Monday, September 12, 2016

How is digital payment working for women in rural India?


The Government of India is pushing its Direct Benefit Transfer (DBT) reforms by creating digital payment of social welfare transfer or pension payment directly into the accounts of beneficiaries. As the DBT rollout proceeds, the bigger question is how these payment flows work for women.

Why women? 
Most cash transfer welfare schemes in India are designed for women. For example, pregnant and nursing mothers in rural India are paid from the second trimester until the child attains the age of six months. Girls from rural areas are provided with special financial incentives with an objective to encourage families to retain a girl child, educate her and prevent child marriage.  Moreover, as the government is converting fuel, food, and other price subsidies into digital cash payments, some states in India are making the payment directly to women’s bank accounts. The female head of the household, some experts believe, is most likely to optimize the subsidies—in particular food subsidies—according to the desired intent. One research study tracked how women and men spent subsidy funds deposited in bank accounts. The study found that women used the subsidy for food purchases whereas men diverted the subsidy funds to pay for non-food items. Experts therefore believe the subsidies will have the greatest development impact when the funds are transferred directly into women’s bank accounts.

But using a bank is still inconvenient for women.

Take this case as an example. Under a conditional maternity benefit scheme named Indira Gandhi Matritva Sahyog Yojana (IGMSY), cash is directly transferred to accounts of beneficiaries (pregnant and lactating mothers).  A study found the scheme failed due to cumbersome banking procedures and delayed funds flow.  Women lived in remote areas, almost 22-24 km away from banks.  Banks took almost six months to open accounts for women. Although zero balance accounts are allowed under the scheme, banks and post offices insisted on a minimum deposit.

Worse, women were required to submit identification documents. 

A recent World Bank Report indicates that women in several countries still face additional documentation hurdles when trying to get a national identity card.  Hence, their absence acts as a barrier to accessing entitlements via banks even though the requirement of identity documents is not a direct criterion of any cash transfer scheme per se.

Furthermore, social, regulatory and cultural barriers prevent women from accessing financial services.  

Several studies have indicated women find interaction with male staff intimidating and in many cultures custom dictates that women should not communicate directly with male officials. A recent GSMA study indicated that women prefer twice the number of face-to-face interactions than men before they feel comfortable enough to use financial services technologies independently.  However, with a higher proportion of male banking staff and agents, women clients experience greater hurdles to learning more about the financial products.  

Experts argue that enlisting female agents may be the most effective way to reach women. Female agents are not only effective but also lucrative as they lead to increased sales, access to new markets and a stronger brand image based on more thorough product communication.

However, in India recruiting female agents has been a daunting task. As of 2015, there are more than 600,000 agents in India. The proportion of female agents has only declined over the years (15% in 2012, 13% in 2013 and 9% in 2015).

Is the Self Help Group platform an answer?

One platform that can be leveraged to create female agents is India’s women-based Self Help Group (SHG) network. SHG is known as both a community meeting grounds and a liaison facilitating access to banks, financial literacy training, and the benefits of government programs. Typically, SHG members are already integrated into the community and a relationship of trust already exists with other members.

Recently, NABARD-GIZ conducted two pilot projects to test the potential of establishing SHG members as female bank agents, known as ‘Bank Sakhis’. This study found Sakhis attracted more first time customers, especially women. The proportion of active savings accounts and the average balance maintained in the savings accounts was three times higher for Sakhis compared to conventional banking agents. Sakhis were more motivated to provide liability products to low-income customers at low commission rates while male agents were more motivated to work with richer customers and sell more lucrative credit products. The pilot study therefore recognized that there is a need for initial funding support through subsidized loans or capital support to reduce the financial burden placed on female agents in the initial implementation phase in order to make women agents’ ventures successful.


Despite the availability of initiatives and schemes to provide financial services to women, low levels of literacy and financial awareness continue to remain impediments to financial inclusion goals. A growing literature suggests that women often lack the financial literacy required in tackling the complex financial decisions they face. Financial counseling can improve women’s capability in making better financial decisions. At the same time, some experts point out that some of the responsibility lies on the provider side and suggest that providers and distributors can also benefit from financial literacy training to ensure better outcomes in their interactions with clients.

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