Understanding Rural Credit in India

"If Rural Credit has failed, it is we who have failed Rural India"

Many years ago, while a Faculty Member at the Reserve Bank of India’s prestigious College of Agricultural Banking at Pune, we were invited to conduct a programme on Agricultural Credit for the Agricultural Officers of Punjab National Bank. This is in a way Ironic. Neither me or my co-faculty Shri RN Dash (R N Dash | LinkedIn) were agri graduates, nor did we have experience in lending, and we trying to teach seasoned Agricultural officers of one of the largest Public Sector Banks about Agricultural Credit? Well, the nomenclature of the programme may be training, but it is not one-way communication, but sharing, learning from each other, and celebrating achievements, never about ‘Teaching’. Such programmes are always a challenge, but in a tight spot, the aura of being from RBI pulls you through.?

The event was held in their home turf, PNB’s Corporate Training Centre in Delhi, a place to which a lot of sentiment is attached, as it was here that the PNB Head Office was housed when it moved from Lahore after partition.

In one of the sessions, I asked the officers to reflect on, and narrate a high point in their lending career. Joginder Singh, a 6-footer agricultural officer in his late 40’s spoke about a dairy loan account in his portfolio that went overdue. ?One early winter morning (that’s when you can catch people), he went on his motorbike to the home of the borrower, after preparing himself to confront the borrower who was given loan for a buffalo under a Government programme.

As he neared the borrowers house, Joginder parked his motorbike and confronted the defaulter. The lady was feeding the buffalo that was bought with the bank loan, while balancing her baby at the hip. Looking at him, she said ‘why did you burden me with this liability, as if I did not have enough troubles already?’ As he cooled down and heard her out, this tall lanky Sikh officer was moved by what she narrated. Deserted by her husband, with an infant to care for, and a barren animal (that had not conceived even after many attempts) to feed, she was, inspite of all the hardships trying to live.

Rummaging his pockets, Joginder took out the little cash that he had, gave it to her saying ‘Bibi, feed your child and the animal. I will be back, let me see what I can do.'

Rushing back to his branch, even before eating the breakfast his wife had packed, Joginder took out the loan documents of the borrower. He processed papers for release of loan for the second buffalo and got approval of the branch manager. That done, he felt relieved, sat down for his much-delayed breakfast.

The rest of what Joginder narrated that day, my memory fails me, but it does not matter. That he considered this event a high point in his career is evidence enough that it had a happy ending.

Contrast this with another page from my field diaries. On a due-diligence visit to a large south Indian microfinance institution (now turned bank), we were escorted by their PRO on a visit to a branch. Being from film Industry background, the conversation along the way with him was interesting, about his experience with on-location shooting in China.

Reaching the venue of the meeting, a kerbside culvert where the clients congregated, we waited for the loan officer who arrived at the assigned time on his motorbike, and immediately got down to collecting the installments due. Taking the opportunity, I asked the loan officer to name one of the borrowers present, whom I pointed to. He drew a blank. Then I asked if he knew the name of the one beside her. No answer. Taking the excuse that he was getting late for his next meeting, he scooted off, much to his relief.

After the loan officer left, I spent some time asking the members, what economic activities they had undertaken with the loan from the MFI. One said she was making straws and another something else. ‘Can I come to your place and have a look, I inquired?'. She said this was not the ice cream consumption season so she was not making them at present. Another had another excuse. I found the answer to my question. It’s not necessary to go deeper and embarrass oneself.

Contrast this to another smaller MFI operating in the same geography (periphery of a metropolis), around the same time, where I accompanied Jacobine Geel (https://nl.wikipedia.org/wiki/Jacobine_Geel) on a visit to their clients. It was a settlement of Romany (Gypsy/Banjara) people who are considered wild to deal with. Here, the loan officer, a lady, had learnt the language of the Romany people and related to them at another level. The place was decked-up like for a festival, with people having stalls of their wares (mostly tribal jewelry). The interesting part was when Jacobine was requested to counsel a young couple who were living apart due to family differences. Unfortunately, the husband ran away on seeing us coming, before Jacobine could meet him.

As we romanticize the use of IT to reach financial services to unserved markets, and unreached clients, these and several other memories come back to my mind, and with it the questions.

How far can technology replace the human touch?

Would the client of Joginder have been comfortable sharing with a 20 something old guy (like the microfinance loan officer) about her problem?

Even if she did, would that guy have time to listen to her considering his tight schedule and rushing from one collection meeting to another?

And, would that loan officer have the capacity to address the problem and resolve it the way Joginder did?

Tech solutions may have their place in analytics and offering solutions to scale business, and reaching unserved markets (if any), but to claim that conventional banking has not worked is a story I do not buy.

If Rural Credit has failed, it is we, the people in positions of power and policy who have failed Rural India. You may ask me how? By not building a cadre of dedicated rural credit professionals of the Joginder kind, in the thousand and ten thousands. ?

Do we have enough people like Joginder in India? Of course, we do. In my short time in the field, I have met scores such; Shaheena Begum, Chandrashekar, Anand, Venkartram and the list goes on. On each I could write an essay.

Does the banking system penetrate the far corners of Rural India? Of course, it does. It has been painstakingly built over years starting from the early 1970’s.

Then what exactly is the problem?

The problem is of not giving due recognition and credit for what has been achieved; the failure to build a committed and empowered pool of rural credit officers capable of saturating the length and breadth of the country, and the hints of vacating this space and giving it away on a platter to others who may not be the able to service the rural market any better and at competitive rates, combining head and heart.

Now is the time to ponder. Tomorrow may be too late.