As part of the Working Paper Series, Lakshay Narang, a public policy graduate from National Law School of India University (Bengaluru), has authored our latest research paper titled “Effects of Mobile-Based Financial Services on Migrant Households’ Remittances and Savings – A Case Study of Migrant Workers in Dundahera”.
The process of expansion of formal financial service delivery to low-income households has been slow in India. According to The Global Findex Report 2017, India has the second highest number of unbanked (adults with no bank accounts) adults in the world (The World Bank, 2017). Though the Indian government opened 280 million bank accounts under the Jan Dhan Yojana scheme and increased the number of banked adults from 53 per cent in 2014 to 80 per cent in 2017 (D’Souza, 2019), nearly 48 per cent of these accounts remain dormant (D’Souza, 2019). The mere provision of access or ownership of bank accounts did not lead to their usage. Studies have shown that opening and maintaining bank accounts are costly, time consuming, and cumbersome tasks. Mobile-based financial services (MBFS) – access to financial services through either feature or smartphones – have the potential to increase bank account usage by encouraging mobile-based fund transfers like remittances and peer-to-peer payments, thereby increasing savings by bypassing the conflict between liquidity and savings (D’Souza, 2019).
Many low-income households in India have earning members who migrate for work and economic opportunities, to help sustain their needs as individual households. Some figures indicate that India has close to 120 million domestic migrant workers, most of whom are often poorly connected to their families in villages (Sangeetha, 2018). There is a critical need for such workers to find a safe, convenient, swift, cheap, and reliable way of securely remitting money to their families. Hitherto, workers mostly rely on friends and family and/or local agents, who charge a high commission for transferring money. MBFS can help them reduce the cost of such transactions and give them autonomy and control over their finances. Given that those using MBFS may also be able to access a wider suite of financial services and products to help improve their households’ well-being, there is an opportunity for mobile-enabled banking services to play a bigger role in improving overall access to more suitable finance. From the supply side, it is often noted that MBFS platforms and the transactional data they generate can become an effective channel for the delivery of suitable financial products (savings, credit, and insurance).
However, do migrant workers use MBFS? How are the experiences of users of these interfaces? Have MBFS improved their ability to access financial services? Have MBFS impacted migrant household savings and remittances? What, if any, barriers do they face while adopting MBFS? To answer some of these research questions, the author undertook a study with migrant workers working as tailors, machine operators, helpers, and line supervisors in the apparel manufacturing industry in Dundahera and Manesar in the Delhi-Gurugram industrial corridor. Using the data collected as part of the study, in this paper the author examines the role of MBFS as channels of remittances; and as platforms for managing savings for migrant households.
The full paper is available here.
*This paper presents research from a capstone project supported by the Future of Finance Initiative at Dvara Research in furtherance of the Initiative’s research agenda. The Initiative’s work focusses on the impacts of digitisation and technological innovation in Indian finance, leading from the low-income consumer perspective on these issues.
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