Finance & Economy

Does Financial Outreach imply Financial Access too?

The conventional wisdom is that opening up new branches is the best way to extend the outreach of the formal financial sector to rural areas. However, it is increasingly believed that access to Financial Services differs significantly from the outreach of Financial Services. Research Reports suggest that relatively resource-rich rural households from distant locations availed of multiple loans from formal lenders than the households closer to them. And the relatively poor households still fall back on informal lenders, because of the high transaction costs in dealing with formal lenders. Also, the limited Financial sector outreach in rural areas could be an outcome of the information asymmetry between lenders and borrowers. What could be the possible way to increase formal financial access to the rural poor? Could commercial banks appoint independent agents, preferably local people with good social standing to help the bank branches in providing banking services to the rural poor? Or maybe they could take the Self Help Group route in Rural India?
Please share your thoughts with us.

Leave a Reply

Your email address will not be published.

Subscribe Our Newsletter