Research on coping mechanism adopted by financial literate (FL) trained microfinance clients to deal with the effect of demonetization

Uttar Pradesh, Odisha, Madhya Pradesh, Bihar

 

For ACCESS ASSIST

Funded by: SIDBI and DFID

Year: 2017

 

ACCESS ASSIST was a key national level consortium partner of SIDBI under its PSIG program. The PSIG program was funded by UK Aid through the Department for International Development (DFID), was initiated to ensure that poor and vulnerable people in low income states benefited from economic growth through better access to financial services in 4 states of Uttar Pradesh, Madhya Pradesh, Bihar and Odisha. SIDBI under its Poor State Inclusive Growth (PSIG) project undertook financial literacy and women empowerment (FLWE) program amongst the microfinance clients in the developing states (UP, Bihar, MP and Odisha) to improve awareness, confidence and financial well-being of women clients. The program aimed to test and demonstrate transformative potential of a gendered approach to financial literacy.
Demonetization had been a major economic event of 2016 and it’s imperative to study the effects of demonetization in the area of PSIG’s work. The objective of this study was to test the hypothesis that “financially literate clients were better able to cope with effects of demonetization” and “financially literate clients maintained financial discipline during unforeseen events like demonetization”.

The study was to investigate and document practices and strategies adopted by the microfinance clients (those having attended financial literacy training under the project) in managing the cash, finance and household expenditure after the Government of India announced the demonetization on 8 November 2016.

The key objectives of the study were to investigate and document if and how did:

  • Financial Literacy (FLWE) training prove helpful for MFIs in maintaining financial discipline amongst their clients during the phase of demonetization.
  • FLWE training prove helpful for microfinance clients in managing the cash, finance and household expenditure during demonetization.

The primary and secondary research were conducted to understand the role of FL as an enabler for the MFIs and their clients in managing the financial conditions post demonetization. The focus group discussion (FGD) with the MFI branch staff including master trainers (MT) and with the microfinance clients were held. The set of clients having attended the FLWE training (i.e. experiment group) as well as the set of clients not having attended the FLWE training (i.e. control group) were covered in the study to analyze if the FLWE training proved helpful for the clients in coping with the effect of demonetization.

Samavit’s team conducted 10 FGDs with experiment group and 7 FGD with control group, along with 4 FGD with the MFI branch staff including MTs in UP, Bihar, MP and Odisha.

A detailed report was prepared highlighting coping mechanism adopted by financial literacy (FL) trained microfinance clients to deal with the effect of demonetization.