DEMYSTIFYING THE ROLE OF COOPERATIVES BANKS IN FINANCIAL INCLUSION: STUDY ON EMERGING MICROFINANCE BUSINESS MODEL FROM INDIA

Paper Number :WP 17/2022
Publication Date :May 3, 2022

Financial inclusion facilitates households’ access to and use of financial services and thereby improves their socio-economic wellbeing. Several policy attempts are being made in India to reach the financially excluded segments of society through formal institutions. Cooperative banks have played a critical role in the countryside to reach the rural poor through collateral-free lending practices. In this study, we analyze the microfinance business model of a District Central Cooperative Bank (DCCB) and its role in financial inclusion. The study finds that DCCB has innovated unique approaches to reach the unbanked and under-banked rural segments through microfinance-plus services. As a result, the bank could reach 0.5 million poor households at the bottom of the pyramid and could attain profitable microfinance businesses. Commercial, rural and cooperative banks have ample policy direction from this study to adopt a similar microfinance business model and to make financial inclusion a sustainable development effort.