The Microfinance Review

Tamanud Ghosh ¹

Affiliations
1 Research Officer CRFIM, BIRD, Lucknow, Uttar Pradesh, IN

Abstract

Traditionally the Indian microfinance industry has relied on cash transactions. However, in the post demonetisation era, microfinance institutions (MFIs) started shifting towards cashless transactions and began to improve their existing operations with innovative and user-friendly technology. The need for digitised channels further exacerbated during the COVID– 19 induced lockdown period. This study attempts to examine the various models of digital repayment systems offered by MFIs and adoption of digital mode of repayment by their clients. The study measures the efficacy of digital repayment systems at both the MFI and client level, and also diagnose the factors hindering the adoption of digital repayment systems, based on data collected from 50 micro borrowers of 10 branches of 2 MFIs - Muthoot Microfin in Kerala and Satya MicroCapital Ltd. in Uttar Pradesh. The study finds that the MFIs adopted multi-pronged digital approaches, viz., Aadhaar Enabled Payment System (AePS), payment through Customer Service Points (CSP), Unified Payments Interface (UPI) such as Google Pay, PhonePay and Paytm, and National Automated Clearing House (NACH) to serve the comprehensive needs of their clients. The study further finds that at the MFI level, digitisation eased their operational process and brought about positive changes in the system; and at client level, it reduced the risk of carrying cash, improved speed of addressing clients’ complaints and resulted in improvement of clients’ satisfaction. Digitisation also built confidence among clients in adopting digital financial services (DFS) at their own business and in their day-to-day lives.

Keywords

Digital Repayment, Microfinance, Banking Sector

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Tamanud Ghosh ¹

Affiliations
1 Research Officer CRFIM, BIRD, Lucknow., IN

Abstract

Over the decades, with the support of banks and other f­inancial service providers, the self-help group - bank linkage programme (SBLP), initiated by the National Bank for ­Agriculture and Rural Development (NABARD) has expanded significantly. The programme has reached out to more than 50% of households nationwide. Such outreach is a major breakthrough as a large proportion of the population is excluded from formal financial services. ­After three decades of the existence of the programme, the present study attempts to examine the level of indebtedness and dependency on self-help group (SHG) credit by households’. The study also diagnoses credit usage ­patterns and factors affecting access to SHG credit. The findings of the study are based on the sample size of 216 SHGs and 432 SHG member households spread across 8 districts of 2 states, viz., ­Maharashtra and West Bengal. The study found that the ­programme ­supported the credit needs of the most ­vulnerable and ­marginalised segment of the ­society, who own a little land and lack ­access to ­formal sources of ­financing. Samplehouseholds owe ­multiple sources of ­credit. However, SHG is the major source of ­credit for households’ and a ­significant part of their debt. The ­majority (70%) were totally ­indebted to SHG. It is ­observed that ­dependency on SHG credit is ­directly correlated with years of association with SHG. ­Senior SHG members, due to their long years of the ­association, were mostly dependent on SHG. The SHG ­credit was mostly used for income-generating

Keywords

SHG, SBLP, NABARD

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Tamanud Ghosh ¹

Affiliations
1 Research Officer CRFIM, BIRD, Lucknow, IN

Abstract

The Kisan Credit Card (KCC) is the single largest credit product for crop cultivation in the country. The scheme was introduced in 1998 to address the financial requirements of farmers at various stages of farming. Over the period, the scheme has been modified with more add-on features to cater to the comprehensive credit needs of farmers in a hassle-free and cost-effective manner. In 2012, the scheme was modified to facilitate KCC holders by issuing debit cards, which could be used by farmers anytime and anywhere to access the KCC loan without visiting bank branches. Despite issuing such debit cards, the usage of cards among the farmers remains poor, and most of them used it a single time in a year. The present paper attempts to assess the factors associated with the usage of the Rupay Kisan Credit Card (RKCC) among the farmers, based on a survey of 895 farmers spread across 12 districts in six states. The paper used a binary logistical regression model to assess the factors influencing the usage of RKCC. The paper finds that being a small and medium farmer having multiple sources of income, and being a semi-matured client are all positively associated with decision of using RKCC. In contrast, being male farmer with a marginal land holding and being a mature client are negatively associated with using RKCC. The paper recommends: (i) building awareness amongst farmers by utilising community-based organisations, media platforms, etc; (ii) creation of infrastructure in rural and semi-urban areas so as to facilitate debit card transactions; and, (iii) utilisation of the services of business correspondent agents to offer doorstep withdrawal services for RKCC.

Keywords

Rupay Kissan Credit Card, Business Correspondent.

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