02 Sep Are small loans key to overcoming the pandemic-induced liquidity crisis?
India’s digitization of the payments system along with the trifecta of Jan Dhan, Aadhaar and Mobile (JAM) has not only pushed the financial inclusion agenda forward, but also served well during the COVID-19 pandemic.
This digital reset has also seeped into daily lives of 1.3 billion people, with almost every Indian authenticated digitally by their Aadhaar number. The best news is that rural India has begun freely adopting digital payments as well as showing incredible ways to take advantage of small lending/loans.
In fact, after reaching saturated levels of demand in urban cities, it is now every nook-and-corner of rural India that may hold the key to our national economic recovery.
Rural India will take the lead in India’s revival story
A few months ago, the pandemic heartbreakingly sent millions of migrant workers home without cash or job. Within such a short time, it has been equally inspiring to see many not only bounce back with a little financial help, but also seeing them support others around them.
The use of ‘contactless’ digital payment methods including UPI (United Payments Interface), BBPS (Bharat Bill Payment System) and AePS (Aadhaar-Enabled Payment System) has played a crucial role in tackling the spread of the virus – as well as ensuring seamless financial transactions for everyday needs. We have in fact, seen a record spike in payments through digital modes (expected to jump to 1.5 billion transactions worth INR 15 trillion per day by 2025).
Seeing them in action has also encouraged the government and think-tank NITI Aayog to launch ‘Project Kashi’ (cash-over-internet) to support everyone from farmers, labourers, small business owners to low-income households with small-ticket loans between INR 30,000 – 60,000. This shows how non-traditional sources of credit for a credit-starved population ends up dictating every pivot, progress and innovation in the BFSI/Fintech sector.
The future is a fully-inclusive and bankable ‘Digital India’
Truth is, we at BHI have seen rural entrepreneurs do far more, with much less – from helping fellow villagers with utility bills, internet recharge to providing them with free health insurance, opportunities to invest in digital gold and more.
Most of True Balance’s loan beneficiaries are in fact, rural migrant workers and youth looking for ways to be financially secure. As per Mckinsey’s recent report, Rural India holds the growth boosters to create INR 2.5 trillion worth of economic value[and millions of jobs. Fintech will be crucial to not only bridge this gap, but also expand the rural reach and create a fully-inclusive, self-reliant ‘Digital India’.