Case Study

Financial Inclusion in Gulbarga: Finding Usage in Access

Does financial inclusion results in usage of newly offered financial services?
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This study examines the process of financial inclusion, and the difference between access to financial services and their usage. Since 2005, the Reserve Bank of India (RBI) has conducted a financial inclusion drive requiring banks to provide rural ‘unbanked households with savings accounts. However, a study conducted in Gulabarga district found that poor farmers hesitate to access deposit accounts, and attributes this to:

  • Large number of legal documents and collateral needed;
  • Banks' organizational and cultural incompatibility to deal with rural poor.

Further, the study examined whether access to a savings account encouraged actual usage. Findings reveal that relevance of these savings accounts in the financial lives of households is extremely minimal. In fact, the poor:

  • Know little about the savings drive;
  • Prefer to save at home;
  • Use bank accounts mainly to receive government assistance.

The financial inclusion drive, while implemented enthusiastically by banks and bank officials, did not appeal to low-income households, and account usage was abysmally low. There is an unmet demand for a micro-savings product, but the drive is unlikely to yield positive returns without financial training.

About this Publication

By Ramji, M.
Published