BHIM and Cashless Economy not feasible in Rural India.

Researches claim with still 21% unbanked Training is required to make Smart Cards viable

By Farah Zehra

The government of India is promoting cashless economy in a big way. People are encouraged to go for digital transactions. But, a challenge remains to bring 21% of the adult population into the banking system.

The banking system penetration in India is quite low and 21 percent of the adult population is still unbanked in the country. According to Global Findex, Database 2014 of the World Bank, which measures financial inclusion around the world, ResearchIndia, China and Indonesia account for 38 percent of the world’s unbanked adults.People lack awareness in terms of managing their finances and savings.


In year 2011, Microfinance Opportunities along with FINO Paytech and MasterCard Foundation initiated a project in India, Philippines, Zambia and Malawi. Partnering with MORSEL Research and Development Pvt Ltd in India, they implemented their research study in 122 villages of Jaunpur and Mau districts of Uttar Pradesh. The project aimed at evaluating if educating consumers would help monetize products of microfinance institutions. Also if awareness drives could play a significant role in helping the people manage their money.Under this project, consumers were provided biometric smart cards to help them facilitate their financial transactions. They were given training and information to access the cards. Apart from the training sessions, an activity book was also given to evaluate the viability of the smart The research study was designed in a way to evaluate the impact of learning sessions on financial behavior of consumers and to assess the knowledge and skills of them.

BHIM and Cashless

ATM Card

The project started off with the distribution of approximately 4,95,822 cards in Mau and Jaunpur districts, creating of MIS data sheet while imparting training to the users in 1599 villages. To track the behavioral patterns of the consumers, financial diaries were issued and data was collected from 187 respondents for 33 weeks.

Impact of FINO Cards

During the research period, only 5.1% of the total cards were used by the consumers, which mean that there was no significant change in the behavioral aspects of the clients. However, when interviewed, the reason of low response was deduced. FINO agents did not visit the consumers frequently to help them make card transactions, whereas the card users with financial diaries showed higher access of cards. These users also showed a particular behavioral pattern, with making some savings as well. Although the prime aim of implementing training program was to increase the usage of the cards and facilitate the card transactions but due to irregularities by the agents, the training program did not prove to be effective.



BHIM and Cashless

Money transfer machine

Significance of Consumer Education

The users accepted the fact that the training program had a positive impact on their money management. It somewhat convinced them to use cards with more confidence in how to keep their card safe. The card usage was higher among respondents who were given financial diaries and imparted training.

One more interesting finding was that there was a significant impact on women’s behavioral pattern. The women who were trained received higher amounts of money transfers and they also borrowed lesser amounts.

The research study was designed with the aim of educating the unbanked people to improve their financial capabilities as well as money management skills. How can such a program help in moving a huge population of the unbanked to a cashless banking system, is to be seen and looked into.

The IT ministry had launched training campaign for rural India along with an incentive program to promote cashless transactions. Later, the training leaders themselves accepted that a large section of the ruling party people were unaware of cashless economy and e-banking. Besides, these people were also reluctant to adopt paperless transactions. During the campaign, the trainers came across numerous people citing problems they face in their cashless transactions.

Hence, the research study was done by MFOis suggestive of the fact that despite of such a far-reaching step by the Government, a well-designed proper training curriculum along with motivational programs is needed. They are imperative to boost people’s confidence and keep them motivated in changing their overall attitude towards financial transactions.

Guy Stuart

“The distribution of payments, whether from government or employers or from one person to another, through digital channels has the potential to increase transparency and security. But for these benefits to accrue to low-income people in all areas of the country, two things need to happen: agents networks need to provide reliable, high-quality customer service; and smart card holders need to have a basic understanding of how to keep their accounts safe.”

Executive Director, Microfinance Opportunities, Fellow, Ash Center, Harvard University