Banking on the Un-Banked

A 2016 PwC India report revealed that India’s un-banked population as of 2016 would be the world’s seventh largest country. That is a whopping 167 Million people who do not even have a bank account. Ideas like investments and savings are not even in the picture for this group.

Considering the reach, benefits and power of the financial system, it is astounding to see that so many people are unaware of its existence altogether. If at all these people are to have a chance at growing their wealth and bringing about a meaningful change in their future, financial inclusion is the way to go. These un-banked millions need to be banked.

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But Why?

But let’s take a step back and try to understand the reason for this ironic state of affairs in the fastest growing economy in the world. Why are these people not part of the system? The answer is different for different demographics-urban and rural.

The Demographics

In rural areas, the problem is more in the hands of the government and the infrastructure. In one of the earlier posts in themfproject, the problem of infrastructure was dealt with in detail. For most banks, it is not economical to set up branches in rural areas and it is up to public-owned financial institutions and the state to bring banking to these remote regions filled with uneducated and unaware people. But the picture is optimistic. With the government actively trying to bring awareness through programs like the Jan Dhan Yojana(targeted at opening bank accounts for Indian households of 4 or more people) as well as aggressive policies like the Demonetization scheme of 2016, people are encouraged(and forced in some cases) to start taking part in the banking system. In urban areas on the other hand, the problem is not one of awareness but of trust and is more relevant to my agenda.

The Urban Dilemma

It is pretty clear that someone living in a city would have easy access to a bank and would certainly be aware of how banks work. But still they choose not to participate. This intrigued me. Why won’t these urban people participate? To understand this, I spoke to a few people in Mumbai(daily wage workers, domestic helpers, housemaids/housekeepers, night watchmen) and tried to get at the root cause of this problem. They all had the same concerns –

“banks are not for poor people”,

“bank accounts are risky and we might end up losing all our money”,

“we will have to pay a lot of money to have a bank account”

and several other misconceptions and trust concerns with regard to banks. The whole idea of the financial system relies on people trusting it and believing in its functioning.

Our take on this problem

As long as these people are not made aware of the correct ideals and benefits of having a bank account, they will never change their views and will never have a shot at saving their incomes.

That is where we at themfproject believe we can make a difference. Rural areas may be beyond our reach but we can definitely make an impact on the urban poor and the urban un-banked. We wish to bring these people into the banking system first and build trust in them on the safety that banks provide and finally get them to start saving through a mutual fund centered systematic investment plan.

In subsequent posts, we will be elaborating more on how we aim to bring banking and investing to these urban un-banked and how we hope to encourage them to start saving their money – A concept that was unheard of by these people until now. Additionally, we hope to also share some of the stories of these people and our interactions with them to understand their take on this whole problem and how financial inclusion and investment can be a game changer for them.

Stay tuned.

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