Financial Inclusion in Gulbarga: Finding Usage in Access

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.