Odisha Financial Inclusion Conclave - SIDBI

Odisha Financial Inclusion Conclave

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Odisha Financial Inclusion ConclaveOrganized under the aegis of

State Financial Inclusion Forum (SFIF)Poorest States Inclusive Growth (PSIG) Programme

Conclave Proceedings

Welcome Address by Ms. Radhika Agashe, Executive Director, ACCESS-ASSIST

Special Addresses by:• S.K.Kale,CGM-NABARD• S.Ramakrishnan,CGM(SFMC)-SIDBI• B.P.Samantaray,SLBCConvenor,UCOBank

Inaugural Address by:• UpendraNathBehera,IAS,DevelopmentCommissioner-cum-

ACS,GovtofOdisha

UndertheaegisofPoorestStatesInclusiveGrowth(PSIG) Programme, funded by DFID and

implemented by SIDBI, ACCESS ASSIST organizeda day long state level Financial Inclusion Conclaveat Bhubaneswar, Odisha on November 4, 2015(Wednesday)todeliberateontheissuesandchallengesthataffectandadvancefinancialinclusiondiscourseintheState.Theconclavewitnessedthepresenceofaround100distinguishedrepresentativesfromthesector.

TheOdishaFinancialInclusionConclavewasformallyinaugurated by Mr. Upendra Nath Behera, IAS,Development Commissioner-cum-ACS, GovernmentofOdisha.Mr.Beherasharedvariousinitiativestakenby thestateaswellascentralgovernments toexpandfinancialinclusionforthepoor.Healsopointedouttotheslowgrowthrateoffinancialinclusionparametersinthestateandhighlightedcertainpocketswhichneed

special attention. He stated that “for instance 92 of102grampanchayatsinMalkangiridonothavebankbranches,ATMsoranyotherbankingfacility.Intermsofsocialsecurityschemesalsoithasnotbeenabletoaffectthelivesandbringaboutsubstantialchanges”.HefurtheraddedthatinOdishaacommontrendhasbeenthataround70%ofagricultureloanshavebeenfundedbyCooperativebankswhileonly30%ofsuchrequestshavebeenattendedbycommercialbanks.Theinterestsubvention scheme in the agri loan is huge whichmeansafarmercanavailaloanfor2%interestrateonly.However,inthe30%lendingfromcommercialbanks,thesubsidyclaimsarehardlyregisteredshowingalackofawarenessamongthebankers.Inviewoftheissuesthat still pose challenges to financial inclusion,Mr.Behera advised all the stakeholders to work in acoordinatedandeffectivemannersothatthebenefitsoffinancial inclusion reach to all, especially thepoorandvulnerablefamilies.

Some of the key highlights of the inaugural session are as follows:

- Governmentprogrammes likePMJDY,PMJJYetc.have been potent initiatives to advance financialinclusion. In the state of Odisha as well, theseinitiatives have been performing fairly well withmore and more people enrolling and reaping thebenefits.HoweverAtalPensionYojanahasnotbeenabletoperformwithmuchvigorandascomparedto theother social security schemeshas shownanaverageperformance(below1lakhenrolments).

- AlongwiththesetheMUDRAyojanaalsodisplayspotential in terms of financial access to smallorganizationsandenterprisedevelopment.

- Women SHGs in as commissioned by NABARDalso been extremely successful with around 3,000beingcreditlinked.ThereishoweveraneedtoworkinareaslikestrengtheningtheBCsupportthrough

INAUGURATION


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Plenary Session 1: ONe YeAR OF PMJDY: HIGHlIGHTS OF KeY ACHIeveMeNTS &

CHAlleNGeS AHeAD

Moderator -T.K.Pradhan,Director-InstitutionalFinance,GovtofOdisha

Discussants-

• P.K.Sinha,GM,SBI

• R.Venkatasubramanian,GM,IDBI

• PremanandaDash,DGM,CanaraBank

• NeeraChakravarty,DGM,IndianBank

• SantoshDash,CEO,Sahaje-Village

PMJDY being one of the major initiatives of thecurrentgovernmenttofocusonfinancialinclusion

inthecountryisseentohaveachieveditsinitialtargetof 100% household banking access in rural areas.PradhanMantriJanDhanYojanahasmadeitswayintoGuinnessWorldRecordforopeningthehighestnumberof bank accounts in the least time. 18,096,130 bankaccountswereopenedinoneweek(fromAugust23to29,2014)aspartoftheFinancialInclusionCampaign.Howeverwith thefirstphaseof theprogrammeover,now the strategic focus has shifted from access to

usage. The greater agenda in the current context into ensure adequate usage of these accounts by thecustomers.Someof theprocesseswhichadvanceandaffecttheprogressofthemissioncouldbeidentified-minimizationof zerobalanceaccounts,promotionoffinancial literacy, clarity onoverdraft facility, telecomconnectivity,Aadharlinkage,useofRuPayDebitCard.This session aims to deliberate on similar processesto further look into the prospects of PMJDY underFinancialInclusion.

Some key highlights of the first plenary session are as follows:

- Giventhecostofoperatingabankbranchinremoteareas,itismoreefficienttoreachouttobeneficiariesthrough the BC channel, moreover they canactually serve more than one single purpose.TheBCAs,Bankmitrasetc.areoftenbasedoutoftheiroperationalareasandaremoresuitabletoworkwiththe localpopulation.Thispotential should furtherbe harnessed to create a successful structure.Theremuneration ofCSPswhowork at the grass rootlevelisalsoaconcern.

TheLeadBankScheme(LBS)playsabigroleonthebanking spectre and acts as a link between banksand the Government. In Odisha, only four bankshavebeenentrustedwiththeresponsibilityofLBSin30districts.Thecurrentresponsibilityofleadbanksshould be spread over so that other commercialbankscanalsoparticipateintheprocessofdecisionmaking so as to address the Financial Inclusionissues. Inorder tomake thebankingsystemreachouttothegoalsoffinancialinclusionisitessentialtohaveanunhinderedsystemofconnectivity,almostallbanksnowaresyncedwiththeCBS.

- Financial literacyinitiativesshouldbeviewedwithutmostimportance.TheGovernmentisworkingonincreasingtheresponsibilityofLBStomorebanksin thenear future.Under thePMJDY-phase II thesurprising factor is that only 20,000 people haveadopted theAtal PensionYojana (APY) out of 30lakhinsuranceenrollments.TheAPYisthecheapestpensionschemeintheworldandtheprocedureofenrollingintotheschemeissimplestamongall.

- Financialliteracyisthekeytothesuccessintermsoffinancialinclusion.Asmanyofthezero-balanceaccountholdersareinthemyththattheGovernmentgoingtoputmoneyintheiraccountsThesubscriber

infrastructure,technologyetc.canfurthermakethesystemsmorecosteffectiveandsustainable.

- However,intermsofSHGsthereisalsoahugegapin commercialbank lendingwhichbecauseof thepercentageofNPAinOdishaisextremelyhigh.Banksandtechnicalagenciescanstepinaswelltosupportthese SHGs in the marketing linkage, livelihoodenhancementetc.Thereshouldbeconcertedeffortsto improve theprevailingsituations in thestate tohelpmoreandmorebeneficiariesavailtheexistingservices. Connectivity and infrastructure facilitiesare most crucial to ensure a widespread of theseactivities.Tomakealltheseprogrammesasuccesscontinued availability of power (electricity) andconnectivity across the state is crucial. This willfurther lead to thesuccessful runningof thebrickandmortarandBCchannelsaswell.


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atthegrassrootlevelshouldbemadeawareaboutprocesseslikeKYC,thevariousschemes,etc.BCAsshouldbeusedtofurtheradvancetheprocessesoffinancialliteracy.

- The success so far achieved under PMJDY witharound26thousandcrshowsthattheBCchannelshave been working at their level to ensure suchresults.Theycanfurtherbeutilizedespeciallyforthepromotion of financial literacy in the villages andruralareas.TheBCAsalongwithlocalparticipationshould be effectively sensitized with adequateremuneration to ensure the sustainability of thisstructure.TheselectionofBCsisimportantonthepartofbankssoastotechnologicallyempowerthem.

Plenary Session 2: RevITAlIzING THe SHG MOveMeNT: STRATeGIeS AND

STAKeHOlDeR ROleS

Moderator -N.Srinivasan

Discussants-

• B.M.Pattnaik,TechnicalAdviser–OLM

• Jagadananda,Mentor&Founder–CYSD

• A.Chandrasekhar,GM,NABARD

• B.K.Rout,Director,RUDSETI

• ParashuramNayak,Whole-timeDirector-SMCS

ithas shownsignsof fatigue.Theneed togiveanewmomentumtotheSHGprogrammewillrequiregreaterintegrationandconvergencebetweentheGovernmentand NABARD, in order to dovetail strategies. Thesessiontriedtodeliberateontheneedtobuildsynergiesandjointlyinvestinpublicgoodsthatwillstrengthenthe SHG financing infrastructure, digitize reportingand monitoring, approaches to leverage the SHGinfrastructure for Financial Inclusion and raising theresourcesforcapacitybuildinginitiatives.

Some Key highlights of the session are as follows:

- Variouscapacitybuilding trainingsareessential tosustain thismodel in the long run.NABARDhasbeenplayingaveryimportantroleinthepromotionofSHGsinOdisha.TheissuehoweverliesinthefactthatthefocusunderFinancialInclusionhasmovedtoindividualaccountswhereastheSHGmovementcontinues to work in groups. Somehow in thispursuit to focus on individual accounts, the SHGgrowthhassloweddowninitsmomentum.Furtherthere are several regional disparities which effecttheuniformgrowthofthismodel.Thereshouldbeastrictprocessthatneedstobeputtouseinordertorevive thedormantSHGsstartingwithcapacitybuildingmeasures,venturingintounder-penetratedareas,financialliteracytobanklinkage.Whentherewas a space between society and economy, andmoreimportantlytocreateaninterfacepoint,SHGmovement started in the country. Gradually theSHGsbecameprimarytargetsofmobilisingmoneyand channelising different Government schemes/sops.ThatinvariablyhamperedthenobelmovementandtheconsequenceswecaneasilywitnessfromtheexistingstatusoftheSHGs.

- Thekindof effortsput in forthby the institutionsinOdisha topromoteaswellasnurture theSHGsis commendable.Thatnurturinghelps in loweringthe default rate to bareminimum.Thuswhen thebankslendtoNGOs/MFIs/NBFCsandtheyfurtherfinancetheSHGs,theNPAissubstantiallynegligible;but thecase inthescenarioofdirect lendingfrombanks to SHGs is not that pleasant looking. TheNPA continues to go northward. The reasons arelikethefieldcoordinatorsofMFIs/NGOsconstantlymonitor the SHGs throughout the loan cycle butthatceasetoexistonthepartofbankfield/branchstaffs.

TheSHGbanklinkageprogrammeinIndiahadforlong been a vibrant people’s movement and the

largestmicro finance programme globally. PioneeredbyNABARD,theSHGBankLinkageProgram(SHG-BLP) has completed more than two decades of itsjourney since itwas started in1992.Over theyears ithasmadesignificantprogressinthecountryincludingin Odisha and facilitated Financial Inclusion for thepoor, especially women. In recent times however,


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Themicrofinance world has had its own learningcurvewiththeAPdebacleof2010andisnowonce

again on an ascendant curve. Non Banking FinanceCompanies-Microfinance Institutions (NBFC MFIs)whichaccount formore than90%ofMFI lending inthecountrygrewat61%lastyearandif thefirst twoquartersofthisyearareanyindication,willcontinuetogrowatthisrate.

TheMFI ecosystem is in the process of a significanttransition. Recently Small Finance Bank LicenseshavebeenaccordedtoeightNBFCMFIsandincludeseveral of the largeMFIs.WithBandhan, the largestMFI,becomingabankinAugustthisyear,almost5000croresmovedout of theGrossLoanPortfolio (GLP)space.Today,theGLPisaround39,000croresbutabout50% of this will alsomove out with the eight SFBs.The session on changing landscape forMicrofinanceInstitutionsaimedatunderstandingtheimplicationsofthesechangesandwithfutureprospectsforthesameintermsofFinancialinclusioninIndia

Some key highlights of the session are as follows:

• After undergoing various development processes,the MFIs in the current scenario have reached amaturedphasewherethesupportextendedshouldalso be tailored as per the needs. Indicators liketheestablishmentofBandhanBank,shareofMFIsundersmallfinancebanks,paymentbanks,etc.tendtopointouttotheemergenceinitsstructure.

• ThenumberofsmallfinancebanklicensesgiventoMFIsitselfisasignthatwearegivendueimportance.As a result the responsibilities and expectationfromMFI increases.The other existingMFIs cancollaboratewith thesenewformofentities so thatthelastmilechallengesofproductenhancementandcoststructuresimplifiedforthebenefitoftheclients.Despite several developments in the MFI sphere,the MFI investments in Odisha have not beenperformingsowell.Atthesametimeitisimportanttoandtakeintoaccountthecrisislikesituationsinthestructureaswell.TheMFIsneedtocontinueinbuildingtheirinternalsystemsaswellascapacitiesinordertoseethemselvesinthemainstream.

• In2010,about95%ofthelendingtoMFIswasfrompublic sector banks where you compare that in2015, ithascomedownto70%.This25%supporthas come from a mixture of sources like privatebanks, insurance,mutual funds,other institutionalinvestorsetc.SothemainstreamingispossibleiftheMFIswereabletobringinadiversesetofinvestorsto the sector.

Plenary Session 4: STReNGTHeNING FINANCIAl lITeRACY CeNTReS

Moderator - Radhika Agashe, Executive Director, ACCESS ASSIST

Discussants-• S.K.Nayak,DGM,NABARD• G.Sahani,FL-Counsellor,UGB• VeenaPadia,ThemeLeader,SIDBI-PSIG• SanjibPuhan,ACCION• D.Mishra,FormerCGM-RBI

Plenary Session 3: CHANGING lANDSCAPe FOR MICROFINANCe INSTITUTIONS: FROM

AlTeRNATe TO MAINSTReAM

Moderator -AshokSamal,FormerGM-SIDBI

Discussants-• U.C.Gaur,GM,SIDBI• DibyajyotiPattnaik,Director,AMPL• RakeshDas,RiskHead,IFMRCapital• Md.Amin,MD,AdhikarMicrofinance• S.K.Arya,VP(COR),VodafoneMpesa

The Financial Literacy Centres, set up by banksas per mandate of the RBI are the mainstream

deliverymechanism for financial awareness.There ishowever still a lack of a sharedunderstandingof theknowledgeandcapabilitygapstheseinitiativescanhelpaddress. Factors like the nature of impact in alteringfinancialbehaviour, effectivedeliverymodels and the


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businesscasefordrivingfinancialeducationshouldbeunderstoodinitsentirety.Thissessionbroughttogetherparticipants with different models of delivery, targetsegments, and content to understand their views onfinancialeducation,theorganizationalmotivationsfortheirinterventions,gaininsightsintothebenefitstheseprogrammesoffer to theclientsand to theproviders,andrecommendhowsupportandfundingcouldbestbedeployed.

Some key highlights of the session are as follows:

• Lookingatstatespecificneeds,inOdishaconcertedeffortsshouldbeputonextendingFLmeasurestothe tribal regionswherein a direct intervention ofsome kind is neededwith the help of communitymembers, etc. For instance, tribal school studentsneedtobesensitizedandmadeawareofthevariousfinancial products who in turn could be used tospread the word in the community. FLCs shouldbeinstitutionalizedinnaturewithamuchstrongerandstructuredapproach.RatherthanlookingatthefactthatMFIshavebeenhelpingfarmerswithcroploansitshouldbepointedoutthatthefarmersarenot adequately educated to ask the same from thebanks.

• NABARD has issued guidelines (2012) on theFLCsandhave institutionalized two funds for thiswhich are Financial Inclusion Fund and FinancialInclusionTechnologyFund(FITF).FITF’sobjectiveistoaddressthesupplysideissues-inordertoreachtheremoteareastechnologyinterventionisamust.Thefirst one is to address the demand side issueswhich are to create the awareness among publicabout all the available financial services and theirbenefits.TheguidelinesonthishavebeenissuestoallcooperativebanksaswellsRRBsacrossthecountry,andtheFLCswerecreatedtodoawaywiththeissuesat the ground level. It’s true that theFLCs arenotyethousedproperlynotonly inOdishabut in theentire country. So looking at the status,NABARDhas temporarily paused the process of openingnewFLCs from1stOctober2015.After reviewingtheexistingchallenges the scheme/processmaybereopened.

• Thewomenneedtobeinformedaboutthefinancialknowledge. The PMJDY’s 6 pillars talks about agamut of important areas where financial literacyisgivenprimeimportance.TheFLCsareoneofthemediumstoreachouttothewomen/womenSHGs

vAleDICTORY SeSSION

• SubirMitra,FormerExecutiveDirector,NABARD• UCGaur,GM,SIDBI• VipinSharma,CEO-ADS• RajeshKumar,SD-PSIG,SIDBI

to spread thefinancial literacy inorder to achievetheuniversalFinancialInclusioninthecountry.

What can serve as better approach- FLCs acting as the Bank’s extended arm? Or to institutionalize the concept and model?

• ItcanbeseenasausefulmodelwhereintheFLCsareintegratedwiththeBankbusinesses.Thishelpsin increasing the bank business as well as helpsto increase the outreach of such programs. Somesuggestionstoimprovethemodelwerelookingintoextending the network by introducing Block levelFLCsalongwithgoodconnectivityandBCsupport.Further monitoring mechanisms to measure theeffectivenessoftheFLCsshouldalsobeputinplaceto get quantitative outcomes to help advance theprocesses.

The valedictory session of the conclave wasaddressedbyseniorofficialsfromNABARD,SIDBI

and ACCESS-ASSIST team. A number of insightfulsuggestions and observations came out during thesessionwithanaim to laydown the future courseofaction.Theofficialscongratulatedtheentireteamandappreciated the initiative forprovidingaplatformfordebate,questioningandsharingofideasandpracticesthereby contributing to the larger policy advocacyecosystemofFinancialInclusion.

Some of the key highlights of the session are as follows:

- The focus now should be on advancing financialinclusionratherthanjustfocusingonMFIgrowth.Institutions like NABARD, SLBC, etc. should

For sending contributions & queries please contact: Arjun Pagal ([email protected]) and Narendra Nayak ([email protected])

State Office: HO: ACCESS-ASSIST, 28 - Hauz Khas Village, New Delhi Ph. 011-26510915

The Poorest States Inclusive Growth Programme (PSIG):TheDFIDsupportedPSIGprogramme,implementedbySIDBI,aimstoincreaseaccessoffinancialservicesto12millionlowincomeclientsinthe4StateofUP,MP,BiharandOdisha.This£30m,7-yearprojecthasthreedistinctoutputs–policyadvocacy,capacitybuildingandfi-nancialliteracy&womenempowerment.ACCESS-ASSISTismanagingthepolicycomponentoftheprogrammeasoneofitspartners.

come together can create forums like this to helpdeliberations of financial inclusion. Even thoughunder PMJDY around 190m accounts have beenopenedbutthereisstillalongwaytobeachieved.Thequestiontobeaskedatthispointisthatwhatdowedowiththeseaccountsorwhatisthefuturehowdowesustaintheseaccountsinthelongrun?

- In terms of the SHG model, increasing NPA isproblem which needs to be tackled. Further lowcapacityof theSHPIs leadto lowqualityofSHGs;SHGs as an effective model of financial inclusion

should be considered along with other availableschemes.Therehastobefresh,innovativeorientationtotheprogramme.

- Technology can definitely serve as an enabler infinancial inclusion. With better connectivity andinfrastructure powered by technology financialinclusioninitiativescanreachouttotheremotestofareas.Inallthisdiscourseitisextremelyimportanttofocusonthesignificanceoffinancialeducation/awareness,etc.Innovative,peoplecentricmodelsoffinancialawarenesscansensitizethebeneficiaries.


Odisha Financial Inclusion Conclave - SIDBI

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