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Case Analysis: One-Stop Solution

Demonetisation is considered necessary in some economies to create change and development. Kenneth Rogoff, professor of Economics at Harvard University says that despite some issues in planning, there will be large positive effects in the long-run

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Demonetisation has been a complete shock to our system, there is no denying that. Especially for the rural folk, who deal with small currency and are not bankable, it is worse. Reducing cash in the economy will definitely build a better society. A recent study by The Boston Consulting Group suggests that there is 11 per cent improvement in well being when there is financial inclusion in a country.

Demonetisation is considered necessary in some economies to create change and development. Kenneth Rogoff, professor of Economics at Harvard University says that despite some issues in planning, there will be large positive effects in the long-run.

However, rural India needs a helping hand at this time. When we read about Nachiket and his situation, we understand the angst and turmoil felt by the villagers. The real hardship felt was the long walk to the bank and then the lack of cash at the ATMs and at the bank as well. The cash crunch did slow down the market and Amal’s artisan community in Chamma had very poor sales and a poorer forecast of the future.

Some exhibition organisers gave options to the artisans that we work with at MicroGraam, to use their machines. The amount was settled at the end of the event. We also learn from our Micro-Graam experience that small-time entrepreneurs in towns usually work well on a credit system and working on credit for a period of one month is something that is not new to them.

Yes, people in rural India do need cash for their daily survival. The Rs 2,000 notes are not helping the situation either. Pensioners struggled that month, farmers also faced issues. So, it is understandable that the artisans of Chamma wanted to hang on to their money. Many of them being illiterate are worried about using the bank. In Haveri, Karnataka some of our borrowers took turns to go the bank and shared their withdrawals.

The biggest complaint that we hear are the queues and physical constraints. They did not feel difficulties to buy rice, vegetable and lentils as they had an arrangement with the shop owner. The main problem is that now they are suddenly forced to deal with a bank and a system that they are not confident of.

The way forward that this government and the ones before this are trying is the digitisation of India. The Aadhar card was the first step to this plan. So, will India become fully bankable and digitised?

Highlighting the importance of financial inclusion, Mohammed Yunus says in a BCG report, “It is well known that bringing people into the financial system will unleash entrepreneurship and give people a chance to participate in creating and sharing wealth.” Demonetisation has given us that
opportunity to opens doors for people to participate more fully in the economy.

Yunus’s experience is a distinct pole star for India. Cash transactions will reduce but will always happen and be available to the small entrepreneur. Even in the most affluent sections of society, it is still virtually impossible to function without cash. If we have to take digitised transacting to the rural parts, we have to remember that network connections have to first be there, and then be good at all times! Cash transactions are quick and being legal tender, never run the risk of not going through. However, this is the right time to make rural India bankable. Temporary solutions will result in all of them going back to cash when it is available.

Our field partner in Trichy, Tamil Nadu, did not do any loan disbursements in November. She spent time on educating the borrowers on banking, its processes and facilities. They e-transferred the loans in December and hope that this will bring about a change. She is confident that with constant education the rural folk in Trichy will not go back to cash.

We need to find a solution that is simple. It should involve the least number of steps and make that a happy option. A bank account is just the first step to having an identity and owning property. The sense of self-worth is enhanced and that should be a motivator to become part of this economy. It has to be a one-stop solution that the common man understands and trusts will result in progress for him and his family.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Rangan Varadan

The writer is co-founder, MicroGraam

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