The Hindi words for “capable” (Saksham) and “development” (Unnati), are helping to define financial inclusion in India. For Indians, developing capability is a call to action. This is why seminars on financial literacy skills are so effective. Financial literacy can be the difference between drowning in unregulated debt, often from loan sharks, or breaking free by building through successful small businesses.
India has made great progress in improving financial inclusion by making loans and other financial services available to low-income borrowers, through support from the Government of India, microfinance institutions (MFIs), and NGOs. In 2014 the government launched Pradhan Mantri Jan-Dhan Yojana, a program aimed at providing a bank account for every household. The program generated a record 443 million accounts for India’s households since its August 2014 launch through to early January 2022.
However, closing the banking gap also requires at least a basic understanding of how the financial system works. Only 27% of Indian adults – and 24% of women – meet the minimum level of financial literacy as defined by the Reserve Bank of India.
Women are particularly responsive to financial literacy outreach. Traditionally they manage the household budget and are often eager to start home-based businesses. When armed with foundational knowledge, financial literacy tools, and small-scale business opportunities, women entrepreneurs can make a remarkable impact on their families and communities.
Financial literacy is helping Rekha Devi to improve her family’s living conditions and prospects. A mother of three living in Danapur, Bihar State, in eastern India, her modest household income comes from her husband’s job as a rickshaw driver. She manages daily household expenses and repayments for informal loans. More often than not, the family had very little left in the end of the day for savings. “Whenever we had a major expense, I resorted to taking out loans. The loan repayments often depleted our daily income.”
Financial literacy training taught Rekha how to start a small savings fund for her family. “I learned the importance of setting aside a small amount daily and consistently. I started setting aside 5 rupees every day until I was able to increase this to 20 rupees,” she says.
RBL Bank, one of India’s leading private sector banks, is helping to deliver this life-changing training. Its Saksham financial literacy training programs, launched in December 2013 in Gujarat, Maharashtra, and Rajasthan provinces, are classroom-based financial literacy courses tailored for women in lower-income communities.
Designed to cater to a wide range of needs, Saksham utilizes visual aids, stories, role-playing activities and exercises that resonate with the clients’ lives and experiences. Trainees are taught life skills alongside financial principles: while they learn how to access banking services and to repay loans responsibly, they also acquire planning skills, such as how to create investment and savings plans for their families.
“When you educate a woman, you educate the entire family and ensure the wellbeing of future generations.”
In 2016, RBL Bank launched Unnati, a blended virtual and in-person customer education program, to customers in Bihar state.
These programs were coupled with the innovation of the Swadhaar Saathi mobile application, which enables clients to digitally record their financial activities and allocate funds for household expenditures, children’s education, savings, and emergencies.
“When you educate a woman, you educate the entire family and ensure the wellbeing of future generations,” says Harjeet Toor, RBL Bank’s Head of Retail Lending, Inclusion and Rural Business. “Financial education helps many of our women customers understand the necessity of financial services, and from that they can become more productive citizens.”
In 2015 ADB provided a five-year loan of $100 million, an equity investment of up to $50 million, and a capacity building technical assistance grant of $800,000 for RBL Bank’s financial inclusion projects. ADB’s assistance supported RBL Bank’s outreach to low-income customers in rural and semi-urban areas, and the expansion of its mobile technology and agricultural value chain lending efforts. ADB reinforced RBL Bank’s targets to ensure that loans benefited agricultural clients and micro, small, and medium enterprises (MSMEs), and helped RBL Bank to focus on women borrowers. ADB’s technical assistance helped RBL Bank to improve its risk management and information technology capacities.
“The impact of empowering mothers cannot be overstressed, particularly in rural communities in India,” said ADB’s Private Sector Department Senior Investment Specialist Doukas Doudikis. "By educating women, we not only give whole families the opportunity to help themselves, but provide a path to better lives for their children and families."
ADB’s loan and equity investment helped RBL Bank expand across the country, with most new locations in low-income areas. From the start of the Saksham and Unnati programs until December 2021, RBL Bank had provided financial literacy and customer education training to over 348,985 women across 46 branches in Rajasthan, Maharashtra, Gujarat, Bihar, and Haryana. And despite restrictions caused by the coronavirus disease (COVID-19) pandemic, RBL Bank was able to train 97,467 clients from April 2020 through December 2021, using both traditional classroom methods and telecalling. Mobile banking, like the app-based Swadhaar Saathi, have also proven very useful to customers, given the importance of limiting person-to-person contacts.
Rekha’s regular savings habit, while modest, has paid for large expenses such as her child’s tuition fee and her husband’s unexpected illness.
“Because my husband and I were able to save enough money to set up a bank account, we became eligible for retirement programs,” says Rekha. “Learning to save has improved our overall quality of life.”