Financial Inclusion- A Study of Awareness Level of People in Indore District

 

Vaishali Waikar¹, Dr. Yamini Karmarkar²

¹Faculty, Arihant Institute of Management & Technology, Indore

²Reader, IIPS, DAVV, Indore

 

ABSTRACT

Financial inclusion is the process of ensuring access to financial services timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost. Financial inclusion is one of the top most priorities of the Government of India. This paper tries to study the financial inclusion services provided by the banks and its awareness of the selected sample of Indore district. Also to study the effect of gender and occupation on awareness level of people. From the study, it is found that, the financial inclusion awareness of people of Indore district after its implementation, though the scheme had a strong social mission of financial inclusion, the mission had not been fully translated into satisfactory action on the ground that the scheme was not fully included. Still half of the citizens and women are not getting awareness of banking services especially. To increase the awareness, Government should be asked to play a proactive role in facilitating financial inclusion. Financial Literacy, financial education should be given to all levels of the society.

 

 

 

“Overcoming poverty is not a gesture of charity. It is an act of justice. It is the protection of a fundamental human right, the right to dignity and a decent life. While poverty persists, there is no true freedom. 

 

Sometimes it falls upon a generation to be great. You can be that great generation. Let your greatness blossom. Of course, the task will not be easy. But not to do this would be a crime against humanity, against which I ask all humanity now to rise up."      

- Nelson Mandela

 

1. INTRODUCTION:

Diversity is an unique feature of Indian society. Whether it is in religion, culture or in economic condition. This diversity is prominent in every aspect of life including financial institutions. Households with low income often lack access to banking services. They find more difficult to save and to plan financially for the future. Even they save a little amount of money they are not willing to deposit in the banks, because of lack of awareness and lack of proper financial services. This leads to a negative impact on the economic condition of the people as well as economic health of the country. Financial exclusion is a both symptom and cause of poverty. For an accelerated growth of the economy it is necessary that all the people should be covered by the financial sector through the financial inclusion. All the people should have some basic banking services such as savings, credit, e-banking and insurance. “Financial inclusion is the delivery of financial services at an affordable cost to the vast sections of disadvantaged and low income group of people who have been excluded from it.” (RBI’s definition for Financial Inclusion) Financial inclusion plays a major role in driving a way the poverty from the country. The main focus of financial inclusion in India is to promote sustainable development in rural areas.

 

Financial inclusion is one of the top most priorities of the Government of India. After the UPA government has come into power in the center, one of the most visible aspects of the governance has been agenda of social inclusion of which financial inclusion is an integral part. The Reserve Bank of India (RBI) has taken a proactive role in ushering the enabling environment for expediting financial inclusion across length and breadth of the country through bank led model. To reach out at 400 million plus unbanked population at pace with profitability is the single most important challenge faced by the multi stakeholders, particularly banks and delivery channels. (Handoo, J-2010)

 

The roles of Commercial banks to be performed as part of financial inclusion programme are Financial literacy, Micro Credit counseling, Jan-dhan-Yojana KYC norms, KCC/GCC, No-frill accounts, Govt subsidy, Mobile banking, Insurance schemes and  other measures.

 

According to RBI, total number of accounts opened under PMJDY have covered 99.98% of households in the country. But does it ensure that the awareness level of account holders towards banking services is upto the desired level?  Does it mean that the coverage under schemes is a sufficient measure of Financial Inclusion and Financial awareness thereby? This paper tries to study the financial awareness among people in selected areas of Indore district.

 

2. Demographic profile of Indore District:

Indore is the most populous city in the Madhya Pradesh. Indore is also the largest metropolitan and commercially developed city in Central India. It is an important hub for all business activities of this region.

 

According to the 2011 census Indore District has a population of 3,272,335. The district has a population density of 839 inhabitants per square kilometer (2,170 /sq.m). Its population growth rate over the decade 2001-2011 was 32.71 %. Indore has a sex ratio of 924 females for every 1000 males, and a literacy rate of 87.32 %. Indore region covers a very large area which consists of not only urban area but also tribal region, rural, semi-urban and industrial towns. All the major banks, financial institutions have their regional offices in Indore. Indore district have 549 villages with population less than 2000 out of which only 288 villages have banking outlets. Thus it represents a suitable cluster to study Financial Inclusion. (Source: - State Level Bankers Committee M.P.)

3. LITERATURE REVIEW:

3.1 Studies on Awareness Level:

Shabna Mol TP(2014) in her study on “Awareness and access of financial inclusion drive a study of below poverty line households in Kerala” The study investigated that the level of awareness about financial inclusion forces and examined the extent of financial inclusion among below poverty line households in terms of access and continuous usage of bank account. The study revealed that the BPL households are aware to some extent about financial inclusion drives and access bank account only for the enjoying the government benefits and schemes.

 

C. Annamalai and Dr. K.Vijayarani (2014) “Awareness of financial inclusion on tribal people in Dharmapuri district’ the study suggested that, the financial inclusion awareness of tribal community region after its implementation, though the scheme had a strong social mission of financial inclusion, the mission had not been fully translated into satisfactory action on the ground that the scheme was not fully included. Still half of the tribal citizen not getting awareness of banking services especially. The study results of financial inclusion initiatives, benefits, and awareness of these society people, so that the main objectives of improving their awareness and standard of living can be aimed.

 

Shweta Singh (2010) in her study “A study on financial inclusion awareness among selected working women of Satna (M.P.)” it was revealed that, women were not availing the banking services upto that extent as it was time consuming as well as lack of knowledge about banking services. The insufficient knowledge about these facilities creates dissatisfaction among working women. Dr. P. Raja Babu (2015) his study “Analysis of the Level of Financial Literacy and Financial Inclusion among Rural Households in Krishna District: Andhra Pradesh” focused on key lessons for financial decision-making in the wake of that crisis, exploring how financial literacy can enhance peoples‟ skills and abilities to make more informed economic choices.

 

3.2 Demographic Studies on Financial Inclusion:

Amit K. Bhandari (2009) in his study on”Access to banking services and poverty reduction: A state wise assessment in India”, investigated that the banks outreach among various section of population in the form of the saving and deposit accounts during different periods.The result showed that reform periods was worst in terms of deposit account .Rural area fared better in terms of deposit accounts during pre reform period,while during post reform period highest growth in the bank accounts observed in metropolis areas.He suggested that the growth in bank account is not significantly associated with the reduction in below poverty line population across states.As a poverty reduction strategy, developing inclusive financial system should give priority,which is financially and socially sustainable. S.Thyagarajan and Jayram Venkatesan(2008) have analysed the result of no frills financial inclusion in cuddalor district of Tamilnadu in terms of coverage by geographical and other categories,cost involved in account opening and maintenance as also the transactional usage behaviour of such accounts.15% of the customers were operating the account and bulk of account hadn’t even operated once .An analysis on the operating account showed a steady balances over one year from their account opening date.

 

Dr.B.C Patnaik (etal) attempted to understand the perception of beneficiary in general towards the basic banking service accessibility in the district of anjam,Osdisha,study depict that the lack of regular and substancial income is one of the reason for the financial exclusion People with low income do not qualify for a loan.Most of the excluded customers are not aware of the bank’s products which are beneficial for them.

 

Joseph Massey (2010) said that, role of financial institutions in a developing country is vital in promoting financial inclusion. The efforts of the government to promote financial inclusion and deepening can be further enhanced by the pro-activeness on the part of capital market players including financial institutions. Financial institutions have a very crucial and wider role to play in fostering financial inclusion. National and international forum have recognized this and efforts are seen on domestic and global levels to encourage the financial institutions to take up larger responsibilities in including the financially excluded lot .

 

Oya Pinar Ardic et al (2011) explained that using the financial access database by CGAP and the World Bank group, this paper counts the number of unbanked adults around the world, analyses the state of access to deposit and loan services as well as the extent of retail networks, and discusses the state of financial inclusion mandates around the world. The findings indicate that there is yet much to be done in the financial inclusion arena. Fifty-six percent of adults in the world do not have access to formal financial services.

 

According to Dr. K.C.Chakrabarty, Deputy Governor, Reserve Bank of India, said that financial Inclusion is the process of ensuring access to appropriate financial products and services needed by all sections of the society in general and vulnerable groups such as weaker sections and low income groups in particular at an affordable cost in a fair and transparent manner by mainstream institutional players. Sharma, and Ms. Sumita Kukreja has concluded in their study that Financial Inclusion has not yielded the desired results and there is long road ahead but no doubt it is playing a significant role and is working on the positive side.

T. Ravikumar has concluded in his study that if government is advocating any kind of sustained development and stability whether financial, economic, political or social and inclusive growth with stability, it is not possible to attain these goals without achieving financial inclusion. Thus, financial inclusion is no longer a policy choice today but a policy compulsion. And, banking is a key driver for financial inclusion/inclusive growth.

 

4. OBJECTIVES:

1. To study the financial inclusion services provided by the banks and its awareness of the selected sample of Indore district.

2. To study the effect of gender and occupation on awareness level of people.

 

5. RESEARCH METHODOLOGY:

The study was conducted in a Indore district. It is intended to assess the awareness about the financial inclusion schemes of Govt provided by the various Banks among the people of the district.

 

Table No. 1 District Wise Allocation of Villages in Indore District

Details of Villages in Indore District Tehsils/ Taluk in Indore District	Villages	Percentage
Depalpur	149	22
Sanwer	128	19
Indore	161	24
Mhow	177	26
Hatod	62	9
Total	677	100

(Source: As per the survey of Department of Planning and Statistics District Indore and Census of India, 2011)

 

5.1 Data Collection:

Data was collected from both primary and secondary sources. Secondary data collected from sources like, published articles, journals, reports, books and websites, Primary data collected through structured questionnaire from 280 people of Indore district. Out of which 70% of data is from rural part and 30% is from urban part of Indore. Out of 280 respondents 67% were male respondents and 33% female respondents, i.e 188 males and 92 females.

 

Graph 1: Gender wise percentage of Respondents

 

While analyzing data it was found that, 23% of respondents were from agriculture background. 20% respondents were having their own business. 7% respondents were belong from such families who are running the family business. Whereas 50% respondents were from service sector. Thus, the study represents all those sections of society for whom this study is intended.

 

 

Graph 2: Occupation wise percentage of Respondents

 

5.2 Sample Size:

Data was collected from 300 respondents of Indore district, out of which 280 questionnaire were properly filled and considered for the study.

 

 

5.3 Time Period:

Data was collected during the financial year 2015-16.         

 

5.4 Scale and Data Analysis:

Percentage analysis was done for demographic variables. There was two categorical variables, Gender and Occupation. ANOVA was applied to study the effect of these two variables on “Awareness Level”. 24 services of banking were listed. The awareness level was measured on a 5 point Likert Scale, where, 1 = Unknown, 2 = Somewhat Known, 3 = Known, 4 = Fairly Known and 5 = Very-well Known.

 

 

6. ANALYSIS AND DISCUSSION:

6.1 Effect of gender on awareness level for banking services:

ANOVA test was applied for comparing the mean level of awareness in Male and Female respondents. Out of 24 variable of awareness level, 22 were found to be significantly different among male and female respondents. While remaining two variables were found same for male and female respondents. These two variables were, Deposit collection and KYC Norms. The highest awareness was found for deposite collection and KYC norms was somewhat known.(Table 1) Incase of 21 services, awareness of Males were higher than Females. Only in one service females showed significantly high awareness, which is “Safe Locker” quite obvious.

 

Table 2- Gender wise Awareness Level about banking services

 

Graph 3 : Gender wise Awareness Level about banking services

 

 

6.2 Effect of occupation on awareness level for banking services

The respondents were classified into 4 different occupations, namely Agriculture (23.3%), Self business (19.8%), Family occupation(6.9%) and Service sector(50%) out of 480 respondents. Out of 24 banking services for which awareness level was studied, two services were found to have similar awareness level across all the 4 occupation categories. These were vehicle loan and safe lockers. For both the services the awareness level was average with the mean of 3.2, which indicates average level of awareness. Out of other 22 banking services, awareness level found to be high for deposit collection, ATM services and housing loans. It was average for services like issuing draft, personal loans, online services, Government subsidy, education loan and no-frill accounts.

 

The average level was found to be low for banking products were business loan, insurance, pension plans, ECS etc. Surprisingly the awareness level was found to be very low even for Jan Dhan Yojana and micro credit schemes. People with agriculture background showed highest awareness level for deposit collection, issuing drafts, personal loans, GCC/KCC. Respondents from service background were found to be more aware about ATM, Online services, education loan, no-frill accounts.

 

Respondents having family occupation, though they were less part of sample, they showed high awareness for housing loan, Government subsidy, insurance products, Jan-dhan Yojana etc.

 

Table No.3 Occupation wise awareness level for banking services

	F	Sig.	Agriculture	Self Business	Family Occupation	Service	Total
Percentage of Respondents Belonging to the category			23.30%	19.80%	6.90%	50.00%	100
Deposit collection	45.436	0.000	4.86	3.18	3.94	4.00	4.03
Issuing drafts	21.973	0.000	3.43	1.99	3.00	3.07	2.93
Personal loan	8.114	0.000	3.43	2.66	3.00	2.80	2.93
Granting loans	26.87	0.000	3.57	2.35	2.45	2.47	2.70
Business Loan	4.757	0.003	3.00	2.68	2.94	2.47	2.67
GCC/KCC	44.256	0.000	2.86	1.32	2.52	1.67	1.93
Housing Loans	3.913	0.009	3.14	3.17	3.48	2.80	3.00
Govt Subsidy Deposited	13.001	0.000	2.57	3.00	3.97	2.80	2.87
Insurance products	8.26	0.000	2.86	2.01	2.94	2.67	2.60
Funds transfer	12.899	0.000	2.43	1.84	2.94	2.80	2.53
Jan-Dhan Yojana	41.027	0.000	1.29	2.82	3.03	2.73	2.43
Mobile Banking services	4.992	0.002	2.14	2.15	3.03	2.53	2.40
Credit Counseling	3	0.030	2.57	2.33	3.00	2.27	2.40
Pension Payments	9.955	0.000	2.43	1.82	3.00	2.27	2.27
Mutual funds	10.126	0.000	2.57	1.81	3.03	2.13	2.23
Micro-credit services	17.747	0.000	1.57	2.65	3.03	2.00	2.10
ECS Payments	14.119	0.000	2.00	2.33	3.00	1.67	1.97
KYC Norms	12.553	0.000	1.43	1.67	2.94	1.93	1.83
ATM Services	14.092	0.000	3.29	2.68	2.94	3.80	3.40
Online services	3.016	0.030	2.57	2.82	3.03	3.07	2.90
Educational Loans	21.058	0.000	2.86	2.01	2.94	3.20	2.87
No-Frill account	8.331	0.000	2.43	2.48	3.03	3.07	2.80
Vehicle loan	0.707	0.548	3.14	3.34	3.00	3.20	3.20
Safe lockers	1.472	0.221	2.57	2.83	3.00	2.60	2.67

Graph No. 4

 

 

From the Graph no.4, It was observed that, in the variable Family Business as Occupation, awareness level was highest in Govt. Subsidy deposited among the other banking services. Second highest awareness level was Housing Loan. There was lowest awareness level in insurance products and KYC Norms.

 

Graph no. 5

 

In the Graph No.5, it was observed that, in Service class people awareness level was highest in ATM services, which was quite obvious. Secondly, they were aware in educational Loan, followed by, Online services and No-frill account.

 

Graph No 6

 

From Graph no.6 it was concluded that, the people from Agriculture occupation were more aware about deposit collection and other loans. It was very surprising that, the awareness level was very low in GCC/KCC (General credit card and Kisan credit card). As these banking services were especially for the benefit of farmers.

 

7. CONCLUSION:

The present study concluded that, the financial inclusion awareness of people of Indore district after its implementation, though the scheme had a strong social mission of financial inclusion, the mission had not been fully translated into satisfactory action on the ground that the scheme was not fully included. Still half of the  citizens  and women were not getting awareness of banking services especially.

 

8. SUGGESTIONS:

To increase the awareness, State government should be asked to play a proactive role in facilitating financial inclusion. Bank officials must be appointed and provided official identity documents for creating awareness for financial services, opening of bank account etc. Undertaking financial literacy drives, making pilot studies or project, are some of the steps that have been taken up by the State and district administration. For women, they should start literacy camps at their door-steps, as most of the women are less educated and hesitate to make bank transactions at their own.

 

Need to make strategies for the provision of bank credit to the semi-urban and rural sectors. Majority of marginal farmer households are not at all covered by formal finance.

 

Post offices are reachable in interior areas of rural sectors. They should take initiatives to aware about the financial literacy among the people.

 

Improvement of infrastructure in rural areas and availability of telecommunication and net facility are required to increase the awareness level.  

 

9. REFERENCES:

1      Aggarwal, M. R. (2014). Financial Inclusion in India: Challenges and Opportunities. International Journal of Research, 557-567.

2      Anderloni, L., Carluccio, E.M., (2007), “Access to Bank Accounts and Payment Services”, in: Anderloni, L., Braga, M.D. and E.M. Carluccio (eds.), New Frontiers in Banking Services, Berlin et al.: Springer, 5-105.

3      Arun Jaitley. (2014). Pradhan Mantri Jan-Dhan Yozana. New Delhi: Department of Financial Services, Ministry of Finance.

4      Asli Demirguc - Kunt and Klapper, L. (2012): Measuring Financial Inclusion‟, Policy Research Working Paper, 6025, World Bank, April

5      Basu, priya and srivastava, 2005 Exploring Possibilities: Microfinance and Rural Credit Access for the poor in India, Economic and Political Weekly, 40(17): 1747-56.

6      Beck, T., A. Demirguc-Kunt, M. Soledad and M. Peria (2007), “Reaching Out: Access to and Use of Banking Services across Countries”, Journal of Financial Economics, Vol. 85, No. 1, pp. 234-266. Census of India 1991 and 2001.

7      C. Annamalai and Dr. K. Vijayarani (2014) “Awareness of financial inclusion on tribal people in Dharmapuri district’ Asia Pacific Journal of Research Vol: I Issue XVII, September 2014

8      Chakrabarty, K.C., (2011), “Financial Inclusion and Banks: Issues and Perspectives” Address delivered at the FICCI – UNDP Seminar on “Financial Inclusion: Partnership between Banks, MFIs and Communities” at New Delhi on October 14 2011.

9      Dr. P. Raja Babu (2015) IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 6, Issue 4. Ver. I (Jul. - Aug. 2015), PP 38-42

10    Handoo J, Financial Inclusion in India: Integration of Technology, Policy and Market at Bottom of the Pyramid Article in SSRN Electronic Journal June 2010 DOI: 10.2139/ssrn.1628564

11    Hawkins P. (2010). Financial Inclusion & Financial Stability: are they two sides of the same coin? Chennai: RBI.

12    India, R. B. (2008). Report on Currency and Finance 2008-08. Mumbai: RBI Bulliten.

13    Kiatchai Sophastienphong and Anoma Kulathunga, (2009) “Getting Finance in South Asia, (2009): Indicators and Analysis of the Commercial Banking Sector” World Bank, Washington DC.

14    Peachy, S. / Roe, A. (2006): Access to finance – what does it mean and how do savings banks foster access, A Study for the World Savings Banks Institute, Perspectives No. 49, Oxford Policy Management.

15    Pranab Mukherjee. (2013). Financial Literacy and Education. New Delhi: Government of India

16    RBI. (2008). Report of the Reserve Bank of India. Mumbai: RBI.

17    RBI. (2012). Directions cum Modification to Non Banking Financial Company-Micro Finance Institutions. Mumbai: RBI.

18    Report on Currency and Finance 2007-08, Reserve Bank of India.

19    Sen, A. (2000). Development as Freedom. New York: Anchor Books.

20    Shabna Mol TP(2014)  Awareness and Access of Financial Inclusion Drive, A Study of Below Poverty Line Households in Kerala G.J.C.M.P.,Vol.3(4):201-204 (July-August, 2014)

21    Shweta Singh, (2010) “A study on financial inclusion awareness among selected working women of Satna (M.P.)” International Journal of Science Technology and Management, Vol.No.5, Issue No.04, April 2016

22    YH Malegam. (2011). Issues and Concerns in the Micro Financial Institutions. Mumbai: RBI.

 

 

 

 

 

Accepted on 21.01.2018            © A&V Publications All right reserved