The Reserve Bank of India has conducted an extensive field survey in Mizoram to evaluate the status of financial literacy and financial inclusion in the northeastern state. The study titled "Determinants of Financial Literacy and Financial Inclusion in North-Eastern Region of India: A Case Study of Mizoram" revealed some startling facts about financial literacy in the largely under-banked region of the country. Field surveys showed that "about 32 per cent of the respondents were not aware of any financial products except the savings bank account ."
The report noted that financial literacy provides basic knowledge and skills to analyse and understand financial products and services and assists in making informed financial decisions. The report said that financial inclusion without financial literacy might lead to exploitation as consumers may be unable to choose the right products and may make uninformed decisions. In the long run, "financial literacy takes people closer towards financial inclusion as there is a high likelihood that an aware person will seek access to finance and achieve it," the report said.
Here are some of the highlights from the RBI report:
· The study stated that nearly 20 per cent of the respondents reported a lack of awareness of the basic payment options available in the market, and about 43 per cent reported knowledge but lack of usage of these options.
· Interestingly, nearly half of the respondents were unaware of financial institutions other than banks, including non-banking financial companies, microfinance institutions, and small finance banks. Even the use of life insurance products was low among respondents in the region.
· Notably, the region's financial inclusion score and financial literacy score were generated using the Organisation for Economic Co-operation and Development/ International Network on Financial Education (OECD/INFE) toolkit to measure financial literacy and financial inclusion.
· As per the report, the average financial literacy score estimated in the study was 14.37 on a scale of 0 to 21 68.43 per cent) and the average financial inclusion score was 3.35 on a scale of 0 to 7 (i.e., 47.86 per cent), noting that financial inclusion remained lower even though the financial literacy score was at 68.43 per cent.
· The study identified several factors affecting financial inclusion and financial literacy. Among the factors were the place of residence, employment type, and nature of family, joint versus nuclear, which strongly influence financial inclusion and literacy status in the state.
· "The relatively lower level of economic development, particularly financial development in the north-eastern region (NER), as reflected in relatively lower credit intermediation, is a major concern from a policy perspective," the study noted the need to conduct a greater
number of financial literacy workshops, especially for the people belonging to the vulnerable groups.
· The survey looked at the banking ecosystem in Mizoram. It noted that 28 banks are operating in the state, which includes 16 public sector banks, eight private banks, one payments bank, one regional rural bank, and two cooperative banks. The report said there are 224 bank branches, of which only 67 (33 per cent) cater to rural areas.
· Mizoram Rural Bank (MRB), a regional rural bank (RRB), is the largest bank in the branch network, but SBI has the largest share in deposits and advances. The bank branches are complemented by a network of 183 ATMs, of which more than half (97 ATMs) belong to SBI. Banking business constituted merely 4.1 per cent of the entire business of the northeastern region (NER); as such, it remained the lowest among the NER states, according to the report.
· The report said that the public sector banks account for most of the banking business, followed by RRBs, private sector banks, and small finance banks. The banking services remain skewed, as it is mainly concentrated in Aizawl. Although accounting for 37 per cent of the population and just 17 per cent of the geographical area of Mizoram, Aizawl accounts for 47 per cent of the state's bank branches, 46 per cent of its deposit accounts, and 52 per cent of its credit accounts as on March 2018.
· A unique and interesting feature of the banking ecosystem in Mizoram is the lead role played by the single RRB (with SBI as its sponsor bank) functioning in the State, viz., Mizoram Rural Bank (MRB), the report noted. "40 out of the 44 brick and mortar branches of commercial banks present in the villages with population below 5,000 belongs to MRB. MRB accounts for 33 per cent of the deposits and 39 per cent of credit in the State as on March 2021," it said.
· The survey noted that there is a need for strengthening the self-help groups (SHG)-bank linkage programme (SBLP) in Mizoram as, in recent years, there has been a significant growth of SHGs with bank linkage (i.e., having savings accounts in banks). As opposed to the all-India trend, where commercial banks have been the "major driver of SHGs, in NER and Mizoram, RRBs have been the game changers," it said.
· In fact, the report said the tepid performance of SHGs in Mizoram and NER might, among other things, be attributed to poor banking penetration.
· Among the factors that influence financial literacy and inclusion in the North-Eastern region, the study found that respondents were less aware of insurance, and the use of insurance was even lesser.
· Regarding awareness among the respondents about various savings and investment schemes, a low level of awareness was found for most schemes. "Less than 15 per cent of the respondents were found using any of the select schemes, except savings bank account," according to the report.
· Interestingly, the report said that a sizeable fraction of the population was unaware of popular payment options available in the market. Nearly "45 per cent were using debit cards whereas 36 per cent were using mobile payments."
