Poverty of access to financial services and its alleviation: some lessons to India from the United Kingdom

Abstract

The measures initiated in India to achieve higher financial inclusion have very high potentials to tackle this dimension of poverty but have yet to go a long way in mainstreaming the financially excluded sections in rural areas. As compared to the success achieved in the United Kingdom in terms of the outreach of financial services, access to affordable credit and other benefits to the hitherto deprived sections, appropriate policy interventions on the part of the Indian government and the financial system with effective mechanisms to tackle the existing high incidence of financial exclusion are yet to be in place. This research mainly reviews the policy initiatives, including considering the main recommendations of the task forces on financial inclusion of both the countries and offers an alternative framework for tackling the poverty of access to financial services of the financially excluded people of India.

Keywords:

• financial exclusion
• financial inclusion
• comparative strategies
• effectiveness
• lessons

Acknowledgements

This article is based on a research undertaken by the author in United Kingdom under the Commonwealth Academic Staff Fellowship (2008) Programme. The author gratefully acknowledges the financial and the administrative support of the Commonwealth Scholarship Commission, UK, and the University Grants Commission, New Delhi. He remains indebted to Professor David Gordon, Centre for Poverty and Social Justice of the School for Policy Studies, University of Bristol, Bristol, for his advice and guidance, as my academic mentor. The academic consultations with the chairman and members of the Financial Inclusion Taskforce and a few of the subject experts in the university have been a great source of inspiration for the research and he particularly acknowledges the discussions with Mr. Peter Kelly, Mr. Nick Pearson, Professors Elaine Kempson, Sharon Collard (UoB) and John Hills (LSE). The administrative help of Dr. Ann Singleton, Professor Ray Forrest (SPS, UoB), Dr. Fiona Groenhout, Ms. Jackie Tucker, Commonwealth Scholarship Commission, and Mr. Ramesh Veluchamy, British Council, Chennai, is gratefully remembered. Lastly, the author is grateful to the Institute for Social and Economic Change, Bangalore, Professors H.G. Devaraj and G.K. Karanth for their academic support and to the seminar inputs at the School for Policy Studies (UoB). But for the support and help from these corners, this article would not have been possible.

Notes

1. The lowest rung of the farming community in India, with agricultural land holdings of less than 1 hectare per farmer. With 150,883 holdings, the marginal farmers constitute the majority (58.97%) in the total agricultural holdings and account to 46,351 hectares or 2.74% of the total 16,94,076 hectares of agricultural lands.

2. See website: http://www.dwp.gov.uk/advisers/growthfund/news.asp.