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| Financial inclusion schemes should have 'recognized specific sensitivities' about minorities | | Story of Exclusion | | BORDER BUSINESS
Sajjad Bazaz
The first year of Modi Government witnessed major focus on financial inclusion programme. It's for the first time that the government at the centre accelerated the pace of inclusion programme with some add-ons. First it was Prime Minister's Jan Dhan Yojana which swept across unbanked areas in the country. Then it was followed by another mega phase of financial inclusion programme through social security schemes - Pradhan Mantri Jeevan Jyoti Bima Yojana (Life Insurance), Pradhan Mantri Suraksha Bima Yojana (Accidental Death & Disability Insurance) and Atal Pension Yojana (Pension Scheme).
By all standards the aim of the schemes is to provide perfect financial protection to the beneficiaries even in worst conditions. However, the schemes are not going to transform a large chunk of the population in the country. Even as the government is contemplating complete inclusion of its population into the financial system, it's simultaneously forcing exclusion of a substantial chunk of its population belonging to the minority community from the ambit of formal financial system. The observation came into focus when finance minister Dr Haseeb Drabu during the launching ceremony of these social security schemes stated during the launching ceremony of these schemes in Srinagar last month that the least financially intermediated communities are the minority communities. He advocated to take financial inclusion to a level where some specific sensitivities about minorities are recognized. He also pointed out insensitive of the banking sector despite being very market oriented to the needs of the minority.
We live in a country where 68.7% of our population, according to World Bank statistics, lives on less than US$ 2 per day. Only 34% of people have access to formal financial system and 80% people do not have insurance. Here huge disparities exist between different segments of our societies. To remove inequalities, it's the universal access to basic financial services which can pave way for achieving more balanced economic development.
Our financial inclusion initiatives may be forceful but are imbalanced where a strong segment of population is 'deliberately' forced to remain outside the ambit of formal financial system. Yes, I am talking about majority of Muslim population. We have 180 million Muslims constituting largest minority group (75%) in the country. Sachar Committee report has revealed that on many indicators Muslims are behind even the SC/ST community, especially in terms of financial inclusion. Notably, Muslim dominated areas are not adequately serviced by banks and these zones are called red zones.
So what's the cause Muslims remain excluded in inclusive programmes? What's the specific approach to bring them into the fold of financial system? Let's first talk about two major problems - acute poverty and ethical deficit- which the world community is facing today. To overcome these obstructions, it's the financial system which is fashioned to remove poverty as well as to minimize inequalities. So, the question arises: Is our prevailing financial system suited to eliminate the kind of poverty and ethical deficit existing in our diverse societies? No, it's not. The existing conventional financial system which is purely based on interest element, doesn't allow financial inclusion of the majority of the largest minority community.
Various studies have revealed the absence of Islamic financial system in the country as one of the major reasons of backwardness of Muslims in India. These studies revealed that Muslims in India have worst credit- deposit ratio due to unavailability of interest free loans which are compatible to the Islamic principles. With 97% workers engaged in unorganized sector, the Indian Muslims need interest free loans to improve their labour output ratio and value additions to foster inclusive growth.
Country's think tank is well aware about the benefits of implementing Islamic banking practices in the country, but the 'bias' under the cover of secular character in the governance practices has confined the scope of Islamic banking in India to debates only. Whenever demand for Islamic financial system emerged, government lost no time to announce committees and these committees too lost no time to recommend huge scope of Islamic banking. And surprisingly, the Reserve Bank of India with equal pace always shelved these recommendations - hinting that Islamic banking is not possible in the existing legal framework. Sometimes notion has been given that RBI Act has to be amended which is not a small job.
Of course, changes in the regulation system may be needed. At the moment many Islamic finance concepts can be introduced by being innovative. Only the will is required. The financial exclusion of Muslims has far-reaching implications for their socio-economic and educational upliftment. The present government has to address to the Muslim sensitivities. And definitely inclusion of the provision of interest-free banking in the ambit of financial infrastructure will result in financial inclusion of all in true sense.
It's imperative to allow the largest minority community to conduct financial activities as per their choice. Notably, among this segment of population there is a good percentage which excludes themselves from the conventional financial system due to religious sensitivities and not because of poverty or illiteracy.
Precisely, you cannot achieve true inclusive growth without financial inclusion of Muslims. For this our governance system has to come out of conventional thinking and allow alternative banking and financial system matching the faith of largest minority community. Let this mega financial inclusion initiative is secular by all means.
Needless to mention, Islamic finance is now the largest alternative financial system in the world today growing at double digit rate, surviving through the crisis.
(The views are of the author & not the institution he works for) |
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