What are the obstacles in generating financial inclusion for Urban Poor?

The KYC(Know your customer) formalities are only used as a convenient tool to block access to banking services to the urban poor. The real problem lies elsewhere. It is not the fear of risk involved but the fear of additional work involved. It lies in the unwillingness on the part of banks in urban areas to provide such services as it means more footfalls, more record-keeping, more work in general. This is just not acceptable. Firstly, there has to be a top-down approach in each bank to bring about an attitudinal change in this regard. Secondly, there has to be greater publicity and awareness among this section of the urban population about the availability of banking services.

Basically, there is a difference between the rural poor and the urban poor as far as proof of identity and address are concerned. In a village, almost everyone knows about everyone in the village, whereas in the urban areas, one may not know who one’s neighbor is let alone be convinced of the identity and address of the urban poor. This, therefore, implies that if the instructions to banks are easy to apply in rural areas, they are not necessarily so in urban areas.

If government is reluctant to give welfare, social insurance and equality as the prototype on which they generate policies, the poor has no chance other than live as they are already doing.

Before reaching any conclusion we have to understand who is our customer ? what are their banking habits, living style, saving pattern, illiteracy level, response to complexity etc. If we carefully analyse all these points then definitely we will reach to some conclusion that Urban poor are very much different than urban rich. And all our banking patterns are based on the upgradation of the technology, and urban poor are not habitual to that. We have to be at their level and then devise the facilities according to their need. This is the hard task for the bank people as it is going to be tedious and extra work for them. Banks have to understand its TG and then act according, only then the involvement of the urban poor and effective service for them will be ensured.

‘Risk’ cover is one of the fundamental criteria of providing banking services. Rural poor can not cover the risk properly for getting finance. That is why private banks hardly come forward to finance them. There are many among the urban poor with entrepreneurial capability and opportunities to prove themselves with high level of performance but do not get attention from banks. They should be brought under shelf help groups or under some government schemes to get favor for loans. Commercial banks should devise some means to pick some genuine entrepreneurs without risk bearing capacity and sponsor them for credits. Follow up training and grooming can minimize the risk and enable them to stand up successful in the long run.

In my view, Urban poor are those people who does not enjoy the financial support from banks both private sector as well as public sector. Most of the private banks do not like  urban poor's account due to cost constraint. These urban poor are mainly migrant and most of them would like to do some small business, like selling Bhel puri or Pav Bhaji. They depend on money lenders for their day to day working capital and the cost of getting the finance is very expensive. Because of their inability to provide sufficient security or guarantor, they do not get any finance from Public sector Banks.

We do not have Mohammed Yunus, winner of Nobel prize in 2006 for Grameen Bank and helping both Urban and rural poor in Microfinancing.  There is no such financial institution like Grameen Bank in India to provide financial assistance to the urban poor.

Take the case of Lijjat Papad, the whole concept is based on micro-finance from co-operative movement.

If the finance is made available to them at a cheper rate or if Government guarantees them, these urban poor will soon become self-employed and contribute towards national development.

It appears to be strange but I have come across a system called MTAKA, the results of which was ,may be today also declared through out INDAI and money changed hands. Even the Riksha puller contributed their might to such games, The collection of funds , distribution was or is really amazing. Can we not do it legally  but not gambling part of it just collection and intrest payment part.....

Let us learn something from..... those ... too

Financial inclusions should first precede SOCIAL INCLUSION. what i mean by social inclusion is that they are not treated as part of the urban class.  Majority of them are migrants from neighboring villages where they see no growth prospects.  They are poor in the village and land up poorer in cities.  They have to carve out their own living, their own shelter and their own identity.  They are at constant threat of outcast from urban rich and at constant mercy of urban municipalities.  They are exploited, used and never allowed to grow and become part of the urban culture.  The amount of life risks they take, whether earning their daily wages or enduring the whims and fancies of the authorities is amazing. 

If this section has to be financially included to become part of the growth, we need to include them socially first.  Govt. should have a policy to welcome and include such people in mainstream development so that when they are assured of support, they get included in the process, including financial incusion.  THAT I FEEL would be a right path.

The major obstacles in generating financial inclusion for Urban Poor is lack of understanding of basic rights allowing the touts to take over their interests. Urban Poor is mainly less educated but theyvery well understand Business  finance

Banking service is predominently based on security, they can able to provide banking services only if they found that the person to whom services are extended is fully secured. Meaning of the word secured shall be understood in a broader sense, it includes tangible and non tangible securities. Normally urban poor are unsecured, they may not have security either personal or otherwise. They are in search of food and temporary shelter, they may be migrated from other parts of the country or rather from rural area. To such urban poor extending banking fecilities involves high risk, bankers are profit motive rather than social welfare, thay will show the tendancy to withdraw from such banking services themselves. In such cases I paersonally feel that Government shall guarantee banking services to them or provide schems to support banking services.

The same Central Govt./ RBI is implementing KYC and Anti-moneyLaundering norms everywhere, in all financial services and at the same time asking for financial inclusion. Think contradictory ?

The urban poor has  no money and no papers to be 'financially included'. No Govt agency / Corporation / Municipality have come ahead to give them "Identy Papers" with which they may open a Bank A/c. Even they might not have atleast Rs.50/- (surplus) for such purpose.

While the urban poor is given dole/donation/relief, may any agency give them Rs 60/- as extra only to open a Bank A/c ? Rs. 10/- for a photograph .... ? May some elite class of Financial Service Co. take similar initiative ? Perhaps possible. Banks may be willing to render some extra job in opening such a/cs.

In fine : the main OBASTACLE is : The age-old fudal mentality and anti-poor approach ( imbibed in our society of elite classes ).