Financial inclusion is an evolution

Financial inclusion is more an evolution than a targeted mission. It happens when the common man is able to generate surplus from entrepreneurship. Financial inclusion takes root when honest extension service officials provide quality services to people. This evolution takes shape when the policeman allows an illiterate villager to lodge an FIR against the village bully and when the judges deliver justice to make innocent people feel there is no jungle raj.

The evolution happens when the basic amenities like health centre, schools, roads, market and transportation etc contribute to extend the productivity hours of people. In fact, financial inclusion coheres around people’s productivity. Providing banking products and services without creating a climate for entrepreneurship is like putting the cart before the horse. 

Post-independence, India has witnessed a huge entrepreneurship loss across the country due to political interference in the day today economic, cultural and social life of the villagers. Loan mela, loan waivers and freebies distribution has already created an iceberg of idle energy which cannot be dismantled easily. Besides, the repayment ethics among people has deteriorated due to populism.

Vulnerability to frauds
The new NDA government wants to distribute banking facilities to vulnerable sections of people. Under the Pradhan Mantri Jan Dhan Yojana, each customer will get a RuPay debit card, with an in-built accident insurance cover of Rs 1 lakh and an overdraft facility of Rs 5,000. Giving Rs 5000 OD facility each to 75 million people may create a wilful default size of Rs 37,500 crore.  The cost of maintenance of each savings bank account including issue of ATM cards and pass books will be around Rs 350 per year which will cost banks Rs 2625 crore per annum. As per RBI, there are already more than 10 million inoperative accounts. The recent inter-media survey found only half the bank accounts have been active in the last quarter.  The financial inclusion programme may add a few million more inoperative accounts which may invite frauds.

Instead of incentivising people, the banks should access the potential of different sectors and devise effective products to activate credit cycle. In Telangana districts, diary development suffers due to high cost of cattle feed. Here banks should encourage fodder cultivation. A milch animal eats up 80 per cent of its total maintenance cost. Here, the government should create awareness about drought resistant indigenous cow breeds namely Pungnur, Deoni and Hellicar. Though, these cows cannot be business proposition, they are good enough to support a poor family with 5 to 7 litre milk yield. 

The real financial inclusion will happen if people have the pleasure of earning surplus income from their hard work.  For that, the government has to control inflation as high inflation in food items erodes people’s surplus. There is an urgent need to look at India’s 47.4 lakh artisans who still have the potential to earn foreign currency.
What they need today is the basic training how to market their product directly in global craft bazaars. India’s export of handicraft and luxury items grows at around 16 per cent per annum. Four years back, when I tried to locate a few Himroo and Paithani saree weavers in Ahmednagar, I was shocked to listen from two senior development bankers who said they don’t know their whereabouts even after spending five years in the same city.  I searched on my own and found them in a narrow lane where some of the Paithani artisans were engaged as daily wagers.  
Similarly, the Himroo shawl makers were found working for a handicraft exporter for daily wage.  Both Himroo and Paithani work have tremendous export potential but there is nobody to guide them. The once famous export quality horn craft of Cuttack is breathing its last due to sheer neglect.  Similar is the situation with the silver filigree work of Cuttack where some traders have introduced machine made silver filigree. As a result, the fine handmade silver filigree is fast disappearing along with its makers. 

The situation is similar in Bidar where artisans make good bidri craft on wood and metal surface. Here, the young generation does not want to pursue their family profession due to low return and lack of social recognition. If an artisan can work hard for five years to learn bidri or silver filigree craft he can quote any price for his product.  If 121 crore Indians make a habit of using a few handicraft products, it would generate employment to the tune of lakhs and good foreign currency.

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