India has achieved significant progress on the financial inclusion of both women and men over the past six years. The number of bank accounts has more than doubled, and the number of bank accounts held by women has almost tripled.
Several initiatives have succeeded by addressing pull and push factors simultaneously, as well as opportunities for income generation. India might now consider how to build on this progress.
3 initiatives that have been effective:
National drive for universal financial inclusion
The Pradhan Mantri Jan Dhan Yojana (“wealth to all”) initiative aims to ensure access to banking, savings and deposit accounts, remittances, credit, insurance, and pensions—all in an affordable manner.
The scheme drives citizen “pull” for, and utilisation of, bank accounts by directing payments of wages and government benefits directly to beneficiary bank accounts. It also “pushes” citizens by mandating the opening of accounts. This coupling of pull and push factors has helped drive rapid progress. According to the Department of Financial Services, 300 million people (160 million of them women) have gained access to bank accounts through the scheme.
Lack of credit is an important barrier to entrepreneurship for both men and women in India. Previous research by McKinsey Global Institute found that India has 23 million enterprises that collectively have a $140 billion gap between the credit they can obtain and the credit they need.
The Pradhan Mantri Mudra Yojana programme, initiated in 2015, provides loans of up to one million rupees (around $15,000) to non-corporate, non-farm micro and small enterprises, with a specific focus on women. Thus far, it has made loans to 13 million new entrepreneurs, and 47.5% of the funds have been dispersed to female entrepreneurs.
India has broadened access to finance for women through self-help groups (collectives with 10 to 12 members). According to National Bank for Agriculture and Rural Development data, loans to self-help groups rose by 35% in 2015–16. Loans were made to some two million groups, reaching between 20 million and 24 million members.
For such efforts to have even more impact, persistent perceptions that women should not have control over household resources need to be addressed. For example, the Bhamashah scheme in Rajasthan attempts to increase financial inclusion by creating a digital ID for households linked with government services and a bank account.