Strengthening financial inclusion through responsible finance practices

The Asian Development Bank in its Strategy 2020 aims to strengthen the microfinance industry to advance financial inclusion, one of its key components. This aligns with India’s National Financial Inclusion Strategy and the priority sector guidelines of the Reserve Bank of India (RBI).

Institutional strengthening, risk management, consumer protection and financial education are the key components of the ADB Project “Strengthening financial inclusion through responsible finance practices”. The key objective of the financial education (FE) component is to improve the financial capability of at least 50,000 clients (95% women) of the selected participating MFIs. Mixed research combining qualitative and quantitative research methods were followed to assess the knowledge, attitude, and behavior/practice of microfinance borrowers towards financial services. 

To meet the objective of improving the financial capability of at least 50,000 clients of selected MFIs, the following activities were carried out:

1. Took stock of available financial education material in the country, including mass media or other cost-efficient technology using applications.

2. Selected, as necessary to revise or standardize education materials —in cooperation  with the selected MFIs.

3. Designed roll-out and delivery of financial education in view financial literacy levels, cultural/language context, costs, sustainability and continued provision of financial education after project end by the MFI, e.g. using cloud platforms for MFIs to easily share and use the material.

4. Prepared pilot and roll out strategy.

5. Delivered financial capability, coaching, and training through innovative technologies, engaging MFI staff and users in a two-way conversation about their financial services and their financial understanding.

Samavit delivered the final output of the project in form of:

1. Development of FE Assessment Framework: The FE assessment framework was developed to assess the principles and practices of microfinance institutions (MFI) towards Financial Education (FE) of its clients and level of integration of FE into its business model, strategy and operations. The framework helped in reviewing the current philosophy and practice of MFIs towards FE for their clients. It also supported the identification of strengths and areas of improvement in the ongoing FE programme.

2. Financial Education Assessment of MFIs: The FE assessment was carried out with the five partner MFIs i.e. SMILE, Madura, Pahal, Sambandh and Svasti.

3. Mass Media Delivery Models: A separate report “Reviewing mass media delivery models of financial education” was prepared. It covered the existing mass media delivery models of financial education (FE) in India and elsewhere based on desk research, the discussion with partner MFIs and other stakeholders working in the areas of the financial education of the target clients (e.g. low income women, microfinance clients).

4. Finalizing FE Modules and Materials: The FE materials in the form of audio-visuals were finalized based on the findings of the desk research and the feedback received from the clients, staff and management of the five partner MFIs. These FE materials were used for dissemination at a large scale, using the mass media platform in the cost-effective and scalable manner.

5. Pilot Testing-Mobile App Based Delivery of FE Modules: The feasibility and modus operandi of delivery of FE training during the group loan management process (i.e. loan origination, members’ training, loan disbursement, loan installment collection meeting), were explored. While preparing the pilot test plan with each MFI, the integration of FE modules within the group lending process were explored.