Section:There is a push for digitizing payments across the board in India. This has picked up steam after the demonetization of large currency notes in November 2016. But how ready and willing are low-income Indians (as well as low-income people in other developing countries) to adopt digital payments? This question needs more thought as there is a range of issues around mobile phone penetration, bank account features, acceptance of digital payments across value chains, and the viability of small transactions.Oh sir, this Modi ji's approach is all very well but many people here don't even know how to dial a number on a mobile phone. (low-income artisan's response to a question about the use of digital services after demonetization)
The vast network of banking and co-operative finance institutions in India has failed to provide low-income families with significant access to financial services. In this situation, the non-governmental microfinance institutions have attempted to provide an alternative to the high-cost informal financial services that most low-income clients must rely on. The extent to which such service provision is appropriate is discussed in this article using information from the financial histories of low-income families in the slums of Delhi and two villages of one of the more economically backward areas of India. The analysis in the article shows that the needs of low-income clients would be best served by highly flexible financial services that enable the conduct of frequent transactions both for small savings and for borrowing at irregular intervals. In relation to this, both microfinance and formal financial institutions do not fully meet the needs of low-income families. The article concludes with practical suggestions for the design of products and delivery systems to meet these needs.
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