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COVID-19 may just be the unintended booster shot financial inclusion needed

Giving every woman a bank account allows government benefits to reach citizens directly and instantly

July 10, 2020 / 09:56 AM IST

Nalin Kumar

Pallavi Madhok

As millions suffer the physical and economic consequences of COVID-19, the events of recent months point to at least one positive, if you happen to be one of the 1.7 billion people on the planet who are financially excluded. Governments have acted quickly to disburse relief benefits to citizens in need. As the global economy stuttered to a halt, these government aid payments literally meant the difference between life and death for many low-income people.

What is interesting about India’s example is that the government has remitted funds only to women. Why this group? What the government knows, and research affirms, is that sending benefits to women ensures that the funds are spent on household goods and services, education and savings. Therefore, as part of its COVID-19 stimulus package, the Government of India announced that it would transfer Rs 500 a month (for three months) to all women with Jan Dhan accounts, to help them manage household expenses during the lockdown.

The benefits of reaching out to women savers


COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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Efforts to distribute benefits typically focus on three areas: expanding coverage, increasing disbursements to build resilience, and simplifying administrative requirements. Since women with low incomes are more likely to be poorly educated and informally employed, with limited access to savings and insurance, they are often one small economic shock away from financial disaster. These payments help.

The Indian government’s success in delivering stimulus payments to citizens who need them rests on a previous effort by public sector banks to provide households with free Jan Dhan accounts. In 2014, the banks called on every household to open an account, using only an Aadhaar number and a biometric fingerprint, offering a zero minimum balance, a certain number of free cash deposits and withdrawals each month, and accident and life insurance at a very low premium. Recipients of government benefits would get payments exclusively through the accounts. The foundation laid by this work has paid rich dividends to India’s citizens in this time of crisis. In April 2020, the Jan Dhan accounts allowed the Indian government to remit funds directly to 210 mn women.

Learning from this for a post-COVID-19 world, every government should ensure a free bank account is mandatorily provided to every woman above the age of 18 years. Of the 2.5 billion women globally who are above the age of 18, an estimated 1 billion women currently do not have financial access of any kind. Giving every woman a bank account creates a pathway for government benefits to reach citizens directly and instantly, providing a timely safety net in crises like COVID-19.

But the goal is not only for governments to disburse payments quickly, but also to ensure recipients are able to access and use those benefits. Many recipients of government payments do not even know that the money is in their accounts. Even if they can withdraw funds, few use the accounts to do any more than just cash out. This is a missed opportunity. Over the long term, we see women engaging more regularly with the bank that provides them with the account they use to receive government-to-person benefits. Banks should take the initiative to show their women clients that the accounts are a more secure place for long-term savings. They should also explain that by using the accounts more actively, women will enjoy more privacy and control over their money, and will get access to other financial services like credit to grow a micro-business, or insurance in case things go wrong.

Banks are important for last-mile connectivity

That brings us to the silver lining. In India, public sector banks administer 97 per cent of all Jan Dhan accounts. Banks should be encouraged to take steps to deploy their agent banking network during the on-going lockdown to ensure that as many customers as possible have access to their benefits within, say, 2-3 weeks. Many state-owned banks have made good progress here.

Bank of Baroda has also actively solicited information on any challenges that prevented customers from accessing their funds. Many key issues have come out during the process, namely the need to support banking agents in continuing to provide services despite the lockdown; to drive awareness through multiple text (SMS) messages sent to all women Jan Dhan customers; and to address technology issues so that our backend servers can handle the peak load caused by the withdrawals and so on. The bank also expressed concern about the need to reactivate dormant accounts so that women could access their funds.

The banking agents are the final mile on the road to financial inclusion, since they extend financial services to communities where there are no branches, and where people have no experience in dealing with a financial supplier. During COVID-19, the banking correspondent network was able to reach women account holders with information and to support them remotely, which helped increase awareness of the government benefit while taking pressure off the physical branch.

Digital literacy is also key. Helping people understand how they can use the accounts for savings and remittances will also build capacity and grow resilience. This should help protect the overall economy from shocks and make recoveries that much quicker. Strengthening agent banking networks to take branches into hard-to-reach local communities and, most importantly, to build trust, will extend financial services to more people.

(Nalin Kumar is Assistant General Manager-Financial Inclusion, Bank of Baroda. Pallavi Madhok is Solutions Head, India, Women’s World Banking)
first published: Jul 10, 2020 09:55 am

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