Factors effecting the inclusive growth and role of financial inclusion in attaining inclusive growth

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Challenges in Achieving Inclusive Growth
S.No Topic Pg. No.
1 Abstract 2
2 What is inclusive growth and need for inclusive growth 3
3 Factors affecting inclusive growth 4
4 What is Financial Inclusion 4
5 Role of financial inclusion in inclusive growth 5
i)Agricultural sector 5
ii)Employment creation and reduction of poverty 5
iii)Social sector development 6
iv)Reduction in regional and other disparities 6
v) Protecting the environment 6
6 A brief on Doddaballapura region 6
7 Survey report on Financial Inclusion in Doddaballapura 7
8
Challenges in achieving Financial Inclusion 7
i) Use of technology 8
ii) Security Concerns 8
iii) Infrastructural limitations 9
iv) Financial literacy and awareness 9
v) Customer service and customer protection 9
9
Analysis 10
10 Conclusion 11
11 Bibliography 12

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Challenges in achieving Inclusive Growth – A Study in
Doddaballapura Taluk.
Abstract
The notion of ‘Inclusive Growth’ has been heard in recent news in public discussions and in various other
forums. Government has been frequently aiming at inclusive growth since the time of independence
and has been in even more promoting it since 1980’s. As the main objective was to increase the levels of
income of people and standards of people by providing adequate employment opportunities and
poverty reduction. It has been gaining immense pace since the eleventh five year plan (2007-2012) for
which the theme was ‘towards faster and more inclusive growth’ and government even included it in
the budgetary and political commitment, but government has failed to achieve the growth at which it
has expected, but was quite satisfactory.
The major factors effecting the inclusive growth are agriculture, employment generation and
reduction of poverty, social sector development, reduction in regional and other disparities, protecting
the environment, financial inclusion is also playing a major role in the process of obtaining inclusive
growth.
For developing nations the epoch is of inclusive growth and the vital factor for inclusive growth is
financial inclusion. It is the process of delivering of financial services, at affordable costs, to sections of
underprivileged and low income segments of society. There have been many drastic challenges in
financial inclusion area such as bridging the gap between the sections of society that are financially
excluded within the ambit of the formal financial system, providing financial literacy and intensifying
credit delivery mechanisms so as to improvised the financial economic growth. A country can grow
economically and socially if its weaker section can turn out to be financial independent.
The review of literature suggests that more than 3billion people across the globe have been excluded
from the financial services there have been various strategies and methodologies followed by various
countries. In India GOI has appointed a committee named Rangarajan committee defines financial
inclusion as "the process of ensuring access to financial services and timely and adequate credit where
needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.”
In this paper an attempt was made to study the role of financial inclusion towards achieving inclusive
growth. Doddballapur District in Karnataka is chosen to study the role of financial inclusion towards
inclusive growth.

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What is inclusive growth and need for Inclusive Growth?
Government is aiming at inclusive growth since the time of independence and has been in even more
promoting it since 1980’s. As the main objective was to increase the levels of income of people and
standards of people by providing adequate employment opportunities and poverty reduction. It has
been gaining immense pace since the eleventh five year plan (2007-2012) for which the theme was
‘towards faster and more inclusive growth’ and government even included it in the budgetary and
political commitment. The term “Inclusive growth” has been a major concern for developing
countries and in a country like INDIA it has been at its peak since the population growth is very
high and India has become the investment decision for many organizations and other foreign
investors as the economy is growing at a steady pace. Many World Organizations like UNO and
the WORLD BANK have been mainly working on the process of achieving inclusive growth in
this regard both government and private players play a major role in achieving inclusiveness,
there have been many schemes and various promotions promoted by Indian government like
Jawahar Rozgar Yojna, Integrated Rural Development Program, Rural Housing Scheme,
Swarnjayanti Gram Swarozgar Yojana and Mahatama Gandhi National Rural Employment
Guarantee Act. Achieving inclusiveness at a steady pace and in a country like India it is very
difficult to achieve inclusiveness only by the implementation of government policies even
private organizations help is also needed in this regard as the size of the country is very high as
we are the 7th
largest country in terms of size and 2nd
largest in terms of population, so even help
from NGO’s and various private organizations is also very much essential and ICICI Foundation
was established with the same objective of helping India to achieve inclusive growth.
It has to be noted that generally when the GDP of a country is growing it’s the sign of
development but for a country like India which was leading to relative and absolute inequalities
which was leading to two faces of India. A “Prospering India” which was growing at a very rapid
pace and was instrumental in achieving technological changes and infrastructural development
on the other side a “suffering India” which was lagging in terms of getting employment, increase
in poverty levels and various other factors. It was observed in various studies that effective
political leadership helps the country in achieving development and it was found that Indian
politicians have very less scientific literacy so our corruption rate was observed at 10% of our
GDP which is very high and if government is able to cut down the corruption rate then the
country can grow both economically and socially as corruption leads to the negative growth of
the country.

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Factors affecting inclusive growth:
The major factors effecting the inclusive growth have been:
1. Agricultural development.
2. Employment generation and reduction of poverty.
3. Social sector development.
4. Reduction in regional and other disparities.
5. Protecting the environment.
6. Financial inclusion is also playing a major role in the process of obtaining inclusive growth.
Now we would to focus on the role of financial inclusion in achieving inclusive growth.
What is Financial Inclusion???
Financial Inclusion is a process of delivering the financial services, including banking services
and credit services at an affordable cost to the vast sections of disadvantaged and low-income
groups of people who tend to be excluded. The various financial services include access to
savings, loans, insurance, payments and EFT facilities offered by the formal financial system.
The main motive of providing these services is to provide economic security and inculcate the
habit of savings in the minds of people.
It was found in a survey that more than 3billion people across the globe are excluded,
from India alone there are 560million people who do not have access to these services. Many
global organizations are focusing on FI at a large, World Bank, UNO and many other
organizations are striving hard to achieve FI.
While India has had an advantage of growing domestic demand and globally recognized
expertise in the areas of information technology, automotive, life sciences, telecommunications
and even space exploration, its continued success and growth as an economic power (in common
with other emerging economies) can only be assured if concrete steps are taken to ensure that the
social and economic development is inclusive.

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Role of financial inclusion in inclusive growth:
1. Agricultural sector:
By obtaining complete financial inclusion our agricultural sector will boost immensely as
still most of the farmers visit money lenders rather than a financial institution to get their loan
and money lenders do charge a heavy rate of interest when compared to a financial institution.
By increasing financial literacy awareness can be brought in the minds of the people and by
which in the long run money lenders can be made extinct. By inculcating the habit of visiting a
bank to obtain a loan will make the people to also increase their savings habit by which the flow
of liquid currency can be minimized by which taxation for the government becomes easy and the
flow of black money can be eliminated to some extent.
2. Employment creation and reduction of poverty:
The main obstacle for GOI was to create employment and to bring down the levels of
poverty in India, we (India) have developed in terms of technology advancements, infrastructure
advancement, space exploration and various other sectors but still we find beggars in India on
road side not only in rural area but also in semi-urban and urban areas this shows that the growth
has not been distributed equally

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3. Social sector development:
Financial Inclusion has emerged as a tool for the socio-economic development of the
society. The basket of financial services under Financial Inclusion will create an opportunity
to capture the underserved market fulfilling corporate social responsibility thereby driving the
economic growth of the country.
GOI has also made it clear for corporate giants having a turnover more than net worth
of Rs 500Cr or more, or turnover of Rs 1000Cr or more ,or net profit of Rs 5Cr or more
during any financial year.
4. Reduction in regional and other disparities:
When government is providing the employment at rural areas by providing training and
development for educated youth staying in rural areas and providing enough opportunities for
unskilled laborers also income levels of people can be increased and when the income levels
are increased among people in the rural areas too they tend to spend more like people living in
urban areas and by which the regional disparities among people can be reduced and by which
the development of the country would be impacted at a large.
5. Protecting the environment:
When the income levels of the people increases then the people would become more
responsible for the environmental cause. To increase the income levels of people initially the
government has to make an attempt to provide employment for the skilled people and make
them financially literate and by which the habit of savings can be increased among the people
by which they would be more responsible towards environment.
In modern days companies are marketing their strategies by creating awareness among
the people they are for the social cause, for instance ITC promotes its classmate brand by
promoting a social cause “SHIKSHA”. Through this the awareness can be brought among
people and they can be made responsible for the environment.
A brief about Doddaballapura:
Doddaballapura is the rural region in the northern western extents of Bangalore that is set
at a distance of 40kms from the Garden city. This area mainly consists of the five important
villages in its territory namely Doddabelavangala, Madure, Kasaba, Sasalu, Nagadenahalli and
Thubagere. This place is one among the familiar localities in India for the production of silk.
Many people residing in Doddaballapura are depending on the occupation of weaving silk.
There are some tourist attractions in the vicinity of Doddaballapura like the Hullu Kudi
Hills, Venkateshwara Swamy temple and many other historic shrines available in this locality.
Doddaballapura is turning out to be more prominent with the up surge of plots for sale in

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Doddaballapura with establishments of various realty projects. Government has already planned
to develop one of the largest IT zones of India named the BIAL IT Investment Region. This
place also more prominence among the realty people as it is well set in the proximity of the
Bangalore International Airport at Devanahalli. Dodaballapura taluk has 52.1% of financial
inclusion (CRISIL survey, 2011).The challenges towards financial inclusion are studied
elaboratively in this study.
Methodology:
As a part of our survey for this paper we covered 150 households opinions in and around
doddabalapur area. The information on financial inclusion and challenges was collected through
one to one interaction method. 30 respondents were interacted from each of the 5 villages. Data
was collected from bus stops, village markets and Dodaballapur railway station. Information
towards their awareness on financial inclusion, the different sources of income, their skills,
employability opportunities and the willingness to learn the new skills, how many members in a
family are having bank accounts, how many people are having smart cards and how many
transactions per month were gathered.
Challenges in Financial Inclusion:
There are four commonly used lenses through which financial inclusion can be measured-
access, quality, usage and welfare.
- Access refers to the supply and availability of financial products and services from
formal institutions.
- Usage captures the levels and patterns of use of different financial products and services.
- Quality encompasses the experience of the consumer, demonstrated in attitudes and
opinions towards those products that are currently available to them.
- Welfare measures the impact of a financial product or service on the lives of consumers,
including changes in consumption, business activity and wellness( source ).

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Fig: Four lenses to measure financial inclusion
Financial inclusion data may be derived from two main sources:
1. Supply –side
2. Demand – side
Supply Side:
In this data capture information obtained from financial service providers such as banks
and other financial institutions. These typically include data on the number of banks, automated
teller machines (ATM’s), and other financial touch points.
Demand Side:
In this data is collected from actual and potential users of financial products and services.
They provide information about client experience and the needs of non- consumers
Challenges in Financial Inclusion:
Use of technology:
Limited number of technology service providers to cover the unbanked villages of all
banks as well as limited service providers to cover the unbanked villages of all banks as well as
limited service centers for servicing diplomacies has resulted in banking operations coming to a
halt in many villages.

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Security concerns:
Given the increasing reliance on technology to deliver banking services to customers, it
is essential to that adequate attention is paid to security, especially IT security. Security related
issues resulting in frauds have the potential to undermine public confidence in the use of
electronic payment products. Further, they could also lead to reputation risks. While preventing
fraud through robust security measures, one should not lose sight of the fact that the ease and
efficiency in operations for the customers is not unduly eroded. Cumbersome security procedures
would deter customers from using the product and carrying out electronic transactions.
Infrastructural limitations:
Power supply and network connectivity are issues in most parts of the country,
especially, so in the rural areas. While banking transactions are enabled on a real-time basis in
urban centers, it often takes more time to complete a transaction in remote areas due to poor
internet connectivity and frequent power failures.
Financial literacy and awareness:
Campaigns for spreading awareness about financial inclusion and financial literacy need
to be intensified. This can be done through innovative dissemination channels including films,
documentaries, pamphlets and road shows. Stakeholders, including the regulators and policy
makers, may launch large scale awareness programs. Reserve Bank of India is in the process of
launching Electronic Banking Awareness And Training (e-BAAT) programs to increase
awareness about technology enabled financial services.
Customer service and consumer protection:
Along with financial literacy and education, customer service is another issue that needs
closer attention. In recent years, the Reserve Bank has worked towards improving customer
service through better dissemination of information to customers and also by improving the
mechanisms fir redressing the grievances. Mind-set , cultural and attitudinal changes at the grass-
root levels and user friendly technology at the level of branches of banks and BC outlets are
needed to extend holistic customer service to the new entrants to the banking system.

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Analysis:
It was found that there were 73people with bank account and only 50people among the bank
account holders have a smart card and only 10people do perform transactions at least once in a
month.
The study on inclusive growth in Doddaballapura Taluka revealed the following facts on
financial inclusion. It was found that 20% of the respondents for the study were having
awareness on financial inclusion. 42% of the respondents were willing to learn the new skills for
their survival and to lead a better life, of the total respondents majoriy of the women were ready
to learn new skills to support their family income. 48% of the respondents were having bank
accounts and this shows very thin percentage of people in and around Doddaballapura Taluka
possessing bank accounts. 33% of the respondents were having smart cards it shows that most of
the villagers were totally ignorant and unaware of the smart card usage and advantages. 6% of
the respondents on an average perform one trasaction a month, this shows the lack of awareness,
poor employability opportunities in these villages sources of finances and also the poor
technological supports in terms of ATM’s in these villages.

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S.No Area Responses Percentage
1 awareness on financial inclusion 30 20
2 willingness to learn the new skills 63 42
3 bank accounts per family 73 48
4 Individuals having smart cards 50 33
5 transactions per month 10 6
Conclusion :
“Financial inclusion” has gained importance since the early 2000’s, and is a result of
findings about financial exclusion and its direct correlation to poverty. Financial inclusion is now
a common objective for many central banks among the developing nations. To achieve financial
empowerment of rural India various financial and non financial institutions should take
continuous and sincere efforts towards empowering the rural individuals by various activities
like education to the girl child and also to the womens in the family’s, training them with
skills/competencies, increasing the employability opportunities for the rurals, financial literacy,
financial education, awareness towards the various schemes, the technological awareness and
financial support to low income group through banking etc.,
So by this we could conclude that banks are concentrating mostly to include people in
financial inclusion but the society and the government has to take initiative.

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