MGNREGA & Financial Inclusion- A Case Study

Transcription

1 International Journal Of Scientific Research And Education Volume 2 Issue 10 Pages October-2014 ISSN (e): Website: ABSTRACT MGNREGA & Financial Inclusion- A Case Study Authors Prof. S.K Gupta 1, Fearooz Ahmad 2 1 Head, School of Management Studies & Economics, 2 Research Scholar Baba Ghulam Shah Badshah University, Rajouri (J&K), India Financial inclusion is the key to empowerment of poor & underprivileged rural households as they constitute 70 percentage of the total Indian population. Financial Inclusion can help the down trodden to improve their financial condition and the standard of living. To provide greater financial inclusion, the Government of India in 2008 declared that wage payments, under the Mahatma Gandhi National Rural Employment Guarantee scheme be made through banks and post offices. It is in this context, the present study has been conducted to know how the scheme is helping in promoting financial inclusion in J&K. It will also highlight some of the constraints being faced by banks and post offices in accelerating the speed of financial inclusion. Besides these, the study also makes few recommendations to overcome the various constraints and problems. Keywords: Financial inclusion, MGNREGA workers, Wage payments. INTRODUCTION It is true that the banking industry has shown tremendous growth in volume and complexity during the last few decades. Despite making significant improvement in all areas including financial viability, profitability and competitiveness, still these institutions have not been able to include vast portion of the population especially the poor and underprivileged sections of the society into the fold of basic banking services. It is also true that around 51% of the population has remained outside the preview of the banking industry for providing basic banking services. It was in this context that Reserve bank of India in consultation with Government of India brought the concept of financial inclusion. To improve the economic condition of poor people, banking and financial services through financial inclusion are to be made in a more simple and fluently manner. In case, people remain outside the financial inclusion, it may lead to higher incidence of crime, general decline in investment, getting credit from informal sources at high rates including increased unemployment etc. So much so financial inclusion can lead to social exclusion. It is in this background the study has been undertaken to Prof. S.K Gupta, Fearooz Ahmad IJSRE Volume 2 Issue 10 October 2014 Page 2062

2 make proper analysis/ X-ray of the problem and to make more efforts for providing greater financial inclusion through MGNREGA to the unreached segment of the population in block Doongi of district Rajouri in J&K state. Banking profile of the state Branch Network (in Nos.) Banking Parameters (Amount in Rs. Crores) Table 1: Banking/Financial Sector Profile of J&K State. Public sector Private sector RRBs Cooperative banks Others Total Banks Branches Rural Semi-urban Urban Total Total Total Advances C.D. Ratio Deposits Source: 93 RD SLBC J&K A look at the table 1 indicates the profile of different banks branches in J&K state. It is clear from the table that there are 1656 branches, which can prove helpful in providing greater financial inclusion through MGNREGA as all payments are to be made through bank accounts. Besides above, Table 2 explains the total number of banks branches in Rajouri District. Table 2: Banking/Financial Sector Profile of Rajouri District. Banking profile of the district Public sector Private sector RRBs Cooperative banks Total Banks Branches Banking Parameters (Amount in thousands) Total Total C.D. Ratio Advances Percentage of Priority Deposits Advances to priority Sector advances to sector total advances % Source: Annual credit plan, District Rajouri ( ) So far as the study area is concerned there are only two branches of J&K Grameen bank viz at Chingus & Doongi. These branches are at a distance of around kms from district head quarter Rajouri. What is Financial Inclusion? Financial inclusion is the delivery of financial services to all the people in a fair, transparent and equitable manner at an affordable cost. Financial inclusion has the potential to improve the standard of living of the poor and the disadvantaged. It is essential to make available the basic banking services to the entire population without any discrimination. Each and every person to be invited and assisted in opening of a zero balance Prof. S.K Gupta, Fearooz Ahmad IJSRE Volume 2 Issue 10 October 2014 Page 2063

3 account. Besides zero balance account, micro finance (General credit card up to Rs 25000) money transfer and micro insurance to be provided to the neglected sector in unreached areas for total rural financial inclusion. MGNREGA-Its role in Financial Inclusion To fasten the pace of financial inclusion, the Government of India in 2008 declared that wage payments, under the Mahatma Gandhi National Rural Employment Guarantee Act, would be made through banks and post offices. This led to the omission of the provision of part payment in kind and payment on daily basis though not ruling out cash payments entirely. Since then, nearly ten crore bank/ post office accounts have been opened and around 80 per cent of MGNREGA payments have been made through this route. As the MGNREGA has mandated payments through formal financial institutions, it is expected to have resulted in enhancing the financial inclusion of poor and marginalized sections of the society. This programme was launched in the study area i.e. Doongi block of Rajouri district in the year OBJECTIVES OF THE STUDY 1. To study the level of financial inclusion through MGNREGA in the study area. 2. To find out various constraints being faced by block agencies and banks in providing greater financial inclusion. 3. To make few recommendations to bring greater financial inclusion in the study area. PROFILE OF THE STUDY AREA The study has been carried out in Block Doongi in which MGNREGA was notified in the Year As per 2011 census the block is having 35 villages with 18 Panchayats and with a total population of in which 4900 is SC population and is ST population and are others. There are total no. of 6596 families in the block as per 2011 census in which 2038 families are BPL which comprises of about 30.89%. There are 6687 number of beneficiaries/ workers working under MGNREGA scheme in the year The number of people who have been connected to banks & post offices in relation to MGNREGA payments has been 3767 in the year which is 56%. RESEARCH METHODOLOGY The study is based on the secondary data, which has been collected from various reports, journals and also from the various websites of MGNREGA and branches of J&K Grameen bank. So far as the primary data and information is concerned, to have an insights in the various problems being faced MGNREGA workers from banks and block agencies, the researchers have interviewed 50 MGNREGA workers from five villages (10 workers from each village) of Chingus and Doongi branches namely Nadyala, Kalar, Narian, Doongi Brahmana and Sasal kote selected through random sampling. Prof. S.K Gupta, Fearooz Ahmad IJSRE Volume 2 Issue 10 October 2014 Page 2064

4 ANALYSIS AND DISCUSSION The study aims to know the level of financial inclusion in Doongi block of Rajouri district under MGNREGA. State Level Table 3: Number of MGNREGA bank and post office accounts and amount disbursed in J&K. No. of bank and post office account opened Total Amount Disbursed through Bank and Post Office (Rs.in lakhs) Source: After, when it was made mandatory that all MGNREGA payments are to be made through banks & post offices. There has been tremendous growth in opening of bank accounts in the state. A look at table 3 indicates that a good no. of accounts stands opened every year under the MGNREGA which is a positive sign of spread of financial inclusion. District Level Table 4: Total number of bank and post office account opened under MGNREGA in District Rajouri and annual average growth rate during Block Annual average growth Budhal Darhal Doongi Kalakote Manjakote Nowshera Rajouri Sundarbani Thanamandi Source: So far as district Rajouri is concerned, the above table 4 speaks about the role of MGNREGA in financial inclusion by opening of accounts in banks and post offices. Besides above, the researchers have also made an endeavor to give a block wise view from of total number of bank and post office accounts opened under MGNREGA with annual average growth rate. It is crystal clear from the block wise position that the MGNREGA has really helped in providing greater financial inclusion in the district of Rajouri of J&K state. Prof. S.K Gupta, Fearooz Ahmad IJSRE Volume 2 Issue 10 October 2014 Page 2065

5 As such, to find out that how MGNREGA has been helpful in the spread of greater financial inclusion in the areae have collected the year wise position of bank accounts opened by the both branches of the J&K Grameen bank which has been reflected in table 5. Block Level Table 5: Year-wise no. of accounts opened under MGNREGA in J&K Grameen bank branch Doongi & Chingus in Block Doongi, district Rajouri. Block Doongi J&K Grameen Bank branch Doongi Year No. of accounts opened under MGNREGA Amount (in lakhs) lakhs lakhs lakhs lakhs Up to sep lakhs Total J&K Grameen Bank branch Chingus Year No. of accounts opened under MGNREGA Amount (in lakhs) lakhs lakhs lakhs lakhs Up to sep lakhs Total lakhs Grand Total From the above table it is clear that 3765 accounts were opened under MGNREGA in block Doongi in two branches of J&K Grameen bank namely Chingus and Doongi which speaks about the spread of financial inclusion in the study area with the help of MGNREGA which can go long way in the socio-economic growth of the area. Village Level Table 6: Village-wise no. of Households & accounts opened under MGNREGA from year in J&K Grameen bank Doongi & Chingus in block Doongi district Rajouri. Villages Households Population No. of accounts under MGNREGA Nadyala Rachwa Rani Badetar Kottari jagir Khanpur chingus Chatyari Kalar Chatyar Dhanwan Prof. S.K Gupta, Fearooz Ahmad IJSRE Volume 2 Issue 10 October 2014 Page 2066

6 Dasak serian Narian Hidayatpur Kottra jagir Sangpur Dogiana Kallar Naghun Doongi Brahmana Mari Maniyalan Thredwal Keri Manialan Shahpur manialan Bonthal Thathiali Jandhidhara Jatot Sasal kote Dherian Trala jagir Total 3765 Table 6 shows the village wise no. of accounts opened under MGNREGA in block Doongi and also the no. of households in block with their population. CONSTRAINTS AND PROBLEMS During the field visits, it was observed by the researchers that MGNREGA workers are facing a no. of problems from the banks and block agencies so far as financial inclusion is concerned. A few to mention are as under:- 1. Lack of Awareness: - Most of the people (60%) in block Doongi are illiterate and are not aware about the various services offered by banks. Due to this, the majority of the people are not connected to the banks. 2. Poor People: - Majority of the population in the block is living below poverty level (52%) and are not in a position to maintain the accounts well. These people open the bank accounts only for the purposes of realization of MGNREGA payments. They don t operate the accounts there after. The researchers during field survey have lot of interaction with the MGNREGA workers regarding the operations of the accounts. The majority of the workers narrated that they are not having regular sources of income and are leading a miserable life I.e. they don t have regular savings and hence can t make any operation in the accounts. However, during discussion with the bank officials, it was made known that around 5 to 7% people have little regular operations in their accounts. Prof. S.K Gupta, Fearooz Ahmad IJSRE Volume 2 Issue 10 October 2014 Page 2067

7 3. Not easy access: - Financial institutions are usually located at very far off centre s from villages which is also another constraint for opening of the bank accounts in branches and there is also a problem of connectivity of roads. 4. More formalities: - Financial institutions are taking a no. of formalities for opening of the accounts for the MGNREGA workers. This is also another reason for not opening of bank accounts. More over bank account opening forms are generally in English and these illiterate workers of MGNREGA can t understand their contents and are reluctant to open the accounts. This was stated by around 70% of the workers. 5. Time consuming: - Most of the processes of the banks are time consuming and labourers have to spend a number of days to avail any service and in return they feel better not to avail the same. 6. Process delay: - According to the scheme, the payments under MGNREGA should be released within 15 days so that the workers may be available to fulfill their needs but there is delay and sometimes a year or so to release the payments of workers by block functionaries. 7. People are reluctant to open bank accounts as they fear that bank may not return their money. 8. Even to fulfill the formalities under KYC norms, these NREGA workers even can t complete these formalities with the result they don t open the bank accounts. As such, the formalities for opening of accounts under MGNREGA should be lessened so that the poor rural people can open the bank account without any mental tension. RECOMMENDATIONS 1. More and more awareness camps should be organized in villages to make full awareness of basic banking services among rural people in villages. 2. There should be online transfer of credit to the banks in case of MGNREGA I.e. they should transfer the credit to the banks in the form of soft copy as compared to the sheets given by the block agencies so that corruption can be minimized. 3. Transparency of account details given by block functionaries should be maintained as they sometimes mention wrong account numbers which becomes a hurdle for the banks and delays the payments. 4. There should be no political interference. Every possible effort should be made to keep away the pressures from local and village leaders including others to allow the banks and post offices to make the payments in a proper way. 5. Mediators should be minimized i.e. the various block functionaries like VLW s and Gram Rozgar sahayak should be kept out of this process so that a direct relation may be between banks and customers. Prof. S.K Gupta, Fearooz Ahmad IJSRE Volume 2 Issue 10 October 2014 Page 2068

8 6. Government should incorporate new types of works under MGNREGA I.e. works related to agricultural sector so that all people may join the scheme which will result in greater financial inclusion in the rural areas. 7. There should be easy access to get works under MGNREGA so that people may easily work under the scheme and also may be connected to the banks for financial inclusion. 8. Wage payments under MGNREGA scheme should be increased so that more and more people are ready to do work under the scheme which may result in greater financial inclusion. 9. It is recommended that more and more MGNREGA workers should be motivated to make regular operations in their accounts as it will lead to inculcating of savings habits among them. 10. It is also recommended that J&K Grameen bank should open ultra small (USBs) branches in the area for the purposes of financial inclusion. 11. In addition to above, it will be in the fittest of the things to establish a literacy centre in the area so that MGNREGA workers can be educated properly regarding the financial matters. CONCLUSION In conclusion, it can be said that the amendment in MGNREGA act stipulating that the wage payments under the scheme be made to the accounts of the beneficiaries introduced a paradigm shift and has resulted in providing greater financial inclusion to the rural poor. Access to credit at an affordable cost, for instance, provides the poor with the means to improve their lot through investment in income generating assets. The opening of a bank account which is of no-frills in nature and followed by provision of financial services like the general purpose credit cards, overdraft in small amounts, micro insurance etc. are essential features of financial inclusion. Thus MGNREGA scheme has resulted in the spread of greater financial inclusion. REFERENCES: 1. Adhikari, A., and Bhatia, K., NREGA Wage Payments: Can We Bank on the Banks, Economic and Political Weekly, Vol XLV NO 1, 2010, Census 2011 Data. Retrieved from 3. Das V, NREGA Orissa Experience struggle for wages and survival of the fittest, Catalyst, Vol VII, no.2, 2009, 7-8, Department of statistics, Financial Access Survey, IMF 5. Gupta, S.K & Ahmad, Fearooz (2014), MGNREGA-Problems & issues, National Research Journal of Business Economics, vol-1, Issue-1, pp Prof. S.K Gupta, Fearooz Ahmad IJSRE Volume 2 Issue 10 October 2014 Page 2069

9 6. Sharma, M. (2008, June). Index of Financial Inclusion. Indian Council for Research on International Economic Relations (ICRIER).Retrieved 2012,From 7. Thapar A. A study on the effectiveness of FI program in India. VSRDIJBMR, Vol 3, June 2013: Vanaik, A., and Siddhartha, Bank Payments: End of Corruption in NREGA? Economic and Political Weekly, vol.43,no.17,2008,33, Prof. S.K Gupta, Fearooz Ahmad IJSRE Volume 2 Issue 10 October 2014 Page 2070