Financial Inclusion: Does Difference Matter? A Case Study of NRLM (SGSY) Beneficiaries in Kashmir

Abstract

Purpose: Innovations in mechanisms aimed at providing unrestrained financial access to all have brought with it many unseen risks. These risks may be in the form of self-selection, mistargetting and other related bias. The bias may in fact lead to overstating or understating the financial inclusion impact; there may, however, be another source for differential nature of impact – individual characteristics. The present study attempts to look into the differential nature of impact exhibited due to credit access (on NRLM beneficiaries) on individuals differing in their characteristics at individual, societal and country level. Results suggest that the gender, group formation and neighbourhood are the important determinants of financial inclusion impact.

Design/Methodology/Approach – This study evaluates the progression of the participants/beneficiaries of NRLM Scheme (erstwhile SGSY Scheme) and comparison thereof between various categories of beneficiaries across various dimensions of poverty by making use of the Multidimensional Poverty Index (MPI).

Findings – The results suggest that the access to finance has lead to increase in the standard of living and thereby reducing multidimensional poverty. Further, the results suggest that the impact of financial access has a differential nature i.e., Individual beneficiaries tend to exhibit lesser impact as compared to their group counterparts, likewise, Females tend to make better use of financial access than their male counterparts, whereas no significant differences were found between rural and urban participants. Further the results also suggest that the programme under study seems to be seriously mistargetted by allocating the programme to non-poor sections rather than absolute poor.

Limitations – The study has been conducted without following the participants over a longer period of time. The study has adopted a pre-post methodology, collecting the responses at only one point using a reflexive quasi-experimental design which leads to a recall limitation.

Originality/Value – The paper tries to evaluate the differential impact of access to financial inclusion through a new perspective – the Multidimensional Poverty Index. The paper examines the targeting of government sponsored programmes and the utility of such intervention in the changing milieu of financial services.

Keywords: Financial Inclusion, Microfinance, Poverty Alleviation, Inclusive Finance