still to lead a project, to the extent information was gathered..
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Need-based, if not extensive, use of ICT applications like FM/Community Radio (Chattisgarh/Jharkhand), documentaries/films (Odisha), video-recorded nukkad natak (Jharkhand), theme/float vans (Jharkhand/Odisha) and kiosks (Madhya Pradesh) etc. Banks must see the picture like Small stories, comics that are easily read or the second business strategist, understood as reported to be effective to look at the opportunity at the enhance FL. bottom of the pyramid and Specially designed multi-stage delivery of move into financial inclusion in FL modules is desired. For example in the a big way. case of SHG, at the time of SHG formation, (Source: Financial Inclusion; Challenges credit linkage and livelihood.
and Opportunities, Dr. D Subba Rao, RBI Bulletin, January 2010)
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Banks and other financial services providers shall take ownership of FL/FI related initiatives as an Household sector with 58.1% share in total investment for their future business. In some way deposits was the largest holder of outstanding deposits as on 31st March 2008 as against better part of the successful FI initiatives like SHG share of 57.4% over a year ago. Thus movement, microfinance, KCC etc. are primarily household sector held the largest share across driven by access to credit (excepting the SHG the three types of deposits viz., current, savings and term deposits. Household movement wherein accumulated savings enables sectors share in saving deposits in March credit). However, it is important for the Banks to 2008 was 85.4% as compared to 86.2% in the recognize the opportunity for deposit mobilization previous year. Household sector had a share of 86.4% in rural areas, 77.9% share in in addition to other financial services like microsemi-urban areas and 45.8% in metropolitan credit, micro insurance, micro pension and areas as on 31st March 2008. (Source: Stateremittances etc. The Banks and other financial wise estimates of financial savings of Household sectoran exploratory study, RBI) services providers need to start looking at FL as an investment for their future business3. Considering the experience of the Banks under the service area approach, emphasis is required on Village Level Profiling so as to ensure FL/FI are designed and implemented as may be needed and based on local socio-economic/cultural scenario. The Banks are bringing TSPs and BCs as part of the FI, but to bring in FL into the overall program it is essential to bring in more NGOs or other agencies working at grass root level for the development of certain modules/tools and implementation of FLPs. It may be noted that the design and delivery of FLPs shall be completely aligned to socio-cultural environment and behavior/attitudes of the target population. The design and delivery of nukkad-natak is worth stating as an example. The communication through FLP, to be
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Banking on Financial Inclusion, Business Standard dt. 17th March, 2011 quotes the Finance Minister, Governor of RBI and The Chief Economic Advisor wherein all three express similar opinion.
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effective shall be in the language and tone of the target population. This is better understood and undertaken satisfactorily by NGOs or such other field based organizations/individuals. ix. The demand creation through FL has to get aligned to the supply being ready with necessary infrastructure and organization to service the demand with appropriate products/services. The experiences of mobile service providers may please be referred to. The demand for mobile phone services has been consistently increasing and supply side is getting strengthened and upgraded to cater to such increasing demand with some exceptions. Introduce Fl as part of the curriculum in the Schools, as has already implemented in Karnataka. There are global experiences as well. The membership with the Desjardins, the number one financial cooperative in the Quebec province of Canada, begins at school level. More than 80% of the population in the Quebec province are Members of Desjardins. Beginning FL at School level not only helps in making FL as part of the way of life but the children equipped with the inputs through FL may play a role in enhancing the FL levels of their elders at home and support the elders in the decision making or management family finances. (DGM, NABARD, Raipur Workshop) Integrate FL-FI into relevant programs/schemes of Central/State Governments and other agencies including National Rural Livelihood Mission and National Skill Development Corporation, RUDSETI/RSETI, Credit Cooperatives Reforms and such others. When more than one program or scheme is aimed at the same beneficiary, the scarce resources are wasted and may as well confuse the beneficiary. It is essential synchronize and integrate FL/FI efforts not only to optimize the resource application but also to ensure maximum benefit to the target population. It was felt that UID will help in financial inclusion but UID being a project of longer gestation period; the timing may be a constraint, as cent percent inclusion is targeted to be achieved by end of March, 2015. However, the infrastructure being developed under UID or PDS automation (like in Madhya Pradesh) can be made use of for FL/FI initiatives and wherever possible, maximum advantage can be derived by integrating FL/FI into such programs. There is need to select, train and position a specific resource at village level to work as a Counselor or Vikas Mitr (Growth Enabler) or being called with such other name. Such resource person would work for one or more financial services providers and support the villagers/poor in accessing need-based financial services. Such person is to be incentivized based on the services rendered. The team of such resource persons working in a block shall work in close coordination with the block level FL/FI development officers positioned with the financial services providers and representatives of the FLCCs and the District Level Committees of Banks and Banking Ombudsman etc.
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III.
FLandFIinRajasthan
The FL and FI initiatives in the State of Rajasthan are being undertaken/supported by various agencies. Some of which include Department of Women and Child Welfare, Government of Rajasthan; Department of Rural Development, Government of Rajasthan; Bank of Baroda (BoB) on its own and also as the Convener of SLBC, State Bank of Bikaner and Jaipur (SBBJ); State Bank of India and several others in addition to Reserve Bank of India and NABARD which are working on FL/FI in all the States. Some of the observations and suggestions that emerged out of the interactions and workshop are summed up as under- some are specific to Rajasthan but some may be useful for other States as well. i. Specific target-group based FLPs and FI initiative shall be designed and implemented for any target group like Tribes, Minorities, Migrants and groups/clusters engaged in particular livelihood activities. The Government of Rajasthan is already engaged with some such groups on certain programs and initiatives through RMOL, Women and Child Welfare Department, Rural Development Department etc. Integrating FL-FI into such programs will be effective and shall be accordingly considered. Any and every FLP shall have financial service providers like Banks by design, as part of the program, and has to be pursued Financial Literacy program and interventions towards the set objective of through may look simple but definitely require enhancing literacy and sustained great expertise of the renowned resource inclusion, rather than as a agencies. Mechanical repetition by those who standalone project, as has been have received some stand-alone training may shared by RMOL and & have adverse impact on the program. Financial CECOEDECON. Literacy programs and projects should therefore be undertaken and administered with a holistic Initiate measures to take the pilot approach in close coordination of the banks and in Tonk forward to the next level other stake holders for Financial Inclusion under and initiate pilots in other districts guidance and supervision of a expert resource with necessary modifications as agencies like ISMW which happens to be an may be required out of the alliance partner of NABARD for Financial learning from the pilot undertaken Literacy programs. (Source: ISMW) in Tonk. Integrating FL into the SHG training as has been shared by Women and Child Welfare Department shall be considered to be practiced by other SHPIs and training institutions.
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SHG movement can help in enhancing the FL even when general literacy levels are very low or nil. Within the SHG training, inputs on FL are required to help in EDP among the members of the SHG. FL is also important under the SHG to bring in thrust on livelihood and while enabling market linkages in support of the economic activities of the SHG. v. Concerted effort by NABARD and WCD to scale up SHG program in the State with inbuilt FL and bank linkage with support from Banks. Integrating FL into payments under MGNREGS - as has been shared by Indian Grameen Services - shall be explored to be implemented It is not justified to suggest or advise the poor by other agencies engaged in payments under to save out of MGNREGS payments but we should allow the poor to spend the money as MGNREGS. It was felt that a directive is required to ensure that there are no cash payments under any government scheme or program and all the payments and benefits are channeled through a bank account4. Government of Rajasthan already issued some directive in this regard. However, to enable payments under MGNREGS or Social Security Pensions or such other programs/schemes, transaction automation throughout the chain till the payment or benefit is credited into the beneficiaries bank/savings account is essential. Lack appropriate computerization in the cooperative banks and post offices is causing problems in the remittance of payments under MGNREGS. The institutional network in Rajasthan that work or associate with NGOs or other field based organizations (FBOs)5 shall be taken advantage of to bring in more NGOs or such FBOs to work on FL-FI in the State. The services of institutions like ISMW or BASIX can be used to train such NGOs or FBOs. Possible options on associating RMoL more on FL related activities may be considered, as RMoL is a State initiative, supported by UNDP and managed on a unique model. Additionally, as contained in the FL Assessment Study Report, institutions like PEDO IBTADA who are reported to be doing good work in the area of FL-FI may be intensively engaged in the FL-FI initiatives in the State.
per their profligacy. The banks usually are reported to mobilize savings in the rural areas and extend loans to rich in the cities. If the savings by the poor do not result in investing such savings for the development in their areas, then there is no reason why the poor should save. (Source: Interactions with Government of Odisha, Bhubaneswar)
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As was experienced in the Cooperative Reforms in Mexico. For example, Aravali, (www.aravali.org.in)
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xi.
Methodology of FI followed by Banks needs to be modified from the present Service Area / Lead Bank approach which may have become bottlenecks. Assigning responsibility of FI in one district to one bank is advisable and would be effective unlike the present experience of a bank being given to work in a number of villages throughout the State. When a bank is given to work in a given number of villages across the State, more than one bank will be working on FI in one district and may not have the scale to be operationally viable and the problem may become much more complex when the assigned villages are not in a cluster. It may also be the case that the bank is working in one district for MGNREGS, another district for FI and another district for SSP payments. However, in the given villages, the bank is reported to be working on all these schemes. Grievance Cell operations to be improved at link branch; Offices of Controller, General Manager, and Ombudsman to enhance customers trust in the Bank and developing a relationship with the bank and ultimately for the success of FL/FI. The present technology used under BC operations allows operation of the account by one person but not joint operation of the account as is required by the SHG account holders. SHG accounts are jointly operated but not by one person. IBA and IDRBT have given guidelines for single operation of accounts. Use of PACS and DCCBs as is already under consideration of RBI6, but necessarily after implementing computerization/CBS across the ST Credit Cooperative Structure (STCCS) in the State. A proposal is also under consideration to use PACS as Counseling Centers under the Rajeev Gandhi Seva Kendra program. Progressive DCCBs like Barmer DCCB, Sikar DCCB and such others offer excellent opportunity to pilot the same. This may be the case in some other States as well.
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It was suggested to have focused discussions with the banks and RRBs having major stake / responsibility for Financial Inclusion in the State of Rajasthan with special reference to the villages with population of 2,000 and above which are targeted for being provided access to banking and other financial services.
IV.
FLandFIinUttarPradesh
The NABARD-UNDP initiatives on FL are exactly a year old when the workshop was conducted. The efforts seem to have started yielding results with the sharing of some success stories and models. The nukkad natak played by the team trained by SRSP, the models on FI
RBIBulletinNov.2010
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being used by Punjab National Bank, The R-Seti of BoB initiative on providing accredited certificate program to BFs, design and release of FL Calendar by Allahabad Grameen Bank are some highlights and details are furnished hereunder. i. It is logical and critical to work further on the strengths of considerable effort that has gone in on the FL as well as FI in the State of Uttar Pradesh. This includes scaling up the ongoing pilots in the respective districts and initiating pilots in the remaining districts so as to be able achieve 100% inclusion technically and objectively. Involvement of Banks, TSPs, BCs and NGOs is happening in structured form in a value chain or individually in one or The institutional reputation of TCS seems to be adding value for the success of FI in Saifai. The villagers value the other value chains. a. It is necessary to identify the association of TCS on this project and not necessarily by the strong leads from each such name of PNB, a public sector bank. This when looked at the concerns and apprehensions expressed by many banks about models and document. the reputation of the BC for the FI to be successful, adds b. Share such leads across all credence to the view expressed by the bankers and also key stakeholder of FL-FI and offers a solution. The villagers and the poor are make use of them in scaling comfortable and confident of using the financial services when offered by a reputed institution and the bank takes up the initiatives.
secondary position. (Source: Interactions at PNB, Lucknow.)
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The FI implemented in Bulandshahr offers a completely integrated model, wherein, Mother Dairy is procuring milk, PNB is the Bank, Integra is the TSP/BC and reported to offer an ideal experience. The average amount of balance in the accounts suggests opportunity for other banking products like fixed deposits; the frequency of deposits into the account from Mother Dairy suggests the opportunity for the banking product recurring deposit; the primary economic activity being rearing milch animals, the same offers opportunity for cattle insurance and these apart there exists scope for extending need based loans including to buy cattle, and as the volume of milk increases to establish BMCs, Chilling Plant and further processing facilities. Adding FL into such model helps in improving productivity and thereby the operations reach a higher scale. The experience gained and expertise developed in the form of various tools as mentioned hereunder shall be consolidates and taken Calendars are printed with FL as theme advantage of to further the efforts on FL-FI. and with inputs to farmers. Allahabad a. Nukkad-Natak, Grameen Bank printed the calendars. This b. FL Calendar, offers an interesting communication option to promote FL as households c. School children based initiatives, d. Wall paintings and flex-sheet based frequently look at or refer to the Calendar in every month of the year. If each of the message displays in the villages 10 Grameen Banks in UP prints and e. Support to the RRBs distributes 10,000 calendars, a target
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group of 100,000 population is reached. (Source: Interactions in Workshop).
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The initiative of Lucknow R-SETI to train and offer a Certificate to the BFs and BCAs as an accredited institution by BIRD, can be a role model for the all RSETIs or RUDSETIs in the country. Out of the present 480 BF of Bank of Baroda, the first batch was trained by Baroda R-Seti in the first week of Dec10 in collaboration with BIRD. This way, RSETI, Luknow will be the second such institution after ISMW which is accredited by IIBF. Integrating FL-FI into various economic activity related programs/schemes as well as sub-sector based value chains. This will help in the success of FL as the same depends on the income generation by the individual and Baroda UP GB has identified innovative financial household. Third party support is required in products for Sugarcane growers i.e. Savings cum income generating activities as the financial overdraft scheme, Credit through Joint Liability service providers do not have expertise in Groups, Sugar Mills acting as Management & Collection Agents (Business Correspondents). this area. This requires involving and Allahabad UP GB has identified two innovative network with the active social entrepreneurs products like Prepaid Sapney Savings Card, present in the State so as to be able to Pregnancy Financing for rural people.Development Alternatives assessed the financial product demonstrate and propagate integration of requirement of tribal people of Bundelkhand region FL-FI into value chains and other initiatives by identifying two products like Community of such social entrepreneurs. It is important Backyard poultry and Rabbit farming. (Source: RO, NABARD, Lucknow) to note that NABARD provided support to NGOs for activity profiling of two VDP villages i.e. Gopalpura and Naugaon villages in Jhansi and Mathura district respectively. These highlight the need for innovation in products and processes. Explore the model used by Mahila Prabodhini Foundation in which Social Security Groups are serviced by Volunteers trained as professionals and compensated with annual fee. Lectures or interactive bhashan in the FLP may have been more useful, as reported under the FL Assessment Study, for the following reason. Interactions between participants and presenters are not possible when the participants are viewing video or game whereas when there is a lecture, the participants can interact with the resource persons. Hence it is important to have competent resource person to deliver a lecture in the FLP. One very important form of communication shared by DDM, Gonda, was to project SLIDES with slogans/messages in the movie It is essential to contextualize the content theatres. Another two communication channels and modules as may be suited to the local population as the culture and dialect in used were - Sampark Rath showing video during
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each location varies from place to place. It was pointed out by one participant that Page17 the lingua varies for every 100km in Uttar Pradesh. (Source: Inputs from the Workshop)
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melas and Magicians were involved in promoting FI. x. In UP, 12.6 million no frills accounts were reported to have been opened but only 2% were reported to be operational7. This brings focus on FL so as to ensure continuous transactions with the financial service provider in addition to looking at financial inclusion as an entry level first step. U.P., has about 107,000 villages. Even if it is assumed that one BCA will cover 10 villages, the requirement for BCAs will be nearly 10,000. Hence there is a need to train BCAs though a structured program in which FL is an integrated module for the success of BC operations and sustained inclusion.
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V.
FLandFIinBihar
The FL/FI initiatives in the State of Bihar are progressing and an important feedback is that sufficient demand for financial services at the village level is already created but such demand is still to be serviced. The teams from NABARD and several NGOs are already engaged in FL work as well as integrating FL into The most significant aspect that came out during the Watershed development and such other interactions with the DDMs of NABARD and programs. Major points arising out of representatives of NGOs as well as in the workshop is that, the interactions with the representatives sufficient work is already done on creation of demand for of the stakeholders and workshop are Financial Services whereas the supply side is not ready to service the demand. The example quoted was from the stated hereunder: district of Gaya is as follows. The district is declared as
financially included. Out of a group of villages when an
i.
Enhancing awareness levels NGO with support from the district officials prepared a list seem to have progressed of 1,200 names with a request to the Bank to open savings significantly. Technically some accounts. But the savings bank accounts were not opened. of the districts are declared as included but not objectively. The preparedness of the supply side is still to be geared up, excepting as the case may be with most banks. Specific drive is required to sensitize/prepare Financial Service Providers and strengthening the NGOs. This also necessitates a review process of the data on inclusion and need to initiate measures to ensure objective inclusion8. In addition to the above, institutional mechanism to coordinate the efforts of agencies working on supply-side and demand-side initiatives for provision of financial services to the target population is required.
7 8
Based on interactions with a Banker Similar opinion was expressed by Regional Director of RBI, Bangaluru
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A large scale campaign by banks and State Government is needed to achieve FI in the shortest possible time. It is required to plan forward on the strengths of the work done at the field level in sensitizing the target population about accessing financial services. One important suggestion is to initiate measures to speed up bank linkage for SHGs and Farmers Clubs, as has been reported by several participants in the workshop as well as during the interactions on 13th December 2010. Banks and NGOs are encouraged to approach NABARD with practical proposals to avail assistance under FIF and FITF available with NABARD. Literacy rate in the State of Bihar is as under as compared to all India rate. Emphasis is required to enhance the literacy while working on FL. Category State India Total 47.53 65.40 Male 60.32 75.90 Female 33.57 54.20 Urban 71.71 80.30 Rural 44.42 59.40 There appears a necessity to hold a workshop with all the Banks in Bihar on assessing their preparedness to work on FL-FI and initiate necessary measures to bridge the gap between the supply-side and demand-side with reference to the financial services in Bihar for the target population. Similar initiative may be necessary to hold interactions with other financial services providers like Insurance companies, Micro pension service providers and such others from financial services sector other than banks. In Bihar the FL/FI are already being taken up as an integrated effort with Watershed development programs. Migration out of the State is a serious issue for Bihar. Livelihood support at ground level can help in checking Integrating support on income generation migration. Bihar Rural Livelihoods Project as part of the FL-FI would help the (BRLP) aims to improve rural livelihood options initiative achieve its objective, has been experienced by an NGO which helped in and works towards social and economic the production of 35 million Agarbathi empowerment of the rural poor and women. The Sticks. (Source: Interactions in the Workshop at initiatives on FL FI will have to be integrated Patna) into the Bihar Livelihood initiatives. Integrating FL/FI initiatives into such schemes is for the benefit of the target population. On the strengths of progress on SHG, it may be explored to federate SHGs and the federated structure can be linked with the bank. In such cases, the banks need not deal with so many SHGs. The federated structure may be established under the Trusts Act or
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the Cooperatives Act. However due care needs to be exercised so that concerns on such federated structure getting into unhealthy microfinance activities are addressed. vii. The FLCC Kaimur based on its objectives offers a good model for replication with suitable modifications. Some important suggestions on FLPs are as under: a. The suggested duration of FLP in Bihar is 3 hours. b. The timing will depend on the location and season. If the FLP is done in central village and we encourage participation from neighboring villages, the program has to be closed early in the evening so that the participants can go back to their houses before darkness. Even otherwise, the exact time will depend on the location and season as the participants should have free time to participate. Certain occasions, the FLP may have to be held between 12.00 noon and 4.00 pm or sometimes after 6.00 pm. c. Again the location, duration and time will vary for programs held to enhance the awareness the programs held for training. d. Specific awareness is required on how to open an account and how to obtain a KCC e. The presence of concerned or competent authority at the FLP helps in making the FLP effective and speeding up inclusion. f. When the FLP is delivered in two phases, the participants will be able have a recap of what was taught earlier and also share their experiences after the participation in the first module. g. It is suggested to prepare and distribute Banks brochure in local vernacular about products like savings, loan etc. and their features, procedures etc. Out of the experience of field level interactions, one very important suggestion is as follows. The FLP should educate the There are reports that, people do not think that target participants on how to make use banks are now opening accounts with zero balance. of a bank account in addition to telling When they are told that they can open a bank them on how to open a bank account account without any balance, they suspect the and how to operate a bank account. This agencies who are telling them to do so and attribute malicious intentions to such advises. (Source: is because we frequently hear a Interactions in the Workshop at Patna) question, What do I do with the Bank account? Bankers, NGOs and BDOs should work together for the success and sustainability of any FL or FI program. We often hear that bank branch team does not have time and that the
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target population covered under FL/FI initiatives are usually afraid of approaching a bank. These have to be addressed with suitable training to the bank HR.
VI.
FLandFIinJharkhand
The initiatives under FL/FI are progressing in Jharkhand. The RO, NABARD is already working with the two RRBs in the State and expected to engage itself with SCBs as well soon. There are efforts to revive/reform and strengthen the Credit Cooperative Structure in the State and there are opportunities to integrate FL/FI into the same. Several NGOs are actively engaged in the FL/FI work of which the model presented by Development Tarang using FM/Community Radio is interesting. The strategy used by RO, NABARD to use the print and electronic media to propagate FL/FI programs is also important. Some of the observations/suggestions arising out of the interactions are presented hereunder. i. RRBs have started working on the initiative but Commercial Banks are still to get into act in association with NABARD, apart from technically working on the mandated task and CCBs are still to be part of the initiative. This requires efforts to strengthen the ongoing and proposed FL-FI initiatives with RRBs and actively engage other banks also into the FL-FI initiatives. Some of the NGOs are actively engaged in the field and the RO, NANARD is in touch with and in the know of the activities of the NGOs in this regard. In this regard, efforts are required to support and strengthen the NGOs and document, disseminate and use the good work done by some of the NGOs and other agencies in the area of FL-FI. Initiate measures to take the work on FL-FI further on the strengths of experiences gained in the areas like awareness generation; identifying impeders/enablers towards inclusion; capacity building; intensifying financial inclusion; adoption and use of ICT based modules to promote FL and FI. The experience of RO, NABARD is that films are found to be more useful in Jharkhand hence make use of entertainment or infotainment like video of nukkad-natak by NGOs to spread messages. Other options include using Radio as another cost effective option to spread messages; involving print/news media to spread the message throughout the State; print and distribute Financial Literacy Calendar as developed by ISMW and also already being printed and distributed by Allahabad UP Grameen Bank in UP. Capacity building and enhancing general awareness should be directed at changing culture as people are reported to be happy if they have rice and vegetables and do not expect more.
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In the context of Jharkhand, some of the issues needed to be addressed in FL/Counseling are as follows. Poor find It was proposed in the Monetary Policy Statement of April 2010 to it hard to manage life constitute a Committee comprising representatives from NABARD and a few with meager income; life state governments to study the functioning of well-run PACS, large adivasi worsens with expenditure multipurpose cooperative societies (LAMPS), farmer service societies (FSS) and thrift and credit cooperative societies set up under parallel Self on social, health related Reliant Cooperative Societies Acts to gather information on their working and family related and assess their potential to contribute to financial inclusion. Accordingly emergencies/ exigencies; Reserve Bank in association with NABARD and the concerned state governments, is studying the working of select (about 220) well functioning compulsion leads to rural cooperatives across the country to assess their potential to contribute to borrowing from financial inclusion. The study is expected to be completed by end-January 1 moneylenders, to be 2011 repaid with high rate of interest; the cycle should be reversed by inculcating the habit of saving first and spending later. Savings can be ensured by opening individual SB Accounts or joining SHGs; the regular habit of savings will encourage bank to extend micro credit. It is necessary to spread the message that opening of a bank account is simplified as never before, try it. On the strengths of the ongoing efforts of the Task Force on Cooperatives, explore options on using the Cooperative Banks and Cooperative Societies under FL-FI. Jharkhand is in the process of having a State Cooperative Bank as part of the efforts to strengthen the CCS in the State. The CCS in Jharkhand has LAMPS and an FSS, offering another channel for FL/FI as stated in the Monetary Policy Statement of April, 2010. Holding the awareness programs or FLPs in the vicinity of a bank or the location of a financial service provider helps in bringing the target group to the institution as well as speedier inclusion.
A nukkad-natak was organized in a location next to the bank branch of Vananchal Grameen Bank. After the nukkad-natak, the audience were encouraged to visit the bank branch, which is close to the venue, 30 accounts were opened including about two thirds by the women. Interestingly all the accounts opened by the women had some initial deposit whereas the accounts opened by the males were all with zero balance. (Source: CGM, NABARD in the Ranchi Workshop
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While the RUDSETI/RSETI can be used to incorporate a module on FL in their programs, the BC and BF should spread message about the opportunity for unemployed youth to get trained at RSETI/RUDSETI, about the role of RUSETI/RSETI, other support available from them like follow up, hand holding support, support on getting employed.
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VII.
FLandFIinMadhyaPradesh
The FL and FI initiatives in the State of Madhya Pradesh are moving ahead. The RO, NABARD has been working with several key stakeholders of FL/FI in the State of Madhya Pradesh. Supplementing the efforts, NABARD and UNDP are expected to work on a specific project to enhance the inclusion among the tribes like Saharya. Some of the observations and suggestions based on the interactions are presented hereunder. i. Structured periodic/quarterly meeting is required with participation of all key stakeholders like DIF, Bankers, and NGOs etc. The sub-committee of the It is important to assess, understand and take into SLBC shall also participate and play an consideration the peculiarities in each state or region of the state rather than attempting to replicate successful models active role in such meetings. It would without customization or otherwise from other parts of the be important to invite agencies who are country or state. The States like Andhra Pradesh, Tamil experienced and having expertise in the Nadu achieved significant success in the SHG movement but most other states are yet to witness significant success design and delivery of Financial on the same. It is important to analyze the reasons for the same so as to be able to implement SHG program as is Literacy at ground level. Design and implement specific FL-FI initiatives for the benefit of target groups like Saharya or other tribes or socioeconomically excluded categories or minorities as there may be religious reasons peculiar to certain religions. FI initiatives should aim at socio-economic development or in other words holistic development, of the tribes like Saharya. Similarly dovetail FL-FI into various programs under Madhya Pradesh Rural Livelihood Project (MPRLP) Exposure visits to representatives of key stakeholders to sites of successful models like the visit of RRB officials to South Mallabar Grameen Bank and associated activities would be useful. 30 officials of the RRBs were taken on exposure visit to South Mallabar Grameen Bank and associated activities. The highlight of the activities studied is integrating FL FI into Rural Entrepreneurship Development Program of NABARD. It may be considered to pilot to use the members of active Farmers Clubs or good borrowers or good depositors from the local area as BF or BCA of a particular bank branch. The outcome and experience gained in the pilot project should be shared and discussed through workshop(s) at district level to address the issues related to inadequacies, policies, product, delivery, coordination etc. We need to address the social bad habits like marriages etc. and work on helping people
There are areas in Bundelkhand where the average earnings per month are about Rs 300 to Rs. 500 and hence there is need to increase the earnings, for such people to be sustainably Page23 included. (Source: Presentation by Sewa, Indore) required in the context of the State or Region. (Source: Interactions in RO, NABARD)
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to get out of social bad habits. These become important, apart from other reasons, as in some areas the income generation itself is very low. vi. One of the ongoing projects being implemented was reported to be Orchards Development for the financial inclusion of select tribes. The WADI model implemented by BAIF in Gujarat9 may be considered integrating watershed management, orchard development and market linkages for the produce and thereafter processing, if required. The FL/FI can be in-built into such integrated model. With majority of the respondents depending on agriculture and their awareness about crop insurance being very low, increases their vulnerability. More and more awareness about crop insurance is required. The awareness about micro enterprise insurance is also very poor and requires attention so as to reduce their risk. Some work is being done by Madhya Pradesh State Cooperative Bank, Agricultural Insurance Corporation of India and others. The content on insurance in the FLPs has to be broadened as per the needs of target population and specific group participating in an FLP. The recent experiences of Soya farmers with frost further strengthen the need for the above. Challenges including the following, as reported by some agencies working in the field on FL-FI, are needed to be addressed Most Banks are reported to be having shortage of HR; some of with suitable measures. Distance to the rural branches are working like Post Offices with one or two the nearest Bank branch is too persons manning the bank branch and providing multiple long; no venue to conduct the FLP; banking services. Average age of bank employees is more than 50 years and they are reported to be having problem in working lack of motivation among bank with latest technologies. In some remote rural areas, where the officials at field level; ensure that bank branch staff would have to get back to their place of BLCC, DLCC discuss the FL-FI; residence, they are always under pressure to close their days work by the time they have to catch the bus to travel back home follow up on Action Points is in the evening. (Source: Interactions with SLBC Convener Bank) required in each of the meetings conducted with reference to FL FI The strengths of ongoing FLPs, as mentioned in the FL Assessment Study Report by BASIX, shall be taken advantage while planning on future FLPs. These include: mix of both formal and informal programs which are effective; FL is place for more than 4 years and hence it is advanced; Banks are more proactive for FL; NGOs and para-government agencies are quite active. CSCs have 10,000 outlets in the State of MP operated by agencies including ICET, NICT, CMS, Reliance etc. 5,000 outlets are opened and 500 are operating. They are using different models like smart card, kiosk etc. Payment under MGNREGS/SSP
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After incorporating necessary changes for financial and commercial sustainability of the project.
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already started happening through the CSCs. Rs. 10 cr is already reported to be paid. State Bank of India is enabling remittances through 3 exclusive kiosks are opened in Bhopal for remittances. Thesekiosks operate on real time and online basis.
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To strengthen the demand side, financial literacy intervention as made by ISMW in the pilot project area should be integrated with the financial inclusion plan of the banks/RRBs along with the targeted approach to provide the access to financial services for every village with population of 2,000 and above as envisaged by Government Of India. The villages identified under RBI outreach program can be selected as pilot for financial literacy interventions by ISMW10.
VIII.
FLandFIinChattisgarh
The State of Chattisgarh offers good models to propagate Financial Literacy and enhance sustained inclusion. The interactions offered a model wherein FL/FI is integrated into SHG and agri-value chain. The RO, NABARD also used an FM Radio and a Float Van to undertake a campaign about FL/FI. The observations and suggestions based on the interactions and workshop in Chattisgarh are summed up hereunder. i. Nutrition, health, well being, education are important for the target group or population and hence it is essential to ensure The poor should have money to get into banking and hence that these are addressed for other emphasis is required on income generation as well. Need to initiatives like FL-FI to be accepted understand the primary reasons for exclusion as mentioned hereunder and plan necessary initiatives: and well received. Also it is Economic conditions, important to put emphasis on No surplus left out of earnings so as to be able to save. general literacy as the same is very Not convinced on Why should we go the bank? or low in Chattisgarh 60% in rural Not having time to go to the bank areas and 65% in urban areas - for (Source: Interactions in the workshop) the FL-FI initiatives to be successful. NABARD is interacting closely with Grameen Banks and also interacting with Commercial Banks. However, both these are yet to be working on the supply side significantly. It is essential for banks and other financial services providers to strengthen the supply-side initiatives.
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Suggestion by representative of ISMW
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On the strengthening of demand side NABARD initiated work and further efforts are required in strengthening and scaling up the same in association with State and Banks and by involving NGOs extensively. Scaling up the initiative of NABARD wherein FL and FI are integrated into some of the NABARD programs like Village Development Program (VDP); WADI Development and Watershed Development etc. and associating banks into such projects. The Resource Center project in Bunderdehi is reported to be having significant impact in forming and nurturing SHGs as well as linking them with Banks. Replicating the model in other districts as well as scaling up the operational area of the present Resource Center is to be explored. Financial Inclusion in terms of opening of no-frills and MGNREGS accounts seem to be very close to cent percent inclusion in most districts with 10 out of 18 districts declared as cent percent included. It may take some time to speed-up the process with reference to the districts which are experiencing problems with Naxal movement.
The process used by Sahoyogi Jan Kalyan Samithi to bring in a working/credit culture as stated hereunder is interesting and the same shall be documented, disseminated and propagated as a field based successful model to be part of all FL-FI trainings and initiatives. a. Initial thrust on savings b. Opening of a bank account and start depositing the savings with the Bank c. Learn to withdraw from and deposit into the Savings Bank Account. d. Extend loans to other members of SHGs whether belonging to the same SHG or different. This is basically to make the Members learn about loaning and recovery. e. The above also helps is on bringing in loan repayment culture. f. They also earn interest on the amount leant which makes them gain knowledge about earning interest by resorting to lending/investing. g. Only then they are encouraged to borrow from Bank The Samithi is planning to bring all the SHGs under 4 clusters with one SHG being part of one cluster. To focus on: a. Specific products; b. Inter-cluster marketing c. Local marketing d. Leadership development e. Bank linkages f. EDP and Management. The Samithi is also considering the following to bring in more economic activities and awareness: a. Gherkins b. Tissue Culture of Banana c. Mithai Dabbas making d. Visits to Melas (Source: Interactions at the Resource Center)
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Explore options on integrating FL/FI into livelihood activities and other programs of Ministry of Minor Forests, Tribal Welfare Department and others including under Non Timber Based Forest Produce (NTFP) based initiatives. NTFP based economic activity can drive FL-FI and such activities include those based on: i. Tendu Patra ii. Mahua Flower iii. Honey etc. Consolidate the experiences of working with various channels/models of FL-FI as well as tools used including ICT based The FM Radio, 94.3 covers area within 60 km. radius is being used dissemination models like FM to spread messages about FL. Sound bites from GM RBI, ED NABARD and CGM NABARD are being used. This is contracted Radio, Float Van or Theme to be broadcast 10 times a day and 2 to 3 days a week over a three based van etc.; conduct of quiz month period. programs in Schools; use of Float Van or Theme based van is used cover an about 60 to 70 special documentaries or films villages. The van is used as a base to spread messages using audiovisuals, street play, quiz program etc. This was done for about 15 to to spread FL-FI; 20 days in October. Pamphlets were distributed by 94.3 FM Radio
through the van. (Source: Interactions in the workshop)
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The Chattisgarh Agricon Samithi also offers a model of agri value chain integration into which FL/FI can be integrated. The value chain is primarily concentrated on fruits and vegetables. It collects F&V from two clusters of villages and supply on door delivery basis in Raipur. Also has three booths for direct sales, operated by SHGs. Initially it worked with membership and issue of coupons to buyers at a fixed price per packet of vegetables. Now it takes orders on phone and ensures door delivery.
IX.
FLandFIinOdisha
The FL/FI initiatives in the State of Odisha are under progress. The RO, NABARD has been engaged with various stakeholders and working on several models. Among the banks State Bank of India is leading and some of the private sector banks are also actively engaged in some of the FL/FI initiatives. The Department of Rural Development, Government of Odisha is working with several Banks and other key stakeholders in connection with payments under MGNREGS and such other payments. The RO, NABARD supported CCBs to open two Financial Inclusion Centers. The work presented by Gram Uthan was well appreciated by the participants in the workshop. The observations and suggestions as summed-up out of the interactions and workshop are stated hereunder. i. Integrating FL into programs/projects of National Skill Development Corporation (NSDC), National Rural Livelihood Mission (NRLM) etc. In the context of the initiatives
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of Government of Odisha under TRIPTI, this becomes much more important. Also more than one program may otherwise be directed at the same target population. The TRIPTI program is aimed at focusing on SHGs and through that the economic development of the poor. TRIPTI was established under Department of Women and Child Development, Government of
Odisha, for the promotion and strengthening of SHGs in the State. Now mandated to be the State level agency under NRLM and will be converted as OPRLM. All SHG related works so far supported by Mission Shakti, NABARD, MFIs are expected to come under TRIPTI.
Intra-rural markets to be tapped to have dual impact in the
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There is need for Biometric ATMs in rural areas, i,e. Employment & Consumption. Some the rural areas. Gujarat government is examples of intra-rural markets are: Low cost housing; Alternate energy; sources; Low water using sanitation supporting banks in such initiative. services; Drinking Water; Handlooms including Khadi; The Government of Odisha may also Indian Medicines; Farm Implements etc. (Source: provide space to establish Biometric Presentation by Prof. L K Vaswani) ATMs in rural areas but all other costs related to the ATM shall be borne by the Banks. To study and document the work of SBI on using a BC per Gram Panchayat (GP) so that if the same is viable for all the stakeholders and effective towards sustainable inclusion, it can be considered for replication across the State and may be across the country. Under this model tt is suggested to have one BC for one GP. This way one BC would be covering about seven to eight villages or a population of about 2,000 to 3,000 or households of 500 to 1,500. Even if we assume one account per one household, the BC would have to service about 500 to 1,500 accounts under one GP. Consolidate the experiences on use of various media and tools like advertisement on television channels, printed promotional material, pictorial flip charts, road shows, wall paintings etc. for their future use in propagating FL-FI. Plan on the strengths of the programs undertaken: Informal Financial Literacy program delivered by NGOs in Orissa have provided the basic skill to the people to understand the terminology of Finance; NABARD-ISMW-CYSD FL program has developed requisite resource person for the FL program. Initiate measures to address the below mentioned weaknesses of ongoing FLPs as mentioned in the FL Assessment Study Report of BASIX: a. The program is being implemented without fixing the accountability of quality of training. b. TOT was delivered to NGO heads but proper TOT was not organised by NGO heads for their staff who will deliver the training to the ultimate beneficiaries c. Duration of the FL program was too tight to understand the content by the people. d. Mode of delivery of the program was on lecture.
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e. Variation in participants education level. f. FL program is essential for both male and female members of the family but in the field number of male groups is nominal. g. Lack of understanding of both funding agencies and the local agencies of the need for repeat program at particular time interval. vii. Presence of number of NGOs in Odisha will provide base for quick coverage of Financial Literacy. Introduce a module on FL in the technology solution being used by the TSPs under the FI work. SIDBI is adapting clusters of specific industries/products like Cashew (Gajapathi and Ganjam districts); KEWDA, Engineering Cluster in Rourkela. These are with support from GTZ/DFID/WB. SIDBI established a Project Monitoring Division for this purpose. Options to integrate FL/FI into the same may be explored.
The model presented by Gram Uthan (GU) may be evaluated and considered for support and scaleup. Gram Uthan is operating in forty blocks of seven districts. GU provides micro enterprise loan to Members for taking up various household enterprise like Paddy processing, Poultry, Dairy, Goatery, Vegetable vending & Cultivation, Pisciculture, Tailoring, Phenyl, Fish vending, Grocery, Brass work, Agarbathi making, Soft toy etc. It works with the following objectives: To impart skill up gradation training of rural poor and create diversified Livelihood option in Non-Farm Sector To bring well being at the household level with increased income of the HHs To enhance livelihoods and ensure food security, enhanced incomes, and increased access of basic entitlements & decreased economic vulnerability To strengthen an integrated composite agriculture for the socio-economic development of the rural poor.
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(Source: Presentation by Gram Uthan)
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ConsultantsWord
The work on FL/FI has generated experience, expertise, models and learning to the various stakeholders engaged with FL/FI work in the respective States. The interactions and workshops held in the seven States have a lot to offer notwithstanding the fact that several observations and suggestions that are apparently specific to a State may as well be true in the case of other States in one way or the other.
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FL initiatives, with a stated intent to work towards inclusion, are successful even though the degree of success may vary from case to case. It is suggested to embark on FL/FI on a Mission mode, on the strengths of an IEC campaign, with structured project management approach wherein the enrolment is through camp-mode - Gram Panchyat after Gram Panchayat - and a series of FLPs are held at various stages/phases. An FL/FI initiative where there is an integrated effort and focus on an economic activity, achieves sustainability over a period. The stand-alone initiative in the Tonk district of Rajasthan concluded with the closure of the project. Whereas the FI work of PNB in association with Mother Dairy in Bulandshahr, the initiatives presented by Gram Uthan (Odisha), the Resource Center model experienced in the Durg district (Chattisgarh), the F&V value chain based model of Chattisgarh Agricon Samithi11 - all have a common feature, i.e. the FL/FI are woven around economic activity/activities and emphasis is on income generation and managing the income. It is essential that all key stakeholders work in an integrated manner with focus on the customer12 who is It is possible that one may have opened an account under SGSY, may included and would also be a member of PACS, also a member of SHG and has an account continue to be with a Bank. Such instances would result in one person having account with multiple service providers or through channels and result in none of included having been the FI initiatives being sustainable. (Source: Interactions in the benefited out of such Workshop, Bhubaneswar) inclusion. All stakeholders including the customer should benefit of out of inclusion in the medium to long terms and only then such inclusion can be sustainable. The FI initiatives need support in the short to medium term. The customer while included, gets need-based access to all kinds of financial services, when needed and at affordable cost. Not necessarily there is over-emphasis on credit but all other financial services like savings, remittances, micro insurance, micro pension and any others as per the needs of the customer are serviced at the time of need and at affordable cost13. The timing of the demand creation through FL is to be aligned with the preparedness of the service providers to service such demand for financial services created at the field
11 12
FL/FI may not have been directly integrated into the same The Customer but not necessarily the beneficiary 13 The financial cooperatives across Europe and Americas work with a Savings led model and are usually called Savings and
Credit Cooperatives
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level. And the field level teams of the financial services providers are trained, prepared to render such service and are equipped with needed infrastructure including technology. The excluded are apprehensive of approaching the Banks and other financial services providers and there are barriers from both demand and supply side. Such barriers are needed to be removed with appropriate measures including enhanced FL, awareness about FL, HR development, provision of needed financial services infrastructure and need-based State support. All stakeholders have a role to play and responsible for the same and have to be duly recognized and rewarded. It is not the case that either a Bank or some other stakeholder is important and others are not so important. However when the Bank or any financial services provider is the owner of and primary investor in the FL/FI initiative, such Bank or financial services provider shall take leadership position. Even otherwise every initiative shall work under a defined leadership. The FL/FI initiatives shall aim at inclusion of all sections and categories of the society, on a stainable basis. Such target population includes children, women, minorities, PWD, PWHA, socially and economically backward, daily wage labour, tenant farmers and such others, The inclusion need not necessarily be through special programs but shall require specific products and services designed for each class or category as aligned to their needs. In an FL/FI initiative emphasis is required on both Making Money and Managing Money. The economic gains at individual or household level and thereby at micro and macroeconomic levels, can be the best, when the resources available and accessible14 to the individual or household are deployed in a manner to optimize the returns to the individual or household within the permissible laws of the land. (Please refer to Annex III on a Framework for FL) Any FL or FI initiative shall make the best out of the use of Information and Communication Technology (ICT) applications as these not only help in improving efficiency, productivity and help in containing leakages through the system but also in optimizing the resource use with service at right time.
Resources of the desired features shall be accessible at needed time and at affordable cost. (right Quality, right Time and right Cost)
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AnnexI:EffortstoexpandthereachofRuralBanking
Evolution of Rural/Agricultural Credit The evolution of the formal institutional structure for agricultural credit in India has been shaped largely by policy interventions over the years. A three pronged strategy was adopted for developing institutional services for agricultural credit, viz., expansion of institutional structure, directed lending and concessional credit. The institutional process of credit to agriculture goes back to 1870s when Government provided credit to farmers during the drought years. The institutional disbursement of rural credit on a regular basis by the cooperative institutions commenced after the enactment of the Cooperative Societies Act in 1904. The Reserve Bank of India has been closely involved in rural credit and banking by virtue of Section 54 of RBI Act. A major initiative in pursuance of this mandate was taken when an All India Rural Credit Survey was initiated in 1951. Based on the committee report, the Imperial Bank was nationalized and renamed as State Bank of India on 1st July, 1955. The RBI played an active role in building the institutional network for agricultural credit by setting up of Agricultural Refinance Corporation (ARC) in 1963. The ARC was renamed as Agricultural Refinance and Development Corporation (ARDC) in 1975 and from this National Bank for Agriculture and Rural Development (NABARD) in 1982 to pay focused attention to rural/agricultural credit. Co- terminus with this multi-agency approach to rural credit, policy intervention in credit allocation to agriculture was considered necessary in the wake of several weaknesses, viz. lack of collateral, high transaction costs and increased risk perceptions. The concept of priority lending was stipulated for agriculture and allied activities. In the 1990s, emphasis was laid on the process of consolidation with a view to improving profitability and viability of institutions. Two major innovations in the field of rural credit delivery in this period were the introduction of Kisan Credit Cards (KCC) and the extension of micro finance in the form of Self Help Group (SHG) Bank linkage program. Out of a large number of agencies engaged in the countrys rural credit delivery system including cooperatives, regional rural banks (RRBs) and commercial banks, the commercial banks have the largest share, contributing over 55% of the annual credit flow to agriculture and allied activities, whereas cooperatives and RRBs contribute 37% and 8% share respectively. Commercial Bank
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credit to rural areas is just 10%15 of total bank credit as against rural contribution to GDP of 40%, indicating low priority of the banking sector for rural areas. In case of RRBs, nearly 60%16 of formal credit is being lent to the non-target group and thus pointing towards changed priorities. Several studies and reviews have shown that only less than half of the credit usage by rural households comes from formal sources. The landless, that constitute the bulk of the rural poor, do not get much credit from any formal institution. Over the nineties and the present century, a variety of micro-finance institutions (MFIs) supported by the international and domestic donor community have introduced some innovations in enhancing access of the poor to financial services. Yet, these institutions are limited in their ability to augment the access of the poor to financial services, both because of their small scale and also the lack of a facilitative regulatory environment in which they may operate. None of the existing institutions have been able to provide savings services to the poor which is one of the most important services required by them. Outcomes The RBIs Assessment The litmus test of any effort is the outcome and perhaps even more important, the perceptions of outcomes. These can be summed up as follows. First, the non-institutional credit still continues as far as rural areas and agriculture sector are concerned. Second, the credit-deposit (CD) ratio shows that despite the intermediation of banks, the ratio continues to be low in the rural area. Third, an all-in costs of credit from banks after factoring in timeliness, transaction costs, access etc., appears high for agriculture relative to private corporate sector even after accounting for the risks as reflected by the level of actual non-performing assets. Fourth, the performance of some of the public sector banks in rural and agricultural lending is also inadequate while that of most of the private and foreign banks is even lower, despite considerable expansion of the scope of priority sector lending. Fifth, credit-system in rural areas finds it difficult to cope with the rising demands of commercial agriculture and in any case, there are few credible risk-mitigation measures for the borrowers resulting in greater distress to the farmers in areas with significant presence of commercial crops. Sixth, while there has been notable progress in micro finance, it is mostly confined to the states with fairly well-developed banking system. Further, the cost of credit at around 20% to 30% also appears high. Seventh, the cooperative credit system is in most parts dormant and it is commented that the three tier structure helps finance the bureaucracy rather than benefiting the farmers.
15
16
Assocham Analysis: Commercial Banks Deposits and Credit Mobilization Pattern (1990-91 to 2003-04)
RBI Basic Statistical Returns, 2003
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Similarly in many parts of the country, RRBs are less active though in some others they are expanding. Eighth, while there has been significant growth in rural credit in the recent years, its medium term sustainability is contingent upon growth in agriculture and improvements in the institutional settings.
In brief, the outcomes of vigorous and varied efforts to expand the reach of rural banking seem to be less than expected.17
17
Extract from speech by Dr. Y V Reddy, Governor, Reserve Bank of India, RBI bulletin Jan.07
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Annex II: Workshops Schedule and Suggested Institutional Participation

Schedule S.No. 1. 2. 3. 4. 5. 6. 7. Location Jaipur Lucknow Patna Ranchi Bhopal Raipur Bhubaneswar Date 8 December, 2010 10th December, 2010 14th December, 2010 16th December, 2010 21st, December, 2010 24th December, 2010 28th, December, 2010
th
No. of Participants 50 35 90 35 38 38 52
Suggested Institutional Participation

The key stakeholders whose presence and participation in the workshop was suggested included from:
Reserve Bank of India NABARD - RO NABARD - DDMs one or two Lead Bank Scheduled Commercial Banks SIDBI RRBs State Cooperative Bank DCCBs - One or two State Government: Department of Rural Development; Commissioner RD MGNREGS implementation agencies State Government: DRDA State level, one or two districts Department of Cooperation Representation from RSETI/RUDSETI Technology firms active in Financial Inclusion NGOs/CSOs active in FIs like SEWA, Institutions active in Financial Inclusion Institutions actively engaged as BC/BF Representatives of premier and established MFIs who work beyond microfinance and on a mission mode in the area of rural development.
Some organizations were pre-selected to make presentations, as a case, on their experiences of working on Financial Literacy/Inclusion.
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Rajasthan 1. Reserve Bank of India on FL/FI initiatives 2. The SLBC Convener on the FL/FI status in the State of Rajasthan
3. Rajasthan Mission on Skill and Livelihoods (RMoL) & CECOEDECON on their FLP in Tonk
4. Department of Women & Child Development (DWCD) on SHG program 5. Indian School of Microfinance for Women (ISMW) on the FLP that they have been working in India 6. Central Bank of India on MGNREGS payments 7. NABARD Bihar 1. 2. 3. 4. Reserve Bank of India on Outreach and FI Punjab National Bank on FI work BASIX on their of MGNREGS payments NABARD
Jharkhand 1. Dynamic Tarang on use of Radio for FL-FI 2. ISMW on their FLPs 3. NABARD Madhya Pradesh 1. 2. 3. 4. SEWA, Indore ISMW HCL Anupama Education Society
Chattisgarh 1. 2. 3. 4. Sahyogi Jan Kalyan Samithi on their Resource Center 94.3 FM on the program undertaken with NABARD support Chattisgarh Grameen Bank on their FL-FI initiatives SPARSH on their experiences with FL-FI work
Odisha 1. 2. 3. 4. 5. TRIPTI NABARD Gram Uthan HCL SBI
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AnnexIII:AFrameworkforFL
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AnnexIV:CommonRecommendations
Number Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4 Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8 Recommendation 9 Recommendation 10 Recommendation 11 Recommendation 12 Recommendation 13 Recommendation 14 Recommendation 15
Recommendation Design and deliver FLP with focus on Target Group Integrate FL/FI into various/schemes/programs including NRLM, NSDC, MGNREGS and such others Ensure sustainability for all stakeholders associated with FL/FI Undertake FL/FI with structured approach Integrate FL/FI into emerging intra-rural opportunities for value addition. Demonstrate FL/FI models with pilots markets and
Innovate products/processes for successful and sustainable FL/FI. Make use of ICT to accelerate FL/FI Communication among stakeholders is required for the success of FL/FI Stakeholders share experiences among themselves to help in accelerating FL/FI as well savings in use of scarce resources. Build/strengthen the capacity of institutions and human resources associated with FL/FI. Unified effort is required among all stakeholders, while working on FL/FI Define and state the roles and responsibilities of all the stakeholders. Strengthen the delivery channels as the last mile connectivity is the key for the success of FL/FI Institute and implement a review/monitoring and follow-up system for the success of FL/FI.
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AnnexV:DefinitionsofFinancialLiteracy/Education
Financial education can be comprehensively defined as the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being18 Financial Literacy includes greater awareness of products and services available, their use/relevance in meeting needs and their contribution to risk management strategies. Financial Literacy of the poor is also very critical to building a vibrant and competitive low income financial services sector that facilitates affordable and need based access to financial services rather than mere access alone.19 Financial Literacy or Financial Education can broadly be defined as providing with and understanding of financial market products, especially rewards and risks, in order to make informed choices. Viewed from this standpoint, financial education primarily relates to personal finance to enable individuals to take effective action to improve overall well-being and avoid distress in matters that are financial20 Awareness, knowledge and skills to make decisions about savings, investments, borrowings and expenditure in an informed manner.21 Financial literacy is the ability to understand financial terms and concepts and to translate that knowledge skillfully into behavior.22 Financial literacy means having the knowledge, skills and confidence to make responsible financial decisions.23 Financial literacy is the combination of consumers/investors understanding of financial products and concepts and their ability and confidence to appreciate financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being.24
18
Inclusive Growth : Role of Financial Education, Special Address by Ms. Shyamala Gopinath at BANCON- 2006, Hyderabad on November 4,2006. 19 Scoping Paper on Financial Inclusion, Considerations and Recommendations for UNDP Ramesh S Arunachalam 20 The Role of Financial Education: The Indian Case Dr. Y V Reddy, Governor, RBI 21st Sep., 2006 21 Indian School of micro Finance for Women (ISMW) 22 Teba Bank 23 Task force on financial literacy -Canada 24 Organization for Economic Co-operation and Development (OECD)
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Undp - Nabard Financial Inclusion Project: State Level Financial Literacy Strategies Summary Report For 7 States

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Undp - Nabard Financial Inclusion Project: State Level Financial Literacy Strategies Summary Report For 7 States

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State level Financial Literacy Strategies Summary Report for 7 States

UNDP NABARD Financial Inclusion Project

Compiled by Gopala Krishna Ayitam

CONTENTS Particulars Page No.

Implementation was suspended after completion of enrolment.

Suggestion by representative of ISMW

(Source: Presentation by Gram Uthan)

Annex II: Workshops Schedule and Suggested Institutional Participation

Suggested Institutional Participation

Odisha 1. 2. 3. 4. 5. TRIPTI NABARD Gram Uthan HCL SBI

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