Innovation Meets Financial Education: Swadhaar in India

Posted by: Katherine Oglietti

Interview with: Preeti Telang, General Manager – Programmes and Operations, Swadhaar FinAccess

Swadhaar FinAccess (SFA), which currently operates in Mumbai, India, was founded in 2005 with the objective of providing the urban poor increased access to financial services, bridging the gap with the formal banking sector. In  2008, the promoters of Swadhaar FinAccess transferred the existing microcredit portfolio of SFA to its newly created Non-Banking Financial Company, Swadhaar FinServe Private Ltd. (SFPL). SFA, the nonprofit entity, focuses on a financial education and savings program, facilitating savings accounts to its clients through Citibank. We spoke with Preeti Telang of FinAccess, who offered her insight as to the importance of combining financial education with the facilitation of savings products.

MIX: What are the major obstacles preventing women who live in urban informal dwellings from being able to save?

Preeti Telang: There are three major obstacles that prevent Indian women from saving:

1) Lack of knowledge about savings. I strongly believe that our female clients would like to save. It is not that they do not want to save; it is that they do not know how to save.  They find it very difficult to set aside money from their limited incomes and put it into savings. Savings essentially becomes the last thing on their agenda, as it is for most of us, so they have to learn that savings should be a high priority.

2) Lack of comfort with the savings systems per se. Most of our female clients do not have access to the formal banking system owing to a lack of the documents necessary to open a savings account. Those who have access are often hesitant to enter formal banking institutions because of their limited literacy levels. Further, formal banks are often unfriendly towards low income, female customers. All of this makes it very difficult and intimidating for them to open a deposit account. 

3) Bank savings requirements. The women we work with receive inconsistent income on a day-to-day basis.  They need to be able to make frequent, small deposits (for example, 10 rupees per day), which a mainstream bank would not accept. A mainstream bank requires a minimum balance of 500 rupees. An account with a checkbook and ATM access requires 1,000 rupees. Currently, the banks also offer a no-frills account, which you can open with 50 rupees. We are now attempting to connect the female clients with other no frills accounts in other banks, beyond the zero-balance account that we facilitate through Citibank.

MIX: What efforts has Swadhaar made to encourage savings among its clients?

Preeti Telang: We are learning that just giving a financial product is not sufficient. Financial education needs to accompany the provision of financial products. Until you educate the clients on savings and explain the utility of having an account, the clients are not going to use the service. This particularly applies to the women with whom we are working. Swadhaar FinAccess has linked a financial education program with our savings facilitation program. We designed an eight-module financial education program specifically for women, which covers several facets of household finance, from calculating income and budgeting, to savings and credit management.

After reviewing our experience with this initial program, we noticed that the clients who opened a Citibank account were not making their deposits through the ATM. Women were not comfortable depositing money into the ATM. We decided to create a new module, which is a two-hour training specifically for women who want to open an account with Citibank. We do not have to educate them on the concept of savings because these clients already want to save. What we need to do is encourage them to save regularly and not to keep a zero balance in their accounts, as well as build confidence in using an ATM.

MIX: What have you learned from the pilot project of this new training module?

Preeti Telang: We saw that women felt more comfortable using the ATM and began making deposits through it. Women also demonstrated that they learned the importance of small savings. Now they don't tend to wait until they have accumulated 200 rupees to deposit the money since they have learned to make more frequent deposits of small amounts before they spend the money. One of the main challenges we are experiencing from the pilot project is that women are still not interested in the concept of training, partly because of their limited time but also because they do not perceive training as necessary for savings.  Encouraging women to attend the trainings is one of the hurdles that we still face.

MIX: Previously, Swadhaar FinAccess worked with ICICI, the largest private bank in India, to facilitate savings accounts in geographical areas that Citibank could not reach. As with Citibank, clients could open zero-balance savings accounts, but had to purchase smartcards in order to use the ATMs. Last year, Amitabh Saxena posted an article on the Center for Financial Inclusion blog in which he states that 75%-93% of the accounts carried a zero balance, marveling that poor clients would purchase the smartcard and not use the service. He found that the smartcards served as a form of identification and social status symbol for clients who had no other form of photo identification. Do you agree with this assessment? Why is Swadhaar no longer working with ICICI?

Preeti Telang: What Mr. Saxena says is true, that the smartcards gave the clients identification. 

The ICICI relationship was discontinued by mutual agreement, because of the lack of usage and therefore inability for the microfinance institution and the Bank to offer it on a viable basis. 

We feel that the Citibank product is a good product for the women who now have the freedom to use the card across the city at no charge. Citibank is handling all costs for the relationship. Swadhaar does not make any profits out of this service nor do we face any cost.

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For more information on Swadhaar FinAccess and FinServe, please visit their website at: www.swadhaar.com or review its profile on the ACCION International webpage. You can also download the Social Performance Report on MIX Market: www.mixmarket.org/mfi/swadhaar/files/.

Comments

[Education India]

Finance situation of the country or nation depends upon the proper education system and infrastructure for investment for the enterprises. So we need to improve the education India for professional and quality citizens.

[Katherine Oglietti]

CGAP recently posted a blog on financial innovative financial services, such as ATM use, in microfinance: “My ATM can beat up your money transfer service” - microfinance and mobile banking news round-up for March 30, 2010

http://technology.cgap.org/2010/03/30/my-atm-can-beat-up-your-money-transfer-service-microfinance-and-mobile-banking-news-round-up-for-march-30-2010/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+cgaptechnology+%28CGAP+Technology+Blog%29