How Digital Public Infrastructure can help in women-led development

It offers an opportunity of using technology to provide credit to deprived communities

India’s Digital Public Infrastructure (DPI) and its role in making direct benefit transfer and other payments possible, into Aadhaar-linked, verified bank accounts, is rightly a global example. It has taken transparency and accountability to a new level in access to public funds. It has improved the ease of money transfer in the remotest regions of the country. The unprecedented success of the Jan Dhan accounts for women has opened limitless possibilities for women-led growth. From DPI being a successful payment system, time has come for it to evolve into a enterprise platform credit access with local-level accountability, financial literacy and fair interface of deprived women’s collectives with formal credit access.

The expansion of women’s collectives with social capital under the Rural Livelihood Mission has been unprecedented, especially over the last ten years. The collectives' success in southern Indian states in poverty reduction is well understood and till as recently as 2013-14. A majority of the 25 million women in rural self help groups (SHGs) came from southern States. As many as 86 per cent of collateral-free lending to SHGs that year went to southern states. We decided to emulate this success on scale in the poorest regions of the country with large scale deprived households.

In 2022-23, more than 90 million rural women were part of the Rural Livelihood Mission-led SHGs all over the country. The coverage is reaching saturation with annual loans increasing manifold in Assam, Bihar, Odisha and West Bengal. More than Rs 650,000 crore has been accessed as credit by women in the last ten years, with a non-performing asset (NPA) level of less than two per cent. Formal banks need to re-visit their surety norms as poor women the world over have a history of non-default, if organised through process-intensive efforts. Women’s collectives are facilitated by more than 45,000 Bank Sakhis and 100,000 Banking Correspondent Sakhis (BC Sakhi) from among them. They are a part of the over 400,000 women Community Resource Persons (CRPs) team that drives the transformation. CRPs are women who have come out of extreme poverty and are now helping other women to do so through diversified livelihoods, access to credit, better provision of public services, and thrust on women’s well-being. Women’s collectives have demonstrated their abilities across multiple sectors and many sell on e-market platforms on scale. DPI can further facilitate such exponential growth.  

DPI needs to harness the social capital of these 90 million women to ensure that their small enterprises do not suffer for want of credit. Microfinance credit is useful for consumption expenditure, housing and debt redemption, but does not offer competitive rates of interest for economic activity. It is for this reason that we need to increase the volume of direct funding to women’s collectives at reasonable and competitive rates for economic activity and enterprise. For banks, these are very ‘bankable propositions’ as NPAs are negligible.

In an unequal world, interface with women’s collectives protects individual members from usurious rates or bondage through mystified loan agreements. For DPI to become a platform for access to credit, financial literacy, community connect, and comfort of women’s collectives, it is very necessary to build capacities among communities for credit access that is fair, micro-credit plan based, and transparent in terms of interest rates, cyber security, and other liabilities and promotes sound record keeping. Hand-holding alongside the digital platform with public information, a role for Gram Sabhas, and greater interface with formal institutions like Banks, facilitate sustainable financing. The success of the Community Based Recovery Mechanism (CBRM) at Bank Branch level in Bihar and West Bengal indicates the power of community connect for sustainable progress.

The challenge in capturing the digital footprint is technological as well. Paradoxically, the bulk of the SHG financial transactions are in cash as the SHG account is operated by two persons, the president and the secretary of the group. While efforts to make dual authentication work in fingerprint/iris readers has been made, few banks are using it and that too limited to ‘on us’ transactions within the same bank. Technology provides a rare opportunity to do dual authentication at scale across banks. This will bring in thousands of crores of savings of women into the formal banking stream. Most of the 90 million women in the Rural Livelihood Mission have Aadhaar-linked, verified bank accounts but unfortunately, the mapping of SHG account to the individual account has been achieved for barely 40 percent of the accounts so far. The Mission is in process of developing a comprehensive database named LokOS, which will record all transactions by collectives. If the digital footprint captures the mapping to individual accounts, the CIBIL score of deprived women will go up substantially. With formalization like registration on the MSME portal and with the acquisition of a PAN Card for taxes, GST registration and so on, many of the nano enterprises of women, can get access to the much in demand working capital at reasonable rates. DPI and women’s collectives will both have to take a few steps to make this possible.    

Even for quickly expanding capacity building for financial literacy, civil society organizations can work with women’s collectives to guide and save them from any credit misadventures. It is important to demystify business processes if we wish to make credible enterprises. The access to professionals to collectives like Primary Agriculture and Dairy Cooperatives, Producer Groups, Farmers Producer Companies, Joint Liability Groups, Cluster Level Federations, etc. can go a long way in building businesses from below. The digital trail blazing has miles to go to achieve its fullest potential.

The experience of ‘Streenidhi’, a lending institution under the Cooperative Act in Telangana and Andhra Pradesh, shows the power of an exclusive, all-digital, lending institution in promoting timely credit among those who need it most. Through effective micro credit plans, community connection, and timely sanction of loans through digital on lending, Streenidhi has stood the test of time. There are other examples, like banks in Tamil Nadu lending to Cluster Level Federations (CLFs) of SHGs directly and SBI using the State Rural Livelihood Mission in Odisha as an on-lending institution. DPI can learn from some of the experiments to actually take credit to a new level. The criticism that Mudra loans are mostly the standard Rs 50,000 Shishu loans can be handled by community connect and a Micro Credit Plan for each disbursement to ascertain the real credit need for the enterprise proposed. The human interface at the last mile improves the power of technological innovation and DPI.

The credit to women’s collectives being made available is generic in nature. Similar is the case for Mudra or other loans. The reason is lack of scale of credit for several livelihood activities, documentation, disbursal and collection processes. There is a need for updating or formulating scales of credit appropriate for the livelihood including interest rates, margin, schedule of payment, manpower for monitoring, hand holding and so on. Fortunately, much of it can be drawn from the DAYNRLM experience and appropriately meshed to form a good enterprise credit mechanism.

The Reserve Bank Innovation Hub is working on some of these challenges. The Reserve Bank of India (RBI) pioneered collateral free lending to SHGs, starting 30 years ago when Dr C Rangarajan was the governor. Time has come for the RBI to take to a new level of formalization and credit for larger businesses. DPI provides an opportunity, if meshed with community collectives of women and end-to-end capture of the digital trail. The way forward is through Digital Public Infrastructure, strong community connection and the social capital of women’s collectives. It is time to trust deprived households with adequate credit based on a rigorous micro credit plan. Women rarely default; it is time we trust them.

DPI offers a technology-led opportunity.

(The writer is a retired civil servant.)

(These are the personal opinions of the writer. They do not reflect the views of www.business-standard.com or the 'Business Standard' newspaper.)