Savings- Habit Formation among the Poor

Financial inclusion refers to the timely delivery of financial services to disadvantaged sections of society. Recent research shows that a well-functioning and inclusive financial system is linked to faster and equitable growth.

This simple definition encompasses two primary areas. Firstly, financial inclusion refers to the poor having access to a range of formal financial services, from simple credit and savings services to the more complicated such as insurance and pensions. Secondly, financial inclusion implies that disadvantaged customers have access to more than one financial services provider, which ensures a variety of competitive options.

The Committee on Financial Inclusion defines financial inclusion as “…ensuring access to financial services and timely, adequate credit where needed, to vulnerable groups such as weaker sections and low income groups, at an affordable cost”. The wording reveals a bias towards credit. In fact, until recently, the discussion on financial inclusion in policy circles tended to revolve around the extension of institutional credit at the expense of providing savings, in spite of evidence that poor people save.

Measures of Financial Inclusion

While in developed nations almost everyone has access to banking services, in less developed countries, access is often limited to small segments of the population. Further, as one might expect, levels of income inequality are negatively correlated with levels of financial inclusion .

Thus, the egalitarian Northern European countries like Sweden and Denmark– States with low levels of inequality–have extremely high levels of financial inclusion while mid-level egalitarian countries like the UK and the USA show inclusion levels of 91% and 88%,

respectively. Finally, high levels of inequality, such as those which persist in South Africa and Tanzania, correspond to higher levels of exclusion.

Is Financial Inclusion Important?

Thus, the question becomes, does a well-developed financial system serve the poor?

There are, in fact, ample justification and evidence indicating that a well developed financial system can be an effective poverty alleviation instrument. Firstly, there are large costs to small and poor entrepreneurs for the market imperfections in a poorly developed financial system. These barriers include informational asymmetries, transaction costs, and contract implementation costs, lack of collateral, credit histories, and contacts. For these entrepreneurs, broad access to financial services would smoothen project financing, positively impacting growth and poverty alleviation.

Studies also show that small firms in countries with greater outreach and access face lower financing obstacles and grow at a higher rate. Access to finance is also an important incentive for new ideas and technologies. In addition, a strong financial system encourages expansion in the market and competition for existing firms. It ensures that poor households and small entrepreneurs need not depend upon middlemen.

Child labour, which is positively correlated with poverty, has been found to be influenced by the financial inclusiveness of a country. This could be because poor households in countries that have well-developed financial systems in place are less vulnerable to economic shocks. Finally, provision of financial services to poor people need not only be for increasing income, empowering women, or starting small businesses – it may simply aim to help them to manage better whatsoever, the little money they already have.

Rural households may feel intimidated by banks and develop a belief that banks are intended for more educated and richer individuals. This self-exclusion by low-income households may be as important a cause for exclusion as direct exclusion by banks. Lastly, banks have historically promoted banking transactions specifically at bank branches. As prior microfinance practice has shown, poor clients, especially in rural areas, may respond better to ‘doorstep’ banking, that is banking which takes place at a location which is both convenient and comfortable, usually the client’s home. Research also points out that currently banks do not have the option to recruit local staff. This might allow the bank staff to better respond to client needs.

Jaladhar Model, or, 5% Model ,or, Hapa for Water Conservation

The 5% model for water conservation ,locally known as hapa in the districts of Bankura and Purulia, is an area of great improvisation in the field of agriculture- water conservation in particular and sustainable development in general. Here, the farmer in possession of a plot/plots of land dedicate 5% of land under his possession, adjacent to the area he intend to cultivate crops. This water so stored is used for irrigation of the adjacent land belonging to the farmer. This results in self sufficiency, recharges ground water, and if done on a massive scale with number of hapas in adjacent plots, the result in reduction of soil erosion in the locale, by reducing the run off velocity of rain water, especially in undulating terrain so common in Bankura, Purulia and some parts of Birbhum and Midnapore.

In Bankura district, especially in the gram panchayet of Andharthole under Bankura I block and in some GPs of Bankura District there has been a major shift of priority towards "hapa" construction in place of building checkdams along the natural canals called "jore"s provided by the undulating topography of the terrain. This entailed almost a psychological revolution on part of the villagers, they had to change their mindset so long attuned to construction of checkdams.

A checkdam do cost approximately 20 times the cost of construction of a hapa. Further, there are maintenence cost of a checkdam. This is generally annual in nature. For each checkdam, the cost of such maintenence is almost 10% of the preliminary construction cost. Not to say of the costs that may accrue due to faulty construction which may result in loss of huge chunk of agrarian land due to soil erosion caused by the huge load of water gathered at the checkdam. The land generally belonging to poor farmers with plots of land just adjacent to the checkdam. It has got its concomitant legal aspects too.

Moreover, the water that has been collected at the site of the checkdam has to carried, often long distances, by means of diesel pumps, which has its associated costs.

It is therefore clear that the "hapa"s are at a definite advantageous position in cost benifit ratio in comparison to the other measure of water conservation.

System for this blog for All Authors

Let us make a system:
1. Each Author take a turn every week, at least, to contribute something meaningful and worth reading in the Blogspot, this is the "new post".For example on gangotri glacier if their is anything informative and substantial, that may come under "new post", all the others like seeking information, any emotional comment etc should come under "comment"
2. On the basis of contribution which has been based on primary/secondary data collection all others and also outsiders may post comment subject to moderation by Sibard.
Please comment on this.

Conservation is power

our glaciers are receding.. our forests are shrinking.. our water is getting polluted.. and our air is filthy.. lets resolve to fight for survival... individually we can do a lot.. people may start with smoking less.. turn off ur monitor while u are not at work, use electricity judiciously, depend more on nature and less on technology.. talk less on mobile.. ur microscopic contributions can hav macroscopic effect.. and please please celebrate dewali without sound..its a festival of light after all... just mind it.. we can afford to let ourselve die, but CANNOT AFFORD TO LET MOTHER INDIA DIE

Gangotri Glaciers- Shrinking Away

The Gangotri glacier located in the Central Himalayas is receeding at an increased pace every day. The rate at which the glacier shrunk has been around 61 feet every year from 1935 for the next 35 years. But presently the rate has almost doubled, thanks to the emission of green house gases and the resultant Global Warming.
The Gangotri Glacier almost 29 kilometres long and 2-6 kilometres wide feeds the Gangatic plain to its south, which in turn is the home of a population numerically equivalent to that of the European continent, whose lives are solely dependent upon the river.

the skrinking of gongotri is of grave concern.............our culture of 5000 yrs is at stake. we must do something... development economic or otherwise, can wait.. but my INDIA cannot be allowed to die

Fighting Poverty, Hunger and Deprivation

Eradication of poverty and feeding the hungry, malnourished and undernourished have to be the topmost priority of the citizens of the world.
Microfinance may be the solution to the above if done sincerely and systematically.

Climate Change- Action point

Climate Change is the most burning issue for the moment for all knowledgable. If you wish to keep this Earth a fit place for our future generations contribute at least half an our daily on this issue. Any thing can be done, you can just read journals or writeups on climate change, or you can write on climate change, or you can try to influence policy makers to incorporate issues on climate change into their mindframe.

Invitation for all concerned

This is a fantastic blog come all and contribute.

Welcome to SIBARDians

SIBARD

This is a Blogspot of like minded people who wish to find the Earth more liveable. Development more sustainable and participative with more Empathy. Empathy more holistic embracing all life forms.
Our field of interest covers the whole of Biosphere, our specific area of interest focuses on the rural areas of West Bengal, India, for the present, of course.