By IANS
Mumbai : In a bid to ensure inclusive growth and access to funds for the poor people, a high-level panel has recommended the setting up of a National Mission on Financial Inclusion (NaMFI).
NaMFI can comprise representatives from all stakeholders for achieving universal financial inclusion within a specific time frame, the Committee on Financial Inclusion chaired by C. Rangarajan, who is also chairman of the Economic Advisory Council, has recommended to the central government.
The Mission should be made responsible for suggesting the overall policy changes required for achieving the desired level of financial inclusion and for supporting a range of stakeholders – in the domain of public, private and NGO sectors – in undertaking promotional initiatives, according to the summary of recommendations released here Tuesday.
The panel suggested launching a National Rural Financial Inclusion Plan (NRFIP) with a target to provide access to comprehensive financial services including credit to at least 50 percent of financially excluded households.
It also recommended the setting up of a semi-urban and rural branch of all commercial banks and Regional Rural Banks (RRBs).
They should have a minimum target of covering 250 new cultivator and non-cultivator households per branch per annum, with an emphasis on financing marginal farmers and poor non-cultivator households.
The committee has proposed the constitution of two funds with the National Bank for Agriculture and Rural Development (NABARD) for the massive exercise of extending financial services to the lower segment of the population.
The Financial Inclusion Promotion & Development Fund and the Financial Inclusion Technology Fund will contribute an initial corpus of Rs.5 billion each.
The central government has already accepted this specific recommendation.
The panel highlighted the significant role played by RRBs. Their outreach vis-à-vis other scheduled commercial banks particularly in regions and across population groups facing the brunt of financial exclusion is impressive.
RRBs account for 37 percent of total rural offices of all scheduled commercial banks and 91 percent of their workforce is posted in rural and semi-urban areas.
They said the Self-Help Group (SHG)-Bank Linkage Programme can be regarded as the most potent initiative since Independence for delivering financial services to the poor in a sustainable manner.
The programme has been growing rapidly and the number of SHGs financed increased to 2.92 million on March 31.
To service such clients, Joint Liability Groups (JLGs), an upgradation of the SHG model, could be an effective way.
NGOs have played a commendable role in promoting SHGs and linking them with banks, the committee said.
Being local initiators equipped with low resources, NGOs are finding it difficult to expand in other areas and regions. Therefore, a need to evolve an incentive package which should motivate these NGOs to diversify into other backward areas.
The committee has recommended amending the NABARD Act to enable it to provide micro-finance services to the urban poor.
NABARD had piloted a project for the formation and linking of JLGs during 2004-05 in eight states through 13 RRBs. Based on the encouraging response it received, a scheme for financing JLGs of tenant farmers and oral lessees has also been evolved.
The committee has recommended that adoption of the JLG concept could be another effective method for purveying credit to mid-segment clients such as small farmers, marginal farmers and tenant farmers, and thereby reduce their dependence on informal sources of credit.
It suggested that Micro-Finance Institutions (MFIs) could play a significant role in facilitating inclusion, as they are uniquely positioned in reaching out to the rural poor.
Many of them operate in a limited geographical area, have a greater understanding of the issues specific to the rural poor, enjoy greater acceptability among the rural poor and have flexibility in operations providing a level of comfort to their clientele.