Poverty can never be eradicated through doles or minimum bank transfers. Instead, the weaker sections should be financially empowered
Poverty is the Achilles Heel for India as it hinders growth/progress. Though poverty and its eradication have been part of numerous political manifestoes since the time of independence, the issue has never really been addressed in reality. The eradication effort has been a continuous process and even today, poverty is seen as a major “poll plank.” But how is it that even after so many years since independence, India is yet to get a grip on this issue? One of the crucial reasons is that the Indian political diaspora has always attempted to get quick results by treating the symptoms rather than the disease itself. This ensured that the problem remains unaddressed and the people continue to remain poor and destitute.
India could have really scripted a different story in its fight against poverty by basing its strategy on financial empowerment of the economically weaker sections. Financial empowerment is an approach to poverty reduction that focusses on improving the financial security of low-income people. It is an evidence-driven set of interventions that have proven to be successful at both eliminating systemic barriers to full financial inclusion of low-income people and providing enabling supports that help them acquire and practise the financial skills and behaviours that tangibly improve their financial outcomes and build their financial security. The financial empowerment approach focusses on community-level strategies that encompass five main types of interventions that have been identified as both necessary for low-income households to improve their financial outcomes and effective at helping them to do so.
These strategies are not designed to replace other important poverty reduction interventions but to be a complementary set of interventions that in most cases can be built into other existing programmes to improve their outcomes for social assistance, employment and housing settlement. This has come to be known as the ‘supervitamin’ effect — a boosting programme in which outcomes are improved by addressing underlying financial issues that many schemes currently ignore or are not equipped to address. For example, the Government can empower, train and support frontline community people or Government personnel to address key underlying causes of financial vulnerability and exposure. In many cases, these problems are a root cause or a significant aggravating factor in exacerbating financial stress related to poverty. This is crucial since these financial problems when left unattended, lead to further deterioration of financial conditions of the people.
In fact, the Government should adopt a multi-pronged strategy to develop a financial empowerment framework. The first step is to create financial information education and counselling, followed by the second step, which is to help access income boosting benefits. The third step is to provide safe and affordable financial products and services, followed by access to savings and asset building opportunities. The fifth is consumer awareness and protection. For most households, savings and assets are the first line of defence against emergencies, unforeseen expenses and income interruptions. Families that have adequate savings and assets can successfully weather such setbacks but households that lack this security are financially vulnerable and at risk of falling into poverty.
Research has shown conclusively that assets should play a central role in whatever strategies we adopt. Assets not only help build individuals’ hope and confidence in the present but also hold the promise of future well-being. Even when economic, institutional and other factors are controlled, the simple possession of assets has been shown to help. Hence, the Government must focus on enabling asset-building opportunities for the poor as part of financial empowerment. Interventions, like financial information, education and counselling services are aimed at providing low and modest income people with free access to high quality, neutral and relevant information. This is achieved by integrating these functions into other existing programmes and making it easier to learn about and access support in the neighbourhood.
Other interventions should be aimed at improving access to safe and affordable mainstream financial services and products that meet the needs of low-income people and reduce their reliance on fringe and predatory financial services like establishing basic financial services in underserved neighbourhoods; creating and promoting low-cost transaction and savings products in partnership with or independently of, financial institutions; providing affordable credit products to reduce reliance on fringe lenders. Poverty eradication can never take place through doles and minimum bank transfers as these facilities are at best only able to ward off financial insecurity that plagues the lower economic classes of India. Instead, India must focus on enabling the weaker economic sections build their financial security through asset build-up and reducing reliance on loans. Measures such as these can ensure a financially empowered society.
(The writer is Assistant Professor, Amity University)
