Journal of Economics and Sustainable Development

ISSN 2222-1700 (Paper ISSN 2222-2!"" (#nline

$ol%&' No%(' 2012
Bottlenecks and Problems Related to Financial Inclusion in
Nasser )*mad +at*er
Abstract.
,*e present -or. of t*e researc* paper is to identif/ t*e problems and bottlenec.s in relation to financial
inclusion usin0 t*e case of 1ad*/a Prades*' one of t*e poorest states in India% India does not appear to be
successful in promotin0 financial inclusion in 1ad*/a Prades* t*e main reason for t*is is t*e lac. of functional
autonom/% In t*e state of 1ad*/a Prades* lac. of a-areness' income and asset constraints' limited literac/ and
social e2clusion act as ma3or barriers to financial inclusion%
unavailabilit/ of diversified products and services' *i0* transactions costs' and eas/ availabilit/ of informal
credits are ot*er ma3or barriers to financial inclusion% 4an.s re5uire collateral to ma.e loans and (06 of
and ++4 borro-ers 0et up collateral% 7iven t*at land is t*e most important form of collateral in rural areas and
poor *ouse*old8s le0al documentation issues and si9eable proportion of poor is e2cluded%
Key words: :inancial inclusion' :inance' 4ottlen

1. Introduction
:inancial inclusion *erein refers to t*e timel/ deliver/ of financial services to disadvanta0ed sections of societ/%
+esearc* in t*e last decade leads us to believe t*at a -ell functionin0 and inclusive financial s/stem is li
faster and e5uitable 0ro-t* (;ono*an' Patric. 200<% :inancial inclusion is an eas/ access to safe savin0s'
appropriatel/ desi0ns loans for poor and lo- income *ouse*olds and for micro' small and medium si9ed
enterprises' and suitable insurance and
1.1. Financial inclusion and its related problems.
From demand side lac. of a-areness' income and asset constraints' limited literac/ especiall/ financial literac/
and social e2clusion act as ma3or barriers% :rom suppl/
unavailabilit/ of diversified products and services' *i0* transaction costs' and eas/ availabilit/ of informal
credits are ma3or barriers to ac*ieve financial inclusion (,*roat' 2007% #t*er factors li.e 0ender issu
occupation' social securit/ pa/ment s/stems are also pla/in0 vital roles in influencin0 access to financial
services% (=orld 4an.' 200!
Empirical evidence su00ests t*at access to financial services *elps t*e poor and *as positive impact on
nutrition and *ealt* outcomes' demand for education and t*e status of -omen -it*in a *ouse*old
(>ittlefied'200&% 1ad*/a Prades* is one of t*e India8s lar0est states' in -*ic* 7<6 of t*e population lives in
rural areas% #ver all' farmin0 supports about
of accessibilit/ is one of t*e bi00est bottlenec.s for 1:Is and N7#s t*at provide services in remote areas of
1ad*/a Prades* %1ost crops are *i0*l/ dependent upon -*et*er' -*ic* increases t*e
borro- to invest in a0riculture t*rou0* financial inclusion (Empo-erpoor' 2007% )lt*ou0* 1ad*/a Prades*
occupies (%76 of t*e countr/8s total land area' it comprises onl/ "%!6 of India8s population% >o-er? population
densit/ deters man/ ban.s and 1:Is from openin0 branc*es in sparsel/ in*abited re0ions of t*e state (Srinivasn'
2007
)ccordin0 to t*e interim report of t*e committee on financial inclusion' at least <%2@ million farmer
*ouse*olds in 1ad*/a Prades* are financiall/ e2cluded%
are not full/ coordinated% ,*is means t*at finance does not accompan/ 0overnment pro0rammes% #n t*e ot*er
*and' 0overnment pro0rammes are fre5uentl/ not available -*ere finance is bein0 provided% :urt*
of t*e poor are left out of covera0e b/ bot* sectors (Srinivasan' 2007% 1an/ S;7s -*ere formed and promoted
under pro0rammes in 1ad*/a Prades*% +e0ional office of t*e National 4an. for )0riculture and +ural
Development (N4)+D in 4*opal *as e
to an/ ban.s despite t*at fact some of t*ese 0roups are several /ears old%
4an.s do not understand *o- micro finance -or.s and create tedious and complicated procedures for
loanin0 to t*e or0ani9ations% In man/ areas ban.s do not cooperate -it* 1:Is% 1an/ -omen *esitate to start
savin0 in accounts because t*e/ do not trust an institution to .eep t*eir mone/ safe% SAS is ver/ successful at
scalin0 up financial inclusion in 1ad*/a Prades* but
4an.s *ave Bfor profit onl/C attitudes and e2pect to ma.e returns immediatel/ on all clients% Suc* e2pectations
Journal of Economics and Sustainable Development
!"" (#nline

21

Bottlenecks and Problems Related to Financial Inclusion in
Madhya Pradesh.
Nasser )*mad +at*er

and Parva9e )*mad >one
D

S%S%> Jain P%7% Eolle0e $idis*a (1%P% India
D
ecoparva9eF0mail%com

,*e present -or. of t*e researc* paper is to identif/ t*e problems and bottlenec.s in relation to financial
inclusion usin0 t*e case of 1ad*/a Prades*' one of t*e poorest states in India% India does not appear to be
ial inclusion in 1ad*/a Prades* t*e main reason for t*is is t*e lac. of functional
autonom/% In t*e state of 1ad*/a Prades* lac. of a-areness' income and asset constraints' limited literac/ and
social e2clusion act as ma3or barriers to financial inclusion% Eumbersome documentation procedure'
unavailabilit/ of diversified products and services' *i0* transactions costs' and eas/ availabilit/ of informal
credits are ot*er ma3or barriers to financial inclusion% 4an.s re5uire collateral to ma.e loans and (06 of
and ++4 borro-ers 0et up collateral% 7iven t*at land is t*e most important form of collateral in rural areas and
poor *ouse*old8s le0al documentation issues and si9eable proportion of poor is e2cluded%
:inancial inclusion' :inance' 4ottlenec.s' Problems%
:inancial inclusion *erein refers to t*e timel/ deliver/ of financial services to disadvanta0ed sections of societ/%
+esearc* in t*e last decade leads us to believe t*at a -ell functionin0 and inclusive financial s/stem is li
faster and e5uitable 0ro-t* (;ono*an' Patric. 200<% :inancial inclusion is an eas/ access to safe savin0s'
appropriatel/ desi0ns loans for poor and lo- income *ouse*olds and for micro' small and medium si9ed
enterprises' and suitable insurance and pa/ment services (Gnited Nations 200@%
Financial inclusion and its related problems.
rom demand side lac. of a-areness' income and asset constraints' limited literac/ especiall/ financial literac/
and social e2clusion act as ma3or barriers% :rom suppl/ side cumbersome documentation procedure'
unavailabilit/ of diversified products and services' *i0* transaction costs' and eas/ availabilit/ of informal
credits are ma3or barriers to ac*ieve financial inclusion (,*roat' 2007% #t*er factors li.e 0ender issu
occupation' social securit/ pa/ment s/stems are also pla/in0 vital roles in influencin0 access to financial
Empirical evidence su00ests t*at access to financial services *elps t*e poor and *as positive impact on
nutrition and *ealt* outcomes' demand for education and t*e status of -omen -it*in a *ouse*old
(>ittlefied'200&% 1ad*/a Prades* is one of t*e India8s lar0est states' in -*ic* 7<6 of t*e population lives in
rural areas% #ver all' farmin0 supports about <<6 of t*e population in 4I1)+G states ()runa*alam 200!% >ac.
of accessibilit/ is one of t*e bi00est bottlenec.s for 1:Is and N7#s t*at provide services in remote areas of
1ad*/a Prades* %1ost crops are *i0*l/ dependent upon -*et*er' -*ic* increases t*e
borro- to invest in a0riculture t*rou0* financial inclusion (Empo-erpoor' 2007% )lt*ou0* 1ad*/a Prades*
occupies (%76 of t*e countr/8s total land area' it comprises onl/ "%!6 of India8s population% >o-er? population
/ ban.s and 1:Is from openin0 branc*es in sparsel/ in*abited re0ions of t*e state (Srinivasn'
)ccordin0 to t*e interim report of t*e committee on financial inclusion' at least <%2@ million farmer
*ouse*olds in 1ad*/a Prades* are financiall/ e2cluded% Efforts of financial service providers and 0overnment
are not full/ coordinated% ,*is means t*at finance does not accompan/ 0overnment pro0rammes% #n t*e ot*er
*and' 0overnment pro0rammes are fre5uentl/ not available -*ere finance is bein0 provided% :urt*
of t*e poor are left out of covera0e b/ bot* sectors (Srinivasan' 2007% 1an/ S;7s -*ere formed and promoted
under pro0rammes in 1ad*/a Prades*% +e0ional office of t*e National 4an. for )0riculture and +ural
Development (N4)+D in 4*opal *as estimated t*at about 2"0'000 previousl/ formed S;7s remain unlin.ed
to an/ ban.s despite t*at fact some of t*ese 0roups are several /ears old%
4an.s do not understand *o- micro finance -or.s and create tedious and complicated procedures for
r0ani9ations% In man/ areas ban.s do not cooperate -it* 1:Is% 1an/ -omen *esitate to start
savin0 in accounts because t*e/ do not trust an institution to .eep t*eir mone/ safe% SAS is ver/ successful at
scalin0 up financial inclusion in 1ad*/a Prades* but it also deals -it* si0nificant bottlenec.s and problems%
4an.s *ave Bfor profit onl/C attitudes and e2pect to ma.e returns immediatel/ on all clients% Suc* e2pectations
---%iiste%or0

Bottlenecks and Problems Related to Financial Inclusion in
,*e present -or. of t*e researc* paper is to identif/ t*e problems and bottlenec.s in relation to financial
inclusion usin0 t*e case of 1ad*/a Prades*' one of t*e poorest states in India% India does not appear to be
ial inclusion in 1ad*/a Prades* t*e main reason for t*is is t*e lac. of functional
autonom/% In t*e state of 1ad*/a Prades* lac. of a-areness' income and asset constraints' limited literac/ and
Eumbersome documentation procedure'
unavailabilit/ of diversified products and services' *i0* transactions costs' and eas/ availabilit/ of informal
credits are ot*er ma3or barriers to financial inclusion% 4an.s re5uire collateral to ma.e loans and (06 of ban.s
and ++4 borro-ers 0et up collateral% 7iven t*at land is t*e most important form of collateral in rural areas and

:inancial inclusion *erein refers to t*e timel/ deliver/ of financial services to disadvanta0ed sections of societ/%
+esearc* in t*e last decade leads us to believe t*at a -ell functionin0 and inclusive financial s/stem is lin.ed to
faster and e5uitable 0ro-t* (;ono*an' Patric. 200<% :inancial inclusion is an eas/ access to safe savin0s'
appropriatel/ desi0ns loans for poor and lo- income *ouse*olds and for micro' small and medium si9ed
rom demand side lac. of a-areness' income and asset constraints' limited literac/ especiall/ financial literac/
side cumbersome documentation procedure'
unavailabilit/ of diversified products and services' *i0* transaction costs' and eas/ availabilit/ of informal
credits are ma3or barriers to ac*ieve financial inclusion (,*roat' 2007% #t*er factors li.e 0ender issues' nature of
occupation' social securit/ pa/ment s/stems are also pla/in0 vital roles in influencin0 access to financial
Empirical evidence su00ests t*at access to financial services *elps t*e poor and *as positive impact on t*e
nutrition and *ealt* outcomes' demand for education and t*e status of -omen -it*in a *ouse*old
(>ittlefied'200&% 1ad*/a Prades* is one of t*e India8s lar0est states' in -*ic* 7<6 of t*e population lives in
<<6 of t*e population in 4I1)+G states ()runa*alam 200!% >ac.
of accessibilit/ is one of t*e bi00est bottlenec.s for 1:Is and N7#s t*at provide services in remote areas of
1ad*/a Prades* %1ost crops are *i0*l/ dependent upon -*et*er' -*ic* increases t*e ris. for farmers -*o
borro- to invest in a0riculture t*rou0* financial inclusion (Empo-erpoor' 2007% )lt*ou0* 1ad*/a Prades*
occupies (%76 of t*e countr/8s total land area' it comprises onl/ "%!6 of India8s population% >o-er? population
/ ban.s and 1:Is from openin0 branc*es in sparsel/ in*abited re0ions of t*e state (Srinivasn'
)ccordin0 to t*e interim report of t*e committee on financial inclusion' at least <%2@ million farmer
Efforts of financial service providers and 0overnment
are not full/ coordinated% ,*is means t*at finance does not accompan/ 0overnment pro0rammes% #n t*e ot*er
*and' 0overnment pro0rammes are fre5uentl/ not available -*ere finance is bein0 provided% :urt*ermore' man/
of t*e poor are left out of covera0e b/ bot* sectors (Srinivasan' 2007% 1an/ S;7s -*ere formed and promoted
under pro0rammes in 1ad*/a Prades*% +e0ional office of t*e National 4an. for )0riculture and +ural
stimated t*at about 2"0'000 previousl/ formed S;7s remain unlin.ed
4an.s do not understand *o- micro finance -or.s and create tedious and complicated procedures for
r0ani9ations% In man/ areas ban.s do not cooperate -it* 1:Is% 1an/ -omen *esitate to start
savin0 in accounts because t*e/ do not trust an institution to .eep t*eir mone/ safe% SAS is ver/ successful at
it also deals -it* si0nificant bottlenec.s and problems%
4an.s *ave Bfor profit onl/C attitudes and e2pect to ma.e returns immediatel/ on all clients% Suc* e2pectations
Journal of Economics and Sustainable Development
ISSN 2222-1700 (Paper ISSN 2222-2!"" (#nline
$ol%&' No%(' 2012
are not realistic? t*e poor cannot be profitable for ban.s until t*e/ 0et out of povert
researc* and t*e case stud/ of 1ad*/a Prades* -e found t*at t*ere are man/ ot*er bottlenec.s to financial
inclusion besides *istorical bac.-ardness' lo- population densit/' and understaffed ruler financial institutions%
Some of t*e ot*er bottlenec.s include resistance of ban. branc* mana0ers to cooperate -it* 1:Is and N7#s'
poor mar.et lin.a0e and no re0ular source of income' little availabilit/ of loan funds from ban.s and financial
institutions and capacit/ buildin0 support for
and central 0overnment' lo- level of literac/ (financial and literac/%
Interaction -it* t*e N7#s and t*e S;7s brou0*t to li0*t underpinnin0 problems of financial inclusion' -*ic*
are briefl/ stated as underH
Povert/H bein0 on lo- income' especiall/ out of -or. and benefits%
I0noranceH lo- levels of a-areness and understandin0 of products caused b/ lac. of appropriate
mar.etin0 or lo- levels of financial literac/%
EnvironmentH lac. of access to f
to ban. branc*es or remote ban.in0 facilities affordabilit/ of products suc* as insurance' -*ere
premiums often price out t*ose livin0 in t*e most deprived and ris./ areas suitabilit/
current accounts -*ic* offer and overdraft and an eas/ route to debt%
Eultural and ps/c*olo0ical barriers suc* as lan0ua0e' perceivedIactual racism and suspicion or fear of
financial institutions%

2. Methodoloy and !ata.
Aeepin0 in vie- t*e nature of problem t*e present -or. of t*e researc* paper is based on bot* primar/ and
secondar/ data% ,*e secondar/ data *as been obtained from 0overnment publications' 0overnment official
records' ban.s and ot*er related a0encies and valid records of t*
measured bot* from savin0 as -ell as t*e credit aspects of t*e financial inclusion% +e0ardin0 collection of
primar/ data a surve/ -as conducted to .no- t*e pro0ress of financial inclusion and t*e pro0ress unde
inclusion is 0iven in t*e table no%1%
Pro0ress under financial inclusion in 1ad*/a Prades* at t*e end of 1arc*' 2011 is 0iven belo-%

"able 1:
S%
No
Particulars
01
No% of villa0es covered under IE, based :I
02
No% of No frills accounts
#&
7eneral purpose credit cards
0<
Aisan credit cards
#"
4usiness correspondents
0@
4usiness facilitators
07
:>EEs
0!
Smart cards issued (No% in >a.*s
0(
Smart card transactions-Number and volume
Source: RBI
:inancial support b/ 7o1P :or financial inclusion in 1ad*/a Prades* at t*e end of 1arc* 2011%
Durin0 t*e tenure of researc* -or. data -as obtained -*ic* s*o-s t*e financial support pr
0overnment of 1ad*/a Prades* for financial inclusion -*ic* is 0iven in t*e table no% 2%

Journal of Economics and Sustainable Development
!"" (#nline

22

are not realistic? t*e poor cannot be profitable for ban.s until t*e/ 0et out of povert/% 4ased on t*e first *and
researc* and t*e case stud/ of 1ad*/a Prades* -e found t*at t*ere are man/ ot*er bottlenec.s to financial
inclusion besides *istorical bac.-ardness' lo- population densit/' and understaffed ruler financial institutions%
*e ot*er bottlenec.s include resistance of ban. branc* mana0ers to cooperate -it* 1:Is and N7#s'
poor mar.et lin.a0e and no re0ular source of income' little availabilit/ of loan funds from ban.s and financial
institutions and capacit/ buildin0 support for 1:Is and N7#s' disconnect in efforts bet-een state 0overnment
and central 0overnment' lo- level of literac/ (financial and literac/%
Interaction -it* t*e N7#s and t*e S;7s brou0*t to li0*t underpinnin0 problems of financial inclusion' -*ic*
Povert/H bein0 on lo- income' especiall/ out of -or. and benefits%
I0noranceH lo- levels of a-areness and understandin0 of products caused b/ lac. of appropriate
mar.etin0 or lo- levels of financial literac/%
EnvironmentH lac. of access to financial services caused b/ several factors' includin0 0eo0rap*ic access
to ban. branc*es or remote ban.in0 facilities affordabilit/ of products suc* as insurance' -*ere
premiums often price out t*ose livin0 in t*e most deprived and ris./ areas suitabilit/
current accounts -*ic* offer and overdraft and an eas/ route to debt%
Eultural and ps/c*olo0ical barriers suc* as lan0ua0e' perceivedIactual racism and suspicion or fear of
e nature of problem t*e present -or. of t*e researc* paper is based on bot* primar/ and
secondar/ data% ,*e secondar/ data *as been obtained from 0overnment publications' 0overnment official
records' ban.s and ot*er related a0encies and valid records of t*e state 0overnment% :inancial inclusion can be
measured bot* from savin0 as -ell as t*e credit aspects of t*e financial inclusion% +e0ardin0 collection of
primar/ data a surve/ -as conducted to .no- t*e pro0ress of financial inclusion and t*e pro0ress unde

Pro0ress under financial inclusion in 1ad*/a Prades* at t*e end of 1arc*' 2011 is 0iven belo-%
Number )mount (+s%crs
No% of villa0es covered under IE, based :I 1020 Nil
72!!<02 Nil
7eneral purpose credit cards &"&@@ 27%2(
@"("""< &(01@
(<2 Nil
Nil Nil
2! Nil
Smart cards issued (No% in >a.*s &%<& Nil
Number and volume ne0li0ible Nil
:inancial support b/ 7o1P :or financial inclusion in 1ad*/a Prades* at t*e end of 1arc* 2011%
Durin0 t*e tenure of researc* -or. data -as obtained -*ic* s*o-s t*e financial support pr
0overnment of 1ad*/a Prades* for financial inclusion -*ic* is 0iven in t*e table no% 2%

---%iiste%or0

/% 4ased on t*e first *and
researc* and t*e case stud/ of 1ad*/a Prades* -e found t*at t*ere are man/ ot*er bottlenec.s to financial
inclusion besides *istorical bac.-ardness' lo- population densit/' and understaffed ruler financial institutions%
*e ot*er bottlenec.s include resistance of ban. branc* mana0ers to cooperate -it* 1:Is and N7#s'
poor mar.et lin.a0e and no re0ular source of income' little availabilit/ of loan funds from ban.s and financial
1:Is and N7#s' disconnect in efforts bet-een state 0overnment
Interaction -it* t*e N7#s and t*e S;7s brou0*t to li0*t underpinnin0 problems of financial inclusion' -*ic*
I0noranceH lo- levels of a-areness and understandin0 of products caused b/ lac. of appropriate
inancial services caused b/ several factors' includin0 0eo0rap*ic access
to ban. branc*es or remote ban.in0 facilities affordabilit/ of products suc* as insurance' -*ere
premiums often price out t*ose livin0 in t*e most deprived and ris./ areas suitabilit/ of products li.e
Eultural and ps/c*olo0ical barriers suc* as lan0ua0e' perceivedIactual racism and suspicion or fear of
e nature of problem t*e present -or. of t*e researc* paper is based on bot* primar/ and
secondar/ data% ,*e secondar/ data *as been obtained from 0overnment publications' 0overnment official
e state 0overnment% :inancial inclusion can be
measured bot* from savin0 as -ell as t*e credit aspects of t*e financial inclusion% +e0ardin0 collection of
primar/ data a surve/ -as conducted to .no- t*e pro0ress of financial inclusion and t*e pro0ress under financial
Pro0ress under financial inclusion in 1ad*/a Prades* at t*e end of 1arc*' 2011 is 0iven belo-%
)mount (+s%crs
Nil
Nil
27%2(
&(01@
Nil
Nil
Nil
Nil
Nil
:inancial support b/ 7o1P :or financial inclusion in 1ad*/a Prades* at t*e end of 1arc* 2011%
Durin0 t*e tenure of researc* -or. data -as obtained -*ic* s*o-s t*e financial support provided b/

Journal of Economics and Sustainable Development
ISSN 2222-1700 (Paper ISSN 2222-2!"" (#nline
$ol%&' No%(' 2012
"able 2.
Name of t*e
4an.
No% of
cards
:und 0iven b/
State 7ovt%
1
2 &
State 4an. of
Indore
2(<2( 0
IEIEI 4an.
2"!1 1"<!@0
Gnion 4an. of
India
101@@ "2"<(2
Eentral 4an. of
India
"!2 "!20
,otal
<27"! @!@1172
SourceH +4I
Position of 27&@ villa0es covered durin0 2010
Eommercial 4an.s *ave covered "@6 of t*eir tar0et and percenta0e covera0e of villa0es b/ )pe2 4an. and
Private sector 4an.s and ++4s is 06' <!6' and @6 respectivel/%

"able #.
Institution
,otal no% of
villa0es
allotted
Eommercial
4an.s
1@!&
Primar/
secondar/ 4an.s
&1
++4s
1007
Eooperatives
1"
,otal
27&@
SourceH +4I
;o-ever' t*e present stud/ attempts to measure b/ collective decision ma.in0% In spite of t*e incre
of formal ban.in0 in t*e recent past' access to basic financial services are still be/ond t*e reac* of lar0e sections
of societ/%

#. Results and !iscussions.
Poor individuals' especiall/ -omen and ot*er mar0inali9ed 0roups' rarel/ *ave proof of
emplo/ment% ,*is renders formal credit even more onerous% ) surve/ of ban. mana0ers in 1ad*/a Prades*
revealed a perception t*at -omen borro-ers -ere most trust -ort*/ and less of a default ris.% In 1ad*/a
Prades* t*ere is 0ood availabilit/ of ban.s t*at is t*e number of deposit and credit accounts' but t*ese services
are mostl/ confined to smaller set of people' -*o use t*em more' -*ile rest of t*e population *as to rel/ on
informal sources% )vera0e time ta.en to process a loan appli
suc* cumbersome and costl/ procedures ma.e it unattractive to rel/ on formal finance% 4an.s *ave also been
unable to open savin0s accounts for bul. of t*e people% In 1ad*/a Prades* t*e pro0ress of financial i
-as not so -ell' t*e volume and number of smart cards transactions -as ne0li0ible at t*e end of marc* 2011'
number of villa0es covered under IE, based :I -as 1020 and t*e amount of rupees in cores belon0ed to t*is -as
nil% Percenta0e covera0e of villa0es b/ )pe2 4an. and private Sector 4an.s and ++4s is 06 '<!6 and @6
respectivel/ -*ile Eommercials 4an.s *ave covered "@6 of t*eir tar0et% People do not *ave access to 4an.
accounts and formal credit mar.ets? t*e/ are forced to approac* informal and o
;ouse*old access to financial services is impeded b/ 0eo0rap*ic isolation in rural areas due to bad or absent
roads? lo- population densit/? la- and 3ustice problems? *i0* povert/? over dependence on a0riculture?
un-illin0ness of t*e ban.s to serve t*e poor and cooperate -it* 1:Is? financial literac/? and 0ender ine5ualit/%
Importantl/' t*e demand for financial services is *u0e' but t*e demand is inade5uate%

Journal of Economics and Sustainable Development
!"" (#nline

2&

:und 0iven b/
State 7ovt%
No% of
;;D
:und 0iven b/ state
7ovt%
< "
&2 &20000
1"<!@0 1 10000
"2"<(2 120 1200000
"!20 11 110000
@!@1172 1@< 1@<0000
tion of 27&@ villa0es covered durin0 2010-2011 and to be covered in 2011-12 is as underH
Eommercial 4an.s *ave covered "@6 of t*eir tar0et and percenta0e covera0e of villa0es b/ )pe2 4an. and
Private sector 4an.s and ++4s is 06' <!6' and @6 respectivel/%
6 s*are of
total no% of
villa0es
No% of villa0es
covered durin0
2010-11
>eft over
villa0es for
2011-12
@26 (<1 ("@6 7<2
1%06 1" (<!6 1@
&76 @< (@6 (<&
>ess t*an 16 06 1"
1006 1020 (&76 171@
;o-ever' t*e present stud/ attempts to measure b/ collective decision ma.in0% In spite of t*e incre
of formal ban.in0 in t*e recent past' access to basic financial services are still be/ond t*e reac* of lar0e sections
Poor individuals' especiall/ -omen and ot*er mar0inali9ed 0roups' rarel/ *ave proof of
emplo/ment% ,*is renders formal credit even more onerous% ) surve/ of ban. mana0ers in 1ad*/a Prades*
revealed a perception t*at -omen borro-ers -ere most trust -ort*/ and less of a default ris.% In 1ad*/a
abilit/ of ban.s t*at is t*e number of deposit and credit accounts' but t*ese services
are mostl/ confined to smaller set of people' -*o use t*em more' -*ile rest of t*e population *as to rel/ on
informal sources% )vera0e time ta.en to process a loan application is almost && -ee.s in a commercial ban.?
suc* cumbersome and costl/ procedures ma.e it unattractive to rel/ on formal finance% 4an.s *ave also been
unable to open savin0s accounts for bul. of t*e people% In 1ad*/a Prades* t*e pro0ress of financial i
-as not so -ell' t*e volume and number of smart cards transactions -as ne0li0ible at t*e end of marc* 2011'
number of villa0es covered under IE, based :I -as 1020 and t*e amount of rupees in cores belon0ed to t*is -as
illa0es b/ )pe2 4an. and private Sector 4an.s and ++4s is 06 '<!6 and @6
respectivel/ -*ile Eommercials 4an.s *ave covered "@6 of t*eir tar0et% People do not *ave access to 4an.
accounts and formal credit mar.ets? t*e/ are forced to approac* informal and often e2ploitative financial mar.ets%
;ouse*old access to financial services is impeded b/ 0eo0rap*ic isolation in rural areas due to bad or absent
roads? lo- population densit/? la- and 3ustice problems? *i0* povert/? over dependence on a0riculture?
lin0ness of t*e ban.s to serve t*e poor and cooperate -it* 1:Is? financial literac/? and 0ender ine5ualit/%
Importantl/' t*e demand for financial services is *u0e' but t*e demand is inade5uate%

---%iiste%or0

,otal fund 0iven b/
state 7ovt%
(&J" @
&20000
1@<!@0
172"<(2
11"!20
2&2@172
12 is as underH
Eommercial 4an.s *ave covered "@6 of t*eir tar0et and percenta0e covera0e of villa0es b/ )pe2 4an. and
>eft over
villa0es for
6 of total tar0et
to be covered b/
4an.s
<<6
"26
(<6
1006
@&
;o-ever' t*e present stud/ attempts to measure b/ collective decision ma.in0% In spite of t*e increased spread
of formal ban.in0 in t*e recent past' access to basic financial services are still be/ond t*e reac* of lar0e sections
Poor individuals' especiall/ -omen and ot*er mar0inali9ed 0roups' rarel/ *ave proof of identit/' address' and
emplo/ment% ,*is renders formal credit even more onerous% ) surve/ of ban. mana0ers in 1ad*/a Prades*
revealed a perception t*at -omen borro-ers -ere most trust -ort*/ and less of a default ris.% In 1ad*/a
abilit/ of ban.s t*at is t*e number of deposit and credit accounts' but t*ese services
are mostl/ confined to smaller set of people' -*o use t*em more' -*ile rest of t*e population *as to rel/ on
cation is almost && -ee.s in a commercial ban.?
suc* cumbersome and costl/ procedures ma.e it unattractive to rel/ on formal finance% 4an.s *ave also been
unable to open savin0s accounts for bul. of t*e people% In 1ad*/a Prades* t*e pro0ress of financial inclusion
-as not so -ell' t*e volume and number of smart cards transactions -as ne0li0ible at t*e end of marc* 2011'
number of villa0es covered under IE, based :I -as 1020 and t*e amount of rupees in cores belon0ed to t*is -as
illa0es b/ )pe2 4an. and private Sector 4an.s and ++4s is 06 '<!6 and @6
respectivel/ -*ile Eommercials 4an.s *ave covered "@6 of t*eir tar0et% People do not *ave access to 4an.
ften e2ploitative financial mar.ets%
;ouse*old access to financial services is impeded b/ 0eo0rap*ic isolation in rural areas due to bad or absent
roads? lo- population densit/? la- and 3ustice problems? *i0* povert/? over dependence on a0riculture?
lin0ness of t*e ban.s to serve t*e poor and cooperate -it* 1:Is? financial literac/? and 0ender ine5ualit/%
Journal of Economics and Sustainable Development
ISSN 2222-1700 (Paper ISSN 2222-2!"" (#nline
$ol%&' No%(' 2012

$. %onclusion.
1ad*/a Prades*' li.e several ot*er central and
e2tend financial services to its people% Proponents of financial inclusion in 1ad*/a Prades* offer e2planations
suc* as *istorical bac.-ardness' lo- population densit/' bad infrastructure' unde
institutions' un-illin0ness of t*e ban.s to open branc*es in rural areas (not economicall/ viable' lac. of
cooperation bet-een commercial ban.in0 sector and 1:IsIN7#s financial literac/' corrupt local 0overnments%
Gnfortunatel/' financial inclusion usin0 onl/ credit does not al-a/s result in si0nificant povert/ alleviation% ,*e
measurement aspect of financial inclusion *as' so for' not e2tensivel/ been covered' bein0 a diversified econom/
and societ/' it is imperative to 0ive ade5u
and researc*ers%

Re&erences.
)runac*alam' +ames* (200!' Developing a strategy on financial inclusion (2!
:I 01-01I200!% Povert/ reductionH GNDP India' Januar/ 2<%
4ec.' ,*orsten' Demir0uc-Aunt' )sli and ;ona*an' Patric. (200('
Impact and polices" ,*e =orld 4an. +esearc* #bserver )dvance )ccess' #2ford Gniversit/ pre
Dobie' >% and 7illespie' 1% (2010'
Ealedonian Gniversit/%
Empo-er poor (2007' State profile #$.
;ono*an' Patric. (200<' Financial Development" %ro&t' and $overty:
*eart' ed% :inancial Development and Economic 7ro-t*H E2plainin0 t*e lin.s' >ondonH Pal0rave%
>ittlefield Eli9abet*' Jonat*an 1urdoc* and Sa/eed ;as*emi (200&'
Reac' t'e #illennium Development %oals(
Srinivasan' N% (2007' $ision of #icrofinance 212" #ad'ya $rades'.
1icrofinance India' 4*opal%
,*roat Gs*a' Reserve Ban) of India at t'e *#+
>ondon' GA June 1(' 2007%
Gnited Nations (200@' Building Inclusive Financial Sectors for Development. ,-ecutive Summary.
Jul/ 20' 200!%
=orld 4an.' Finance for .ll( : $olices and $itfalls in ,-panding .ccess"
=orld 4an.' 200!%



Journal of Economics and Sustainable Development
!"" (#nline

2<

1ad*/a Prades*' li.e several ot*er central and nort*eastern states' continues to la0 be*ind in t*e abilit/ to
e2tend financial services to its people% Proponents of financial inclusion in 1ad*/a Prades* offer e2planations
suc* as *istorical bac.-ardness' lo- population densit/' bad infrastructure' understaffed rural financial
institutions' un-illin0ness of t*e ban.s to open branc*es in rural areas (not economicall/ viable' lac. of
cooperation bet-een commercial ban.in0 sector and 1:IsIN7#s financial literac/' corrupt local 0overnments%
inancial inclusion usin0 onl/ credit does not al-a/s result in si0nificant povert/ alleviation% ,*e
measurement aspect of financial inclusion *as' so for' not e2tensivel/ been covered' bein0 a diversified econom/
and societ/' it is imperative to 0ive ade5uate attention to measurement of financial inclusion b/ polic/ ma.ers
and researc*ers%
Developing a strategy on financial inclusion (2!/2120.
01I200!% Povert/ reductionH GNDP India' Januar/ 2<%
Aunt' )sli and ;ona*an' Patric. (200(' .ccess to Financial services: #easurement"
,*e =orld 4an. +esearc* #bserver )dvance )ccess' #2ford Gniversit/ pre
Dobie' >% and 7illespie' 1% (2010' +'e Benefits of Financial Inclusion: a literature +evie-' 7las0o-H 7las0o-
State profile #$. Poorest )reas Eivil Societies' ()ccessed on Jul/ 27' 200!%
Financial Development" %ro&t' and $overty: ;o- close are lin.sK In E*arles 7ood
*eart' ed% :inancial Development and Economic 7ro-t*H E2plainin0 t*e lin.s' >ondonH Pal0rave%
>ittlefield Eli9abet*' Jonat*an 1urdoc* and Sa/eed ;as*emi (200&' Is #icrofinance an ,ffective Strategy to
Reac' t'e #illennium Development %oals( E7)P :ocus Note% Januar/% ()ccessed June 20' 200!%
of #icrofinance 212" #ad'ya $rades'. )ccess Development Services'
Reserve Ban) of India at t'e *#+/DFID Financial Inclusion 1onference (2007' -*ite *all place'
Building Inclusive Financial Sectors for Development. ,-ecutive Summary.
Finance for .ll( : $olices and $itfalls in ,-panding .ccess" =orld 4an. Polic/ +esearc* Paper'






---%iiste%or0

nort*eastern states' continues to la0 be*ind in t*e abilit/ to
e2tend financial services to its people% Proponents of financial inclusion in 1ad*/a Prades* offer e2planations
rstaffed rural financial
institutions' un-illin0ness of t*e ban.s to open branc*es in rural areas (not economicall/ viable' lac. of
cooperation bet-een commercial ban.in0 sector and 1:IsIN7#s financial literac/' corrupt local 0overnments%
inancial inclusion usin0 onl/ credit does not al-a/s result in si0nificant povert/ alleviation% ,*e
measurement aspect of financial inclusion *as' so for' not e2tensivel/ been covered' bein0 a diversified econom/
ate attention to measurement of financial inclusion b/ polic/ ma.ers
2120. =or.in0 paper no%
.ccess to Financial services: #easurement"
,*e =orld 4an. +esearc* #bserver )dvance )ccess' #2ford Gniversit/ press%
a literature +evie-' 7las0o-H 7las0o-
Poorest )reas Eivil Societies' ()ccessed on Jul/ 27' 200!%
;o- close are lin.sK In E*arles 7ood
*eart' ed% :inancial Development and Economic 7ro-t*H E2plainin0 t*e lin.s' >ondonH Pal0rave%
finance an ,ffective Strategy to
E7)P :ocus Note% Januar/% ()ccessed June 20' 200!%
)ccess Development Services'
2007' -*ite *all place'
Building Inclusive Financial Sectors for Development. ,-ecutive Summary. ()ccessed
=orld 4an. Polic/ +esearc* Paper'
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