Publication:
Scaling-up Access to Finance for India's Rural Poor

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dc.contributor.authorWorld Bank
dc.date.accessioned2013-07-08T16:19:01Z
dc.date.available2013-07-08T16:19:01Z
dc.date.issued2004-12
dc.description.abstractSince the early national plans, successive governments in independent India have emphasized the link between improving access to finance, and reducing poverty - a stance that has had influence globally. The need to improve financial access for India's poor, the overwhelming majority of whom are concentrated in rural areas, motivated the nationalization of commercial banks in the late 1960s, and an aggressive drive through the 1970s and 1980s, to expand rural banking, coupled with policies mandating banks to provide subsidized credit to rural households. The 1990s saw the partial deregulation of interest rates, a gradual reduction in the Government's stake in commercial banks, and increased competition in the banking sector. Access to finance for the rural poor has improved somewhat over the past decades, with the public sector commercial banks being the dominant players in the formal rural finance market. Yet, the vast majority of India's rural poor, still do not have access t o formal finance. The report examines the reasons, and factors affecting both banks, and their clients. First is the problem of uncertainty - about the repayment capacity of poor rural borrowers, and their irregular/volatile income streams and expenditure patterns - which, in the absence of credit information, drive up default risk. Second, the transactions costs of rural lending in India are high, mainly due to small loan sizes, high frequency of transactions, large geographical spread, and heterogeneity of borrowers, and widespread illiteracy. Third, the Government policies have made things worse from the banks' perspective, creating a "financial climate" not conducive to lending in general, and rural banking in particular. New approaches and products to improve rural access to finance in India are reviewed, namely, the 'Self-help Groups (SHGs) Bank Linkage' model, the growth of which - from just 500 SHGs linked to banks in the early 1990s, to over 700,000 in 2003 - has been truly remarkable; specialized microfinance institutions; and, partnerships between private Banks,, micro-financiers, and service providers, including the Kisan Credit Card. Furthermore, a potential means of reducing default risk in rural finance, that has recently caught the attention of the Government, is the establishment of a "warehouse receipts system' to cover the agricultural risk management of products for farmers. The policy agenda to improve access to finance by the rural poor looks at introducing flexible products; the need for composite financial services; simplified procedures to access finance; and, improved staffing policies and doorstep banking, including an enabling policy, legal and regulatory environment for micro-finance.While the importance of microfinance in consumption-easing should not be underestimated, its success in budding up poor peoples' assets, over the medium term, would much depend on efforts directed at providing assistance in skills development, technology and marketing - all of which are critical to ensuring that investments made by poor households, reap returns and contribute to a sustained increase in incomes and improvements in rural livelihoods.en
dc.identifierhttp://documents.worldbank.org/curated/en/2004/12/5662664/india-scaling-up-access-finance-indias-rural-poor
dc.identifier.doi10.1596/14389
dc.identifier.urihttps://hdl.handle.net/10986/14389
dc.languageEnglish
dc.language.isoen_US
dc.publisherWashington, DC
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectADVERSE SELECTION
dc.subjectASSET CLASSIFICATION
dc.subjectBANK ACCOUNTS
dc.subjectBANK BRANCHES
dc.subjectBANKING CRISES
dc.subjectBANKING SERVICES
dc.subjectBANKS
dc.subjectBONDS
dc.subjectBORROWING
dc.subjectBROKERS
dc.subjectCAPITAL ADEQUACY
dc.subjectCAPITAL REQUIREMENTS
dc.subjectCAPS
dc.subjectCOLLATERAL
dc.subjectCOMMERCIAL BANKS
dc.subjectCOOPERATIVE BANKS
dc.subjectCOST SAVINGS
dc.subjectCREDIT
dc.subjectCREDIT CARDS
dc.subjectCURRENT EXPOSURE
dc.subjectDEBT
dc.subjectDEFAULT RISK
dc.subjectDEPOSITS
dc.subjectDEREGULATION
dc.subjectDERIVATIVES
dc.subjectECONOMICS
dc.subjectEXPENDITURE
dc.subjectEXPENDITURES
dc.subjectEXPOSURE
dc.subjectFINANCE COMPANIES
dc.subjectFINANCE INSTITUTIONS
dc.subjectFINANCIAL DISTRESS
dc.subjectFINANCIAL INTERMEDIATION
dc.subjectFINANCIAL NEEDS
dc.subjectFINANCIAL SERVICES
dc.subjectFINANCIAL SYSTEM
dc.subjectFINANCIAL TRANSACTIONS
dc.subjectFUTURES
dc.subjectGRAMEEN BANK
dc.subjectINCENTIVE FRAMEWORK
dc.subjectINCOME
dc.subjectINSTITUTIONAL STRUCTURES
dc.subjectINSURANCE
dc.subjectINSURANCE COMPANIES
dc.subjectINTEREST RATE
dc.subjectINTEREST RATES
dc.subjectL C
dc.subjectLAWS
dc.subjectLEGAL FRAMEWORK
dc.subjectLINKAGES
dc.subjectMICROFINANCE
dc.subjectNATIONALIZATION
dc.subjectOBLIGATION
dc.subjectPORTFOLIOS
dc.subjectPRIVATE BANKS
dc.subjectPRIVATE SECTOR
dc.subjectREGULATORY FORBEARANCE
dc.subjectREGULATORY FRAMEWORK
dc.subjectRESERVE BANK OF INDIA
dc.subjectRISK MANAGEMENT
dc.subjectRURAL BANKS
dc.subjectSAVINGS
dc.subjectSAVINGS ACCOUNTS
dc.subjectSECURITIZATION
dc.subjectSERVICE PROVIDERS
dc.subjectSMALL LOANS
dc.subjectSMART CARDS
dc.subjectTRANSACTION COSTS
dc.subjectVULNERABILITY
dc.titleScaling-up Access to Finance for India's Rural Pooren
dspace.entity.typePublication
okr.date.disclosure2007-01-05
okr.date.doiregistration2025-05-07T08:55:27.297163Z
okr.doctypeEconomic & Sector Work::Other Financial Sector Study
okr.doctypeEconomic & Sector Work
okr.docurlhttp://documents.worldbank.org/curated/en/2004/12/5662664/india-scaling-up-access-finance-indias-rural-poor
okr.globalpracticeEnvironment and Natural Resources
okr.globalpracticeFinance and Markets
okr.globalpracticeGovernance
okr.guid262391468051271626
okr.identifier.externaldocumentum000012009_20050315110938
okr.identifier.internaldocumentum5662664
okr.identifier.report30740
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2005/03/15/000012009_20050315110938/Rendered/PDF/307400IN.pdfen
okr.region.administrativeSouth Asia
okr.region.countryIndia
okr.sectorMicro- and SME finance
okr.sectorFinance
okr.themeSmall and medium enterprise support
okr.themeFinancial and private sector development
okr.topicBanks and Banking Reform
okr.topicFinance and Financial Sector Development::Financial Intermediation
okr.topicEnvironmental Economics and Policies
okr.topicFinancial Crisis Management and Restructuring
okr.topicPublic Sector Economics and Finance
okr.topicEnvironment
okr.topicPublic Sector Development
okr.unitFinance & PSD Sector Unit (SASFP)
okr.volume1 of 1
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