Purpose

Generating

cutting-edge, rigorous evidence

to interpret the past and power the future

of financial inclusion

in rural India

Despite 5 decades of policy-influenced promotion of financial inclusion initiatives in rural India, HIGH-LEVEL EVIDENCE on long-term effects and specific outcomes of inclusion is largely absent.

A comprehensive, sharp and rigourous evidence-building initiative is critical for policy makers, industry, academia, think tanks and most importantly, the PEOPLE OF BHARAT.

What is Financial Inclusion for Rural Transformation?

FINANCIAL INCLUSION for RURAL TRANSFORMATION is a novel evidence building and research undertaking. In two parallel tracks, this initiative gathers evidence and closely analyses data to understand patterns of change in rural India, particularly those associated with past and ongoing financial inclusion interventions.

Our work untangles the PRECISE MECHANISMS and PATHWAYS OF IMPACT of policy led and market driven financial inclusion on rural households.

We MAP and MEASURE micro-level outcomes of financial inclusion for households in rural India, and model macro-level impacts of financial inclusion on India’s rural economy.

Our Work Combines Two Research Tracks

Three Decades of Understanding Rural Households

We look at 3 unique panel data sets to measure outcome variables and pathways of impact from participation in financial inclusion initiatives for households in rural India. We track sampled households across three decades from 1982 to 2021. The scope of this study is unparalleled in past or contemporary research in the area.

Market Interventions for Financial Inclusion

We perform a series of innovative field experiments designed to discover behavioural processes underlying discrimination, selection and purchase of digital financial products among farm households in rural India.

Our 30-Year Panel Study Combines Three Large Datasets

The Rural Economic and Demographic Survey (REDS)

The REDS database covers the period of 1981-2006, during which six rounds of survey were carried out in 241 villages across 17 Indian states.
For more information, visit Prof. Andrew Foster's page here.

Social and Economic Profile of Rural India (SEPRI)

SEPRI is a continuing panel of the ARIS and REDS databases. It is a nationally representative dataset based on surveys carried out in 192 villages across 10 Indian states covering over 90,000 households, between 2014 and 2016.

Financial Inclusion Survey (FIS)

Conducted in urban and rural parts of the northern Indian state of Uttar Pradesh in 2016-17, FIS covered 7,800 households in 34 villages. The FIS rural dataset can be traced to REDS and SEPRI and forms a panel back to 1982.

The Rural Economic and Demographic Survey (REDS)

The REDS database covers the period of 1981-2006, during which six rounds of survey were carried out in 241 villages across 17 Indian states.
For more information, visit Prof. Andrew Foster's page here.

REDS data, combined with Additional Rural Incomes Survey (ARIS) provide us with a combination of community, household and member level information based on a nationally representative sample of 241 villages from rural India across 17 states and collected over six rounds encompassing the period 1981 to 2006. There is detailed demographic information on households, participation in welfare schemes, governance, evaluation of governance by households and members of households, composite pattern of cultivation, infrastructure, availability of public goods, etc., with community data. The data cover a period of considerable change in the rural economy of India, both in terms of structure as well as the policy regime. In addition, the data allow the tracing of the impact of changes in policy on to the households and fixes these households within a policy space.

Social and Economic Profile of Rural India (SEPRI)

SEPRI is a continuing panel of the ARIS and REDS databases. It is a nationally representative dataset based on surveys carried out in 192 villages across 10 Indian states covering over 90,000 households, between 2014 and 2016.

SEPRI is a representative dataset that was carried out in two phases between 2014 and 2016, where in the first phase, data was collected on 10 states, and in the second phase data was collected on five states at the Institute of Rural Management, Anand (IRMA). SEPRI consists of a listing questionnaire (that surveyed all households in sample villages on aspects of education, schooling, governance, asset ownership, savings, consumption etc.) and a village or community questionnaire that collected village-level information from administrative respondents. The data covers 92,993 households in 192 villages across the states of Andhra Pradesh, Bihar, Chhattisgarh, Haryana, Jharkhand, Madhya Pradesh, Rajasthan, and Tamil Nadu, Maharashtra, Gujarat, Uttar Pradesh, West Bengal, and Odisha. These villages were selected on the basis of a continuing panel of the nationally representative Additional Rural Incomes Survey (ARIS) and Rural Economic and Demographic Survey (REDS) by the National Council for Applied Economic Research (NCAER).

Financial Inclusion Survey (FIS)

Conducted in urban and rural parts of the northern Indian state of Uttar Pradesh in 2016-17, FIS covered 7,800 households in 34 villages. The FIS rural dataset can be traced to REDS and SEPRI and forms a panel back to 1982.

The Financial Inclusion survey was conducted in 2016-17 in both urban and rural Uttar Pradesh at the Institute of Rural Management, Anand (IRMA). It consisted of two components: Listing (individual information on savings behaviour for approximately 7,800 households in 34 villages in Uttar Pradesh); and Household (household and individual information on detailed consumption patterns, education, healthcare, etc.) for a smaller sample. It also contained a novel test of financial literacy (institutional, technical, functional, and analytical) for all individuals above the age of 18 at the time of the survey. The households in the rural dataset can also be traced back to SEPRI and REDS to form a panel running back to 1982, to examine longer-term impacts of financial assets and savings.

We Are Investigating a Range of Economic and Welfare
Outcomes of Financial Inclusion for Rural India

Financial Inclusion and Household Welfare: Investigating the Missing Links

In this research we explore the three way link between financial inclusion, women’s agency within households and household welfare. We wish to show that access to bank accounts triggers greater levels of autonomy over decisions made by women within households. This in turn significantly affects household level welfare (measured by consumption). We are able to isolate policy variables that trigger access to bank accounts (financial inclusion). Consequently, the impact of such policy variables on women's agency and household level welfare will be measured. The policy variables include bank density, gap between formal and informal interest rates, and access to bank correspondents. The data for this study comes from the SEPRI database, collected at the Institute of Rural Management, Anand (IRMA). The dataset features individual-level information on decision-making within the household on pattern and quantity of consumption, health, children’s education, sanitation, and several other variables. There is also detailed information on village-level financial systems (such as sources of credit) that will be used to construct policy variables.

Impact of Financial Inclusion on Household Indebtedness: The Role of Women’s Agency

If women took a majority of household decisions, or were in control of financial decisions (such as borrowings), then given their latent levels of risk aversion, the extent of household level indebtedness should decline. We investigate the impact of women's agency as triggered by financial inclusion on household indebtedness. Women decision makers will tend to borrow from less risky sources, repay loans sooner and in general take less risky decisions related to expenditure. Since financial inclusion is a trigger for household agency of women, we empirically investigate the three way links between financial inclusion, agency, and indebtedness. This research is particularly important in the context of increased levels of farmer indebtedness and suicides. If women increasingly participate in decisions triggered by financial inclusion related to farming (such as crop choice, choice of technology and inputs) then the prospects of choosing risky crops could decline, thereby reducing the reliance on expensive pesticide and fertilizer inputs and high levels of financial leverage. The data for this study will draw from the SEPRI and FIS databases. FIS contains detailed information on use of financial products, financial literacy, and various aspects of access to credit at the individual level. Additional information on farm inputs and crop choices (season-wise data) can be traced back to 2016 with SEPRI data.

Impact of Financial Inclusion on Household Coping Mechanisms

Since rural households are impacted by various types of shocks, then in the absence of any mechanism related to insurance, their vulnerability status could be magnified. In the presence of financial inclusion, households can mitigate the impact of shocks as a result of access to financial resources and adequate planning for such adverse events. Since financial inclusion can enable households towards increasing savings, borrowings and planning for adverse events, it is logical to expect that households that have been incentivized in this manner through financial inclusion will not have to resort to coping mechanisms such as selling of assets, withdrawing children from school, reducing consumption or starvation. This study will employ household-level information from the SEPRI cross-section (2016) on adverse events faced and coping strategies used for each shock from more than 90,000 households across 15 states in rural India. The shocks are aggregated to study covariate and idiosyncratic shocks, using a range of coping mechanisms.

Financial Inclusion, Portfolio Choice and Wealth Inequality in Indian Villages

Could financial inclusion have the unintended consequence of magnifying wealth inequality in Indian villages? Using panel data spanning more than 2 decades (the REDS panel), we examine whether financial inclusion could have contributed to worsening wealth inequality in Indian villages. Financial inclusion (ownership of bank accounts by households) enables portfolio accumulation (saving in multiple instruments, purchase of other assets etc.) by households. However, households in villages differ in their ability to use bank accounts to accumulate other assets. As a result, strengthening of financial inclusion policies could interact with varying levels of household abilities and potentially create increased levels of wealth. Several policy recommendations are explored. This study uses a panel dataset constructed from the ARIS (1982) dataset collected at the National Council for Applied Economic Research (NCAER) and the REDS (1999,2006) database. Detailed data on bank account ownership, investment in precious stones and metals, cash holdings, and insurance is available for more than 3500 households from 1982 to 2006. This dataset will be complemented by district-level policy variables and other policy change information during the 25-year period.

Our Approach

Collaborative

Leveraging a coalition of experts from IIMA, IRMA and CIIE.CO to demystify the hard problem of rural transformation in India.

Evidence Focussed

Working with large scale historical data to push the frontiers of knowledge on the transformative potential of financial inclusion in rural India.

Solution Oriented

Designing unique experimental games to detect micro-linkages between financial product attributes and user welfare.

Actionable

Synthesizing unique intervention frameworks and toolkits for policymakers and fintech entrepreneurs to drive knowledge assimilation in practice.

Our Work is Led by a Team of Distinguished Experts and Driven Researchers

Dr. Hari K. Nagarajan

Dr. Hari K. Nagarajan is a Professor and Infosys Chair for Societal Development at Indian Institute of Management Ahmedabad (IIMA). Before joining IIMA, he held the RBI Chair in Rural Economics at the Institute of Rural Management, Anand (IRMA), and was Senior Fellow at the National Council of Applied Economic Research (NCAER), New Delhi. He holds a Ph.D. in economics from the University of Oklahoma, Norman. He has also taught at the Indian Institute of Management Bangalore (IIMB) and, at The University of Oklahoma, Norman.

Dr. Abhiman Das

Dr. Abhiman Das is Professor of Economics and the RBI Chair of Finance and Economics at the Indian Institute of Management Ahmedabad (IIMA). He is also the Chairperson of the Misra Centre for Financial Markets and Economy, IIMA. He was the Chairperson of the Doctoral (Ph.D.) Programme in Management of IIMA and was also the Chairperson of the Economics Area. Before joining IIMA, Dr. Das worked for over two decades in the Research Department of the Reserve Bank of India. He was a postdoctoral research fellow at the Department of Economics, Massachusetts Institute of Technology (MIT), Cambridge, USA and completed his Ph.D. in Population Studies from the International Institute of Population Studies (IIPS), Mumbai. He is the recipient of prestigious Prof. C. R. Rao National Award in Statistics for 2012-13 and the Prof. P. C. Mahalanobis Medal in Quantitative Economics for 2008.

Dr. Vivek Pandey

Dr. Vivek Pandey is an Associate Professor (Economics) at the Institute of Rural Management, Anand (IRMA) and heads the Verghese Kurien Policy Lab (VKPL). He has a doctoral degree in Agricultural Economics from Michigan State University. At IRMA, he teaches Microeconomics and Econometric Methods for Impact Evaluation. He has extensive experience in raising research grants and consulting on themes related to Impact Evaluation, Corporate Social Responsibility (CSR), Applied Econometrics, and Development Economics.

Priyanka Agarwal Chopra

Priyanka Agarwal Chopra is Chief Operating Officer and Managing Partner, Seed Investing at CIIE.CO. She started her journey with CIIE.CO as a Venture Partner with the Bharat Innovation Fund and has subsequently managed various leadership roles in her time at the organization. Ms. Agarwal Chopra completed her MBA from The Wharton School, University of Pennsylvania and has a M.S. in Electrical Engineering from the Georgia Institute of Technology.

Dr. Supriya Sharma

Dr. Supriya Sharma is Partner - Insights at CIIE.CO. A Fellow of Indian Institute of Management Ahmedabad (IIMA) specializing in Organizational Behaviour, Dr. Sharma leads research at CIIE.CO where she is building the Entrepreneurship Toolbox - a one stop destination for entrepreneurial knowledge and training in India. She has led the identification and implementation of research directions in the space of financial inclusion, entrepreneurial cognition and learning, incubation, women entrepreneurship, and emergent sectors, among others.

Anirudh Tagat

Anirudh Tagat is a Research Author at the Department of Economics, Monk Prayogshala, Mumbai, and a Consultant, Insights at CIIE.CO. He holds an MSc in Economics from the University of Warwick, and completed his doctoral research at the Indian Institute of Technology Bombay (IIT Bombay) and Monash University Research Academy.

Trisha Ghoshal

Trisha Ghoshal is a Specialist with Insights at CIIE.CO. She completed her M.Phil and Masters in Development Studies from Tata Institute of Social Sciences, Mumbai. At CIIE.CO, her role is to distil rich academic research findings into actionable insights for practioners in the financial inclusion space.