Studying Bottom of the Pyramid Banking Habits

Business Wire IndiaThe Institute of Rural Management Anand (IRMA), along with Grameen Foundation India, recently concluded a study entitled “Scaling Digital Financial Services: Research and Innovation”. Aimed at gauging savings and banking habits of the Bottom of the Pyramid (BoP) populace – both rural and urban – the study threw up some interesting revelations.

The researchers discovered, for instance, that women were likelier to own bank accounts and engage with banking institutions compared to men. According to the study, nearly 72 percent women prefer depositing money in formal banks compared to men who would rather keep their money at home. Also, ownership of more than one account increases the likelihood of usage by 29 percent. Additionally, the study established a linkage between account activity and level of economic activity in the context of geographies. Among the important recommendations made by IRMA, therefore, is that financial inclusion policies take geography-relevant economic activities into consideration.

Studying cellphone ownership trends among both rural and urban account holders it was discovered that only 36 percent rural women owned basic phones compared to 77 percent of their urban counterparts.

Other findings, not necessarily gender-related, have been equally significant. For instance, individuals possessing a PMJDY (Pradhan Mantri Jan Dhan Yojana) account along with a regular savings account were likelier to leave the latter dormant. The probability of such a scenario is as high as 80.63 percent. This has to do with the incentives linked to PMJDY accounts including access to government schemes, among other things.

The study also found that participants in the formal banking sector were likely to select sub-optimal types of accounts. Also, in the event of information deprivation they were less likely to operate them frequently. The significance of educating clients about the types and benefits of the accounts was highlighted by the researchers. Finally, the study raises concerns including rural access to financial services along with inadequate infrastructure, low financial literacy, and lack of suitable products for the underprivileged.

The project, funded by JP Morgan Chase India, was coordinated by Prof. Rakesh Arrawatia, with IRMA’s RBI Chair Prof. HK Nagarajan, Prof. Vivel Pandey, and Prof. Shyam Singh as members.

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