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Financial inclusion needs friendlier products

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Third in the series of articles in The Hindu Business Line, Puneet Gupta and Jayshree Venkatesan of IFMR Mezzanine  Finance write about some of the barriers to accessing finance.


Well-targeted financial products can go a long way in meeting the varied needs of low-income households. The fact that financial inclusion remains an unfinished task points to the absence of such instruments to address the needs of the poor. Understanding the supply-side response of the Indian financial system will give us some hints as to why this crucial task remains incomplete.

In India, policy decisions related to nationalisation of banks, branch licensing norms and the big push to the co-operative and postal networks have been instrumental in establishing deep branch networks. On average, there is one bank branch for 20,000 individuals.

More recently, there have been significant contributions by non-bank entities, notably the micro finance institutions (MFI), organised chit funds and self-help groups (SHGs). While the adequacy of this network is debatable, it is nevertheless a deeply penetrated infrastructure. Why, then, has this network not translated into the kind of financial access that is meaningful?

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