Here are three different bits of news that are deeply connected. One, the Sahara group has to refund about Rs 24,000 crore to depositors.
Two, with the exit of microfinance companies from Andhra Pradesh, moneylenders are back in action. Three, regardless of gold prices, Indian households will continue to buy it in huge quantities.
At the bottom of all these lies the sorry fact that 65 years after independence and 43 years after the first bank nationalisation, a large part of the country’s population basically has no access to financial services.
However, there’s a patronising sub-text to the way the idea of financial inclusion has been talked about, which is that its target population by and large needs to borrow and doesn’t have anything worth saving. But the truth has a different shape. Some people are savers and others live hand to mouth, spending everything they have. This is just my own anecdotal observation, but the interesting thing is that this division is not congruent to the division of the rich from the poor. There are rickshaw pullers who earn a hundred rupees a day and save ten from that, and there are people who earn a lakh of rupees and blow everything by the middle of the month, every month.
Whether someone is a saver or not seems to be hardwired into a person’s brain, probably a matter of psychology rather than finance. The thing about successful grassroots level savings systems, whether it’s Sahara or a Peerless or chit fund schemes, is that they manage to coerce saver-like behaviour from non-savers. Non-savers join up out of good intentions or family pressure and then become savers because someone turns up to ask them for the deposit on a periodic basis. Incidentally, this is the real reason why SIPs in mutual funds work so well.
A few years of this and non-savers’ brains get rewired, and they become savers. This is real financial inclusion, but it can’t be achieved by having savings counters in 150,000 post offices or by giving every Indian a bank account in three years.