Originally Published 2010-09-13 00:00:00 Published on Sep 13, 2010
THE recent land rights issue of the Niyamgiri hills in Orissa seems to have been resolved with Rahul Gandhi's intervention. We are relieved that the ancient Dongria Kondh tribal population would be able to save their hills from exploitation by commercial interests.
Take banks to villages - Financial inclusion necessary for growth
THE recent land rights issue of the Niyamgiri hills in Orissa seems to have been resolved with Rahul Gandhi’s intervention. We are relieved that the ancient Dongria Kondh tribal population would be able to save their hills from exploitation by commercial interests. With assurance from the highest quarters, they are not only safe but may also see more concrete actions being taken regarding their welfare and development in the future.

While most leaders are talking of the vast divide between the rich and the poor, very little is being done to bridge the gap despite the numerous centrally and state sponsored anti poverty schemes. Though the poor are being helped with regular cash handouts (as in NREGA) and bailouts (debt waivers for farmers) the concept of inclusive growth which is increasingly talked about in government circles, is still without a convincing road map.

Income inequality seems to be rising even though we have a huge middle class of over 250 million people. If the government policy of inclusive growth is followed sincerely, most of India’s 750 million poor and very poor should be able to climb into the middle class income category rather quickly and not slip back into poverty when some calamity or personal misfortune strikes them.

While most in the middle class category can afford nice clothes, decent food, holidays and the rich living it up in a glaringly ostentatious manner, the tribal population in Orissa is still clad in simple garb, dwelling in mud huts without electricity and eating very basic food. They not only lack assets, education, health facilities, toilets, safe drinking water but are also not gainfully employed.

They are however not alone in being deprived from the good life of the average middle class city dweller, because around 37.7 per cent of all Indian households do not have access to a water source and 49 per cent do not have proper shelter, 69.5 per cent do not have access to suitable toilets and 85.2 per cent of villages do not have a secondary school and 43 per cent Indian villages do not have an all weather road connecting them with towns.

For centuries, the tribal populations in different parts of India have preserved their customs and are steeped deeply into their tradition and like the Kondhs worship the hills and forests. It is not enough to assure them that they are going to be heard in the future and the government should also provide them with alternate sources of livelihood so that they can have assets of their own for safeguarding their future.

In the past they have been mainly dependent on forest products for their living and have for generations been food gatherers, hunters and small farmers. They also have a lively tradition of folk art which they practice for themselves and not for commercial purposes. For them to be able to start small businesses or improve their farming methods and forest activities, access to cash facilities is essential which means there has to be ‘financial inclusion’.

Financial inclusion means that banking facilities are available to people in the remotest areas so that they can build savings, make investments, avail of credit and insure themselves against income shocks and emergencies.

It is amazing that India has 40 per cent of the population who do not have bank accounts or roughly 400 million people are without banking facilities and only 5.2 per cent of India’s 6,50,000 villages have bank branches. According to a recent discussion paper of the RBI on the entry of new banks in the private sector, in March 31, 2009, the banking sector comprised 27 public sector banks, 7 new private banks, 15 old private banks, 31 foreign banks, 86 regional rural banks, four local area banks, 1,721 urban cooperative banks,, 31 state cooperative banks and 371 district central cooperative banks. The RBI claims there has been a progress in financial inclusion but more banks are needed for better services.

As per the Dr. Raghuram G. Rajan committee’s recommendation, the RBI is considering giving new licenses to private banks to operate in India. This proposal however has come up with problems and one of the main issues is about whether these banks would be able to reach out to the poor.

Since the bank nationalisation of 1969 when Indira Gandhi nationalised 14 commercial banks, India has tried to extend more credit to the poor through ‘priority sector’ lending scheme of the RBI in which all public sector banks are required to set aside 40 per cent of net bank credit as loans for the weaker sections and the agricultural sector. But the results have not been so good and many banks have not reached the targeted amounts over the years.

The RBI also stipulated that banks should open at least 25 per cent of their total number of branches in rural and semi-urban centre but this too has not been fulfilled. The RBI is, thus, rightly cautious about extending licenses to more banks in the private sector.

For improving the lives of the poor it is a very important to have financial inclusion because they cannot live on handouts and doles and ought to have sustainable sources of livelihood. Those who are financially excluded are also mostly uneducated and from the backward castes and communities and they hesitate to approach a bank manager. Most banks also do not find them creditworthy and are reluctant to give them loans as a result of which they have to turn to the exploitative money lender. With more access to banking, this attitude of bankers would change.

Microcredit is a good alternative and has been successful in Bangladesh but it has not taken off very well in all parts of India. Self-help groups can help the poor with credit but these have not become popular in most areas.

With ‘no frills’ account (or zero minimum balance requirement), banking could reach the tribal population which would enable them to improve and introduce innovations in their economic activities to achieve higher productivity and incomes. They could earn and save more and send their children to school. They could sell their handicrafts also and access raw materials and simple tools through bank credit.

For financial inclusion, the tribal and below poverty line population could be given ‘smart cards’ and biometric authentication. These would ease identity management and ensure them easy accessibility, simplicity and flexibility in operating their accounts.

Stopping mining in the hills is only the first step because more needs to be done to enable the tribal population to have a more decent standard of living that includes better sanitation, roads, power, education and health facilities.

Courtesy: The Tribune, September 10, 2010
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