Kerala: A Model State for Financial Inclusion

Devanshi Patani|Sep, 2016

In November 2014, Kerala became one of the first states in India where every household had access to at least one bank account. The Ministry of Finance applauded this result, declaring it a “100 percent saturated state”. However, a recent estimate found that a large number of accounts are dormant or inoperative and, further, that many individuals hold multiple bank accounts, which presents overindebtedness concerns. Yet, even without full saturation, Kerala remains a leader in financial inclusion in India and, thus, the industry can learn from its accomplishments.

Along with its exemplary financial services access statistics, there is no doubt that Kerala is a model state for financial inclusion partly due to its history, being home to one of the five financial institutions in India during the 1800s. It developed its banking infrastructure relatively early and, due to extensive population segmentation, created a large network of branches that still caters to different communities and customer bases.

MIX has mapped over 280,000 access points at the district level in India and made them available through interactive dashboards and data visualizations on its FINclusion Lab platform. The platform includes the geospatial components of both supply and demand for financial services, and in doing so it provides a nuanced picture of how market dynamics may influence the types or availability of financial services in a given area. The goal is to help financial service providers (FSPs), policy makers, and other industry stakeholders to more accurately assess demand, identify regions lagging behind the national average, and develop solutions to increase financial inclusion.

We recently launched the Kerala Workbook - and accompanying report - to offer insight into drivers of financial inclusion at the district, taluka, and village levels in the state. For example, public sector banks account for 48 percent of all financial access points in Kerala, signifying the strategic importance of these banks in the drive to financial inclusion. However, by drilling down to the district level, it becomes clear that these are concentrated heavily in two districts, one of which is the state’s administrative headquarters and the other being the commercial capital. So, although public sector banks account for a large portion of all access points in Kerala, they are not effectively reaching certain segments of the population.

On the other hand, India Post accounts for only 22 percent of the total access points in the state, yet its presence is more evenly distributed. Further, if we look at only branches, India Post has a 42 percent share compared to the public sector banks’ share of 30 percent. Branches often provide more product and service options to clients when compared to other access point types, indicating added value for those outside the reach of public sector banks.

The interactive dashboards highlight potential opportunities for FSP expansion. When comparing the number of access points to the district population, Malappuram stands out as an outlier against other districts in Kerala. Given its high population but low number of access points, FSPs could build strategies to target this district for expansion and reach underserved clients.

Although there are many unique characteristics to Kerala’s financial services landscape, industry stakeholders can use the Kerala Workbook to examine granular data and compare various indicators, view information differently through interactive visualizations, and uncover actionable insights that can be applied to other regions in the country and, indeed, around the world. Head to the FINclusion Lab platform to explore how to leverage financial inclusion data from Kerala and elsewhere.