Guwahati: In Mizoram, despite the availability of several payment options, majority of the general population is not aware of them.

A study carried out by the Reserve Bank of India, titled “Determinants of Financial Literacy and Financial Inclusion in North-Eastern Region of India: A Case Study of Mizoram”, has found that only 34.6 per cent people were acquainted with all four payment options – debit cards, credit cards, prepaid cards and mobile payments.

The study evaluates financial literacy in the north-eastern region of India where banks are known to be scarce. The findings are based on primary data, collected through a survey of 523 respondents selected from eight blocks, covering four districts of Mizoram.

It was found that “out of 523 respondents, only 181 (34.6 per cent) were aware about debit cards, credit cards, prepaid cards and mobile payments”. The remaining 20 per cent (101 out of 523) of the respondents reported that “they did not know any of the four payment options”.

It was found that 299 respondents (57.2 per cent) were using at least one option, and remaining about 43 per cent respondents were not using any of these options. 32 per cent of the respondents were not aware of any financial products other than the savings bank account. It was also revealed that compared to the national average, the Credit Deposit (C-D) ratio and use of life insurance in Mizoram is very low.

The study recommends an extensive awareness campaign to educate Mizoram about insurance, both life and general. Popularising the availability of credit-related products and making them more accessible and affordable is a must according to the study.

“Mizoram is one of the most literate states in India. Still, the level of financial literacy is low because school curriculums do not include personal finance. It is necessary to incorporate practical aspects of personal finance (e.g., budgeting, savings, investment products, payments services, formal credit, goal planning, need and importance of insurance, retirement planning, etc.) in the school curriculum,” the study said.

The actual users of the select schemes were found to be even lower and less than only 25 per cent respondents were aware of all 11 products selected for the study. 16 per cent of respondents were aware of only two schemes (out of these two, one is a savings bank account).

The study, while revealing a lack of awareness and interest in long-term investments, also added that due to the outbreak of pandemic, it was not possible to move within the state which is why a “purposive sampling method has been used” for the research and the results “may not be representative of the state population.”

There are 28 banks operating in Mizoram, including 16 public sector banks, eight private banks, one payments bank, one regional rural bank and two co-operative banks. In all, there are 224 bank branches, of which, only 67 (33 per cent) cater to rural areas.

The number of banks in Mizoram is low when compared to other NER States owing to the lack of infrastructure across the state’s hilly terrain. The study recommends the need for alternative options for banking business and suggests the need to reform the existing branch-authorisation policy, which sets banking outlet opening quotas for individual banks at national level but not at the state-level.

Although Mizoram has more ATMs than the rest of the north-eastern region, the ATM penetration in the state can be attributed to public-sector banks, which account for around 80 per cent of the ATM network.

Among the identified factors, the place of residence (block), employment type and nature of family (joint versus nuclear) of the respondents were seen to strongly influence their financial inclusion and financial literacy status.

There is also a need to expand the role of Mizoram Rural Bank in promoting financial inclusion in the state. The SHG-bank linkage programme also needs to be fostered as it can achieve desired outcomes, especially in rural areas. While the limited banking outreach may not have been able to fully meet the credit demand of the state from the formal banking channel, poor industrial base and traditional farm practices and inadequate infrastructure facilities may be keeping the credit absorption tepid in the state.

“This also gets reflected in lower C-D ratio and credit-GSDP ratio. Against this backdrop, there is a greater need for strengthening the infrastructure in the State, promoting industrialisation, fostering commercial cropping and food-processing industry and also developing forward and backward sectoral inter-linkages to allow the financial sector to play its due role in fostering growth,” the study said.

Responses were collected for seven financial schemes and it was found that for most of the schemes, awareness was less than 50 per cent. On the other hand, among those who were aware, majority did not avail the schemes. The actual number of respondents who were availing the schemes was less than 20 per cent in each of the cases.

With the passage of time and advancement in technology, the mode of delivery of financial services has also evolved. Financial services are no more an exclusive domain of banks. A good number of alternative financial institutions have come forward to make available select financial services to the common people. An attempt was made to investigate the level of awareness of select financial institutions, viz., NBFCs, MFIs, SHG, SFBs and payment banks among the respondents in the eight blocks of the State.

“More than half of the respondents did not know about NBFCs, MFIs and SFBs. Around 80 per cent of respondents were found to have basic awareness about SHGs and payment banks and a very small number of them availed services of these financial institutions. Measures are required to make these financial institutions known to the people” the study said.

The study is co-authored by Bhartendu Singh ( Professor in the Mizoram University, Mizoram), Raj Rajesh (Director, Department of Economic and Policy Research (DEPR) of RBI Kolkata), Ramesh Golait (Assistant Adviser in Department of Economic and Policy Research (DEPR) of RBI Mumbai) and K. Samuel L. (Manager, RBI Aizawl).

Also Read | Mizoram study group to collect information on border areas

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