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Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614

Volume 4, No.1, January 2015

Dwindling Levels of Financial Inclusion: An Exploratory Study

in Lucknow, India
Mohit Kumar, Research Scholar, Department of Rural Management, School of Management Studies, Babasaheb Bhimrao
Ambedkar University, Lucknow
Dr. Kushendra Mishra, Head, Associate Professor, Department of Rural Management, School of Management Studies,
Babasaheb Bhimrao Ambedkar University, Lucknow
The access to basic financial services for disadvantaged groups is regarded as a prerequisite for reducing poverty and
catalyzing the engines of economic development. Hence, financial inclusion becomes very important. Though the govern-
ment and RBI have taken several steps to improve the supply side of financial inclusion, these measures will not work
without adequate demand for financial inclusion. The demand for financial inclusion means the need and use of the same
from the people in terms of the need to open a savings account or the need to avail the credit facilities from the formal fi-
nancial channel available. The only way to keep up with the economic growth is to ensure that the capital formation is
always on track. This capital will be generated only when the savings of the large masses will be mobilized. Since Accessi-
bility is the most influential factor of the demand for financial inclusion the RBI should take some measures that will make
financial services more accessible to those who are financially excluded. The people should be made aware of the availa-
ble facilities and its related advantages to make use of our financial system for their betterment and also for the nation’s
betterment. This paper intends to explore into financial access which plays a pivotal role in understanding the progress of
financial inclusion. The research highlights that there are various reasons for low level of access which needs to be taken
care of to achieve better and faster growth with respect to financial inclusion. Each reason needs to be catered to the pos-
sible extent so as to ensure that the overall demand is generated which will provide an added incentive to increase the
supply as well. Hence, the efforts of the government and RBI to improve the supply of financial services will end up fruit-
less if the demand side of financial inclusion is not taken proper care of.

Keywords: Financial Inclusion, Financial Access, Financial Exclusion, RBI

Introduction people use the varied services with a lot of cost involved
Nearly more than half of the world’s population coming in it – implicit as well as explicit.
from developing and emerging economies does not have
a formal mechanism to save. They don’t have an access Savings accounts are the most commonly used vehicle
to a bank account .Further; a sizeable chunk of the same for poor people to channelize their hard earned money
population live on less than $2 per day (World Bank for productive investments. But still savings account are
Report 2008) implies a clear link between poverty and out of access for majority of poor people for reasons
access to a formal banking mechanism. Most studies such as the cost factor, stringent documentation process-
dedicated to financial inclusion have suggested that peo- es, distance factors of the banking branches , lack of in-
ple need to be motivated to save and save it via formal come and so on. It is evident that people save for a varie-
banking route and they reiterate a vital fact that most ty of reasons and they make loans for different reasons
savings by the poor people still is mobilized using in- as well. A close inspection would help policy makers to
formal sources. The fact remains such mobilization final- devise policies to fine tune their banking mechanism and
ly never reaches the wiser hands of the government and their banking processes as well as banking products.
administrative machinery and ultimately fails to stream-
line the economic development process. The number of Literature Review:
financial instruments available for usage in emerging Rangarajan Committee (2008) defined financial inclu-
economies is plenty, but just having a bank branch does sion as the process of getting an access to financial ser-
not merely leads to its usage or access. vices and timely and adequate credit at an affordable
price when needed by weaker sections of the society.
Access to financial services refers to the ease with which
an individual uses the financial services if at all the need Leyshon and Thrift (1995) underpinned financial exclu-
arises. It is completely different from the term ‘usage’ of sion as phenomenon that resulted from such processes
financial services since a mere access to financial ser- that prevented specific groups from getting an access to
vices doesn’t amount to usage. A mere usage of the fi- formal financial system. Sinclair (2001) further support-
nancial services also does not connote in any sense of ed the above saying that financial exclusion results from
imagination that the hindrances to access are inexistent. the inability to get an access to financial services
It is definitely seen in various pockets of rural areas that

© 2012 The Author © Blue Ocean Research Journals 2012 Open Access Journals Blue Ocean Research Journals 39
Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 4, No.1, January 2015

Again, Financial Exclusion could be the result of supply nations and analyzed reasons and impacts of financial
side inefficiencies or it could come from the demand access. The initial results suggested that financial ac-
side altogether. It could be due to reasons such as high cess is greater in urban areas and is higher among males
costs, distance factor, economic conditions and so on. and educated people. They further created a framework
for determining the level of financial access based on
Carbo et al. (2005) in his work related financial exclu- surveyed results across demographic profile.
sion with the access dimension and stated that is the
sheer inability of some groups to get an access to the Research Objectives:
formal financial system. a) To determine the access of a banking product among
males and females
Beck, Demirguc-Kunt & Martinez Peria (2007), b) To determine the reasons for non access of a bank-
Honohan (2007), and CGAP (2009) in similar studies ing product
pointed out that word bank has been very active in at- c) To determine other parameters shaping up the ac-
tempting to gauge the relevant parameters having an cess to a financial product.
impact on the access to the financial services in develop-
ing countries. Further, they attempted to deduce a rela-
tionship between access to financial services and finan-
Research Methodology:
The research study is a mix of exploratory and descrip-
cial system development and economic development. It
tive research design. The sample size is 300 and consists
was found that savings play a crucial role determining
of respondents from specific blocks of Lucknow namely
the investment level in economy and is directly linked to
Sarojininagar, Mohanlalganj, Mallihabad and Bakshi ka
Talab. Respondents have an equal participation from
Aportela (1999) measured the result of increasing the males and females and there is an equal participation
access dimension on the net saving made by the low from each of the blocks. The sampling technique is a
income segment. It was concluded that once low income mix of judgmental sampling and simple random sam-
people have an access to a formal savings route, they pling. Data is collected from the respondents using a
churn up even higher volume of savings. structured schedule as a data collection instrument. Data
is entered in MS Excel and relevant tools are applied to
Beck, Buyukkarabacak, Rioja & Valev (2008) on similar arrive at necessary conclusions.
lines highlighted the influence of access to a saving
mechanism helps to increase the net savings as well. Results And Discussions:
Table 1 indicates various sources of income for respond-
Beck, Demirguc-Kunt and Martinez Peria (2006), stud- ents. It is deduced that most of the respondents surveyed
ied various barriers to banking access in one of the most practice agriculture and allied activities. Further, some of
exhaustive studies conducted ever and came out with them are local traders and small businessman or shop-
various reasons for non- access to instrumental financial keepers. Very few have regular jobs or are involved in
services such as deposit and credits. permanent services

Honohan and King (2009) carried out a cross country

analysis where they pooled data from various African

Table 1: Sources of Income

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Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 4, No.1, January 2015

Table 2 provides the information on the access of a cess to a formal banking channel and the remaining 32 %
banking product. The results indicate that less than half are unbanked indicating the scope for further expansion
of the respondents surveyed have an access to a formal of client base.
banking product. One fourth of the respondents lack ac-
Table 2: Access to Finance

Table 3 provides a breakup of the above analysis. It re- ther, majority of the unbanked respondents are females
veals that most of the formally banked respondents are showing a skewed distribution of formal and informal
male. On the other hand, most females prefer to have an access among males and females
access to an informal banking product/ association. Fur-

Table 3: Access to Finance- Male Vs. Females

Table 4 indicates that most of the banking accounts are than one fifth of the respondents have an account more
new and recent highlighting the work and initiatives tak- than five years old revealing lack of banking habit and
en on part of financial inclusion. It also shows that less trust some years back

© 2012 The Author © Blue Ocean Research Journals 2012 Open Access Journals Blue Ocean Research Journals 41
Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 4, No.1, January 2015

Table 4: Duration of Banking

Table 5 indicates various reasons for savings having an save for agriculture related activities and other business-
impact on the financial access and ultimately the volume es. Only few save it keeping in mind the future education
of business transactions. The data pinpoints that most and marriage of their children.
Table 5: Reasons for Savings

Table 6 reveals types of banking channels being mostly while using any other banking channel. However, it is
used at the places surveyed. It is clearly seen that bank- also evident that ATMs have been slowly but surely
ing is mostly done at bank branches. This may be partly making their place felt in most of the business transac-
due to the lack of awareness or for the lack of habit tions.
Table 6: Types of Banking Interfaces at use

Table 7 indicates that there is not a lot of banking trans- fifth seem to use it actively for their businesses or per-
action at places surveyed since one third of the respond- sonal uses.
ents do not use banks even once in a month. Only one

© 2012 The Author © Blue Ocean Research Journals 2012 Open Access Journals Blue Ocean Research Journals 42
Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 4, No.1, January 2015

Table 7: Banking Frequency

Table 8 points out that there are various reasons account- place of banking and the cost of managing a bank ac-
ing for non-access to a banking product. One of the rea- count. The cost of managing a bank account was the
sons is the lack of income which makes it difficult for opportunity cost in terms of minimum balance require-
the people to save and deposit for investment purposes. ment which was supposed to be maintained at all times
Other reasons included the distance travelled to reach the in a bank account.
Table 8: Reasons for Non-Usage/Access

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Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614
Volume 4, No.1, January 2015

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