Financial Inclusion in India: Social Enterprises as the Unlikely Heroes

India collection

By D. Anisha Adhikari and Siddhant Mishra

Financial inclusion in India has been the area of focus for the government and social enterprises for some time now. While the tribal populace, especially women, stay largely excluded from access to financial services, several institutions and government initiatives seek to address such a challenge.


Sukirna Majhi, a 65-year-old tribal woman from eastern India, was once not allowed inside a temple because she was poor and belonged to the lower strata of the society. Rani Hembrum, another tribal woman, was dislodged from her village because she was suspected of practicing sorcery and witchcraft. Witch hunting is an instrument of class as well as gender oppression used by villagers to oust the suspect from the society and take away their land.

The marginalised tribal women in India have not just experienced inequalities of class and gender, but also of caste and religion. The woes of financial exclusion are symptomatic of deep-seated structural disparities, which not only curtail access to formal financial provisions but also the capacity to participate in other aspects of social life.

Women from the de-notified tribes remain excluded from the financial system because of social exclusion of their communities, lack of market access, rigid infrastructure of the banking system, and underdeveloped business and financial skills. Given the fact that most of them are employed in the unorganised sector, there is a lack of job security.

Despite a radical transformation in the Indian economy over the last few years, women’s participation in the labour force has been called “precarious”. The International Labour Organisation ranks India’s Female Labour Force Participation (FLFP) rate at 121 out of 131 countries as of 2013, among the lowest in the world. Only 27% of Indian women are noted to be in the work force – the lowest among the BRICS (Brazil, Russia, India, China and South Africa) nations and G-20 countries.1

This, along with other alarming statistics such as high unemployment and maternal mortality rates, suggests a severe need for a support system for the marginalised communities, particularly women, in India. While the maternal mortality rate in India has been on a decline, there is a long way to go.2

Fortunately, over the past few years, India has seen the rise of many social enterprises willing to fill this void by providing banking services, small loans, business and financial trainings and health care to women in need.

Among the social organisations that aim to facilitate financial inclusion is Vat Vrikshya (VV) – a social enterprise that focusses on lifting women like Sukirna and Rani out from extreme poverty and transforming them into businesswomen, in charge of their own operations and finances. Given the reluctance of communities in trusting women with being the breadwinners of the families and giving them charge of handling finances, the process of effecting a change in mindset has been a challenge in itself. The fear of being ostracised by their families and tribes has made women fearful of daring to dream.

Sukirna specialises in indigenous bamboo art, but middlemen who used to connect her to the market and sell her produce, had been exploiting her by paying a fraction of her fair wages. After VV provided her with the required skills and market linkages, she has found a way to run her business without any need for the middlemen, and now gets more returns for her produce. She has now matured as an entrepreneur, who employs 26 women from her village to run her business. Her bamboo products have received wide-spread acclaim, both in terms of design as well as from an eco-friendly viewpoint.

Similarly Rani, who was once abandoned from her village, is living a life of dignity, thanks to the helping hand extended by Vat Vrikshya. Rani was skilled in weaving and knitting. Vat Vrikshya provided her a seed funding of 15,000, mentored her to start a new business, branded and marketed the products, and connected her to potential customers. Rani happily said, “My handwoven products have found place in wardrobes of European customers. I feel highly elated that I make others look beautiful through my hand-woven products.” 

Vat Vrikshya was set up primarily to empower tribal women to catalyse their own process of change. Vat Vrikshya’s vision is to be an agent of “financial change”, with the aim of improving the livelihood of tribal communities. The enterprise aims to achieve this by creating a sustainable market as well as feasible business opportunities for them, based on their cultural knowledge and traditional skills, whilst ensuring fair and equitable remuneration.

Vikash Das, the founder of Vat Vrikshya, said, “I was particularly interested in women’s economic empowerment, and my initial thought was to create a business around some sort of product that tribal women could manufacture.”

The idea behind this mission is that improving the financial health of women will lead to an overall improvement in the financial standing of the community in total. The organisation follows a four-pronged approach to economic empowerment – needs assessment, networking and partnerships, education and marketing strategy, as well as transparency and involvement. The social enterprise provides women with vocational training, soft loans, expert advice, and market linkages to help develop supplementary sources of income.

Vat Vrikshya has built a network of nearly 2,300 women artisans across the four eastern states of Odisha, Jharkhand, Chhattisgarh, and Bengal. The organisation has helped them develop sustainable business models to help them achieve financial independence. Additionally, VV has provided business and financial training to almost 18,000 tribal women.

Encouraged by the training, more women have started their own business – 27% became first-time entrepreneurs, 42% expanded their existing business and 13% of the women started a second enterprise. Adequate livelihood opportunities and favourable working conditions helped women operate their businesses from home instead of migrating to cities in search of livelihood. They are using their monthly earnings to invest in agriculture, get their children educated and take care of their family’s health requirements.

Apart from the role of social enterprises, the Indian government’s role in spearheading financial inclusion has been significant too. The Union government, led by Narendra Modi, unveiled a programme known as the Pradhan Mantri Jan Dhan Yojana, which is aimed at opening bank accounts for the unbanked population in the hinterland.

This national mission for financial inclusion is aimed at ensuring access to bank accounts, credit facilities, insurance, etc. to people in rural areas. The scheme has reached close to 316.7 million beneficiaries so far, according to official records.3

Another initiative, the Sukanya Samriddhi Yojana, is a welfare scheme targeted at parents of female chil-dren. The scheme encourages parents to establish a fund for the girl’s future expenses, like education and marriage, by opening an account anytime between birth and until she reaches the age of 10, which matures after 21 years of the opening of the account.

These initiatives, while still in the nascent stages, have given an impetus to the mission.

The prime challenge facing the Indian society is the lack of awareness of the financial inclusion initiatives by social enterprises and the government especially in rural areas and regions disconnected from the mainstream.

According to the latest Inclusix index by rating agency Crisil, which measures progress in financial inclu-sion – taking into account data provided by the Reserve Bank of India, the Microfinance Institution Network, and the Insurance Information Bureau of India – the country’s score surged to 58 in financial year 2016, compared to a score of 50.1 in financial year 2013. The report states that the improvement in ranking took place largely on account of the Jan Dhan scheme, which facilitated stronger penetration of deposits and credit accounts.4

The contribution of such social enterprises as well as government schemes are delivering significant results notwithstanding the several challenges on the financial inclusion front – which impede the access to financial services for people living in the hinterland, away from the developed cities and towns.

The prime challenge facing the Indian society is the lack of awareness of the financial inclusion initiatives by social enterprises and the government especially in rural areas and regions disconnected from the mainstream. According to a 2017 report by EY and Assocham, a trade association in India, over 19% of India’s populace remains unbanked, despite the initiatives by the government, and the strong focus on getting people into the formal banking system.5

Apart from lack of information and education, what has made matters more difficult is the rigid banking system in India. As banks and financial institutions lack the willingness to take their products to regions where returns and revenues might not be high, which happen to be the rural regions, a large section of the people remain excluded.

Additionally, access to financial services among the unbanked remains largely provided by microfinance institutions (MFIs). These are institutions that provide funding to the low-income groups or unemployed, to facilitate their businesses. However, unlike social enterprises, their aid is largely financial in nature, with less focus on extending mentoring, education and providing market linkage to the entrepreneurs. The Assocham-EY report cited above states that the microfinance industry is dominated by Non-Banking Financial Company (NBFC) MFIs, who have captured 88% of the market share. 

These MFIs charge a hefty interest for providing credit to budding entrepreneurs in the low-income groups. While banks in India are known to provide loans with interest rates ranging from 12–19%, MFIs provide loans with an average interest rate of 23.13%, which is a major factor that could discourage people from availing of such financing.6

Of late, the banking system in India has been plagued with rising non-performing assets (NPAs). Government figures put the amount of NPAs at 8.41 trillion as of December 2017, the fiscal third quarter (India follows an AprilMarch financial calendar).7

As fallout of the rising NPAs, banks have become more stringent and conservative in extending loans and are keen on avoiding extending loans to sectors that may not guarantee repayment or high interest income.

Geographically and socially, the vast tribal population in India, in certain pockets, remains isolated from the mainstream and this isolation of communities has been a huge factor in the lack of progress. While successive governments have highlighted the need to get tribal communities into the mainstream, there has not been any significant progress on this front.

In addition, these tribal communities face the problem of male dominance, where female members are prohibited from taking financial responsibilities into their hands, as such tasks are still viewed as “a man’s job”.

Finally, the problem of insurgency in tribal regions acts as another impediment to realising the dream of financial inclusion. Tribals are often affected by armed insurgents, and threatened not to cooperate with government officials, as a result of which many of them remain wary of taking help extended by gov-ernment officials. Similarly, banks and financial bodies are reluctant to operate in areas that may pose a threat to lives of their staff, and operations.

Financial inclusion is vital and could be the trump card in tackling inequalities, thus making it a powerful tool to ensure inclusive growth.

While the key is establishing trust among tribals and providing them a direction, it is imperative to ensure people understand fiscal prudence and to take note of the opportunity to enhance the fiscal health of their community as a whole.

Financial inclusion is key to empowering women. Access to financial services is a critical link between economic opportunities and outcomes. Financial inclusion is vital and could be the trump card in tackling inequalities, thus making it a powerful tool to ensure inclusive growth. With women constituting almost half the population, their equal participation in society cannot be overlooked to achieve sustainable development.

It is with this outcome in mind that the government has introduced such welfare schemes. The support extended by officials, and these operations being conducted at a national level directly aim to improve the lives of women in tribal communities across the country.

Social enterprises like VV are not only empowering women economically and socially but also creating role models and change-makers who could induce positive change in their communities. They are creating a holistic system of intervention and services that give marginalised women the tools to take control of their businesses and change their approach in taking their products to the market.

The stakeholders involved, such as the government, regulatory authorities, financial institutions, technology service providers, and social organisations, need to step up their approach to financial inclusion. A strong collaboration, which involves effective coordination between these entities, is imperative for formulating and implementing effective interventions.

This article was originally published on 24 July 2018.

About the Author

D. Anisha Adhikari is a Social researcher and Economic Affairs Officer at the UN, based in Geneva. Prior to joining the UN, she worked as an IT security consultant with Yahoo and JP Morgan. She is also a public speaker who catalyses social impact leadership and has been helping social enterprises tackle their challenges using design-thinking methodologies, facilitating events and collaborations. Anisha holds an MS in Information Security from Florida State University.

Siddhant Mishra is a Business journalist, based in New Delhi, India. He has previously worked in leading dailies like The Hindu BusinessLine, and Mint. He has also worked briefly as an investment banking data analyst with Verity Knowledge Solutions, an affiliate of UBS.



1. International Labour Organisation (2013). India: Why is women’s labour force participation dropping?.–en/index.htm

2. Rhythma Kaul. (2017). India’s Maternal Mortality Rate on a decline.

3. Pradhan Mantri Jan Dhan Yojana. (PMJDY).

4. Crisil Research (2018). India’s financial inclusion improves significantly.

5. The Associated Chambers of Commerce & Industry of India (2017). 19 per cent of Indian population is still unbanked: ASSOCHAM-EY.

6. Sa-Dhan (2016). The Bharat Microfinance Report 2016.

7. Bank gross NPAs at Rs8.41 trillion in December 2017.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.