Financial Services for the Rural Poor and Women in India: Access and Sustainability
This article uses conceptual framework to describe a financial institution (FI) serving the poor and women. It posits two causal variables for institutional performance: Internal Practices Attitudes (IPAs) and mechanisms for client interface that either enhance or thwart access (MEAs). Both of these variables are largely within the control of financial institutions. The study seeks to identify changes in these variables that could improve access and sustainability of financial services by rural poor.
It concludes, however, that rural financial institutions are faced with a hierarchy of constraints, largely beyond their control, including:
- Chronic income deficit nature of target group;
- Erosion of repayment ethic and banker-borrower relationship of mutual trust;
- System wide dependence on low cost capital, operating subsidies and capital infusions to compensate loan losses;
- Erosion of autonomy;
- Restrictive nature of regulations.
As country progresses in financial sector reforms, it is unlikely that poor will benefit from any initiatives unless they are accompanied by:
- Depoliticising of rural credit;
- Increased autonomy of RFI professional boards;
- Increased accountability of RFIs;
- Allowing mutliple private sector RFIs to emerge;
- Revamping of recovery system.
[Adapted from authors' abstract]
