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Financial inclusion eludes large sections of backward caste migrants in Gujarat

By Rajiv Shah 
A recent study, “Remittance Needs and Opportunities in India”, sponsored by GIZ, or the German Society for International Cooperation, and the National Bank for Agriculture and Rural Development (NABARD), and carried out by Dr YSP Thorat and Dr Howard Jones, has found that formal financial institutions, including nationalized banks, may have taken take firms roots in Gujarat, but when it comes to serving the poor migrants seeking to transfer their remittances, these have failed to deliver. Estimating that “average annual remittance amount is about Rs 20,000”, the study says, even today, “informal remittance channels are pervasive and attractive due to the multiple functions they can serve.” In fact, on-the-spot survey of Rajasthani migrants in Gujarat suggests around 90% of the respondents “carry cash themselves or send it through others.”
Pointing towards reasons, the study says, “Most migrants do not have bank account at the destination point where they are working. The migrants value the security and speed of money transfers highest. They see these attributes best met by banks, but they continue to mainly use informal transfer methods. This may be due to factors such as inconveniences related to banking services (e.g., travelling and waiting time), know-your-customer principles and other banking requirements, and a low degree of financial literacy and capability.”
While there are researches which suggest that measures for improving financial literacy and capabilities as well as consumer protection are central to successful financial inclusion strategies, study finds that “many migrant workers do not have adequate information about formal financial services, and many of those who have accounts with banks do not use them effectively.” Thus, “while 35% of the respondents have a life insurance, many of them do not understand the product and regard it as a savings rather than insurance instrument. While commercial banks have the necessary technical infrastructure, they lack convenient delivery channels.” 
The study adds, “Regional rural banks and cooperatives usually do not meet the technical requirements, while they have the advantage of proximity and large service networks reaching out to rural households. The India Post has the largest office network, but its services take a relatively long time and are sometimes not perceived as customer-friendly. Most service providers have not made remittances a business proposition, but there is considerable potential for remittances to be linked to other financial services. Migrants need a secure place to deposit and remit small amounts of money. Many of them live at their work sites and get paid on a daily basis, and remittance recipients wish to receive relatively small amounts frequently.”
Pointing towards why the topic of domestic migration and remittances is particularly pertinent to India, the report says, India has “more domestic migrants than the total population of the largest western European country.” Yet, it regrets, these migrants have failed to get necessary attention because they “are frequently from Scheduled Caste (SC) and Scheduled Tribe (ST) populations, which are historically disadvantaged communities in the country”. While SC and ST go to work in brick-kilns, unskilled construction, loading and unloading of trucks, and agriculture, where living and working conditions leave much to be desired, other backward castes are also “heavily represented”, typically working in “small industrial units, in security services, as drivers, in the hospitality industry, and in plumbing and carpentry.”
Estimating that there are around 100 million in India, the report says, “Micro-studies also emphasize the importance of remittances in rural household budgets. For example, in Udaipur district in Rajasthan, an area with large numbers of tribal migrants, remittances accounted for between 42-48% of total annual household earnings. A study of six villages, across three diverse regions in Madhya Pradesh, showed that remittances accounted for 30% of total household earnings. In Jhabua district, southern Madhya Pradesh, households in the three poorest quintiles were shown to earn between 65-70% of wage income from seasonal migration. Data collected under the Western India Rainfed Farming Project showed that in the tribal areas of Madhya Pradesh, even higher proportions of household cash income were coming from migration.”
The study adds, “The southern part of Madhya Pradesh is predominantly tribal, with high levels of poverty and out-migration. The poorest migrate for nearby low-return farm work, the slightly better connected/experienced migrate to Maharashtra and Gujarat. In general, poor migrants from this region do not send remittances, rather they hand-carry money on the way home or send money through friends and relatives.”
Things are no different with regard to large-scale migration from Ganjam and Puri districts to Surat and other places in Gujarat. “Many of the migrants work in the textile, and diamond cutting and polishing industries”, the study says, adding, “A recent informal estimate suggests there are around 900,000 Oriya migrant workers in Surat, of whom 600,000 are from Ganjam district alone. One NGO estimates that Oriya migrants remitted as much as Rs 2,000 crore in 2007. A 2009 study of Oriya migrants in Surat shows a monthly average of Rs 1,427 being remitted, with wage earners remitting relatively less and self-employed or private sector employers remitting up to Rs 1,655 monthly. The same study notes how amounts remitted also depend on the number of dependents, with single migrants remitting nearly half their earnings. The use of banks to remit money has fallen, while the use of private operators has expanded, and many remitted through family members.”
Referring to its on-the-spot surveys, the study says, most migrants (76%) belonged to the group of 20 to 39 years with high proportions of the migrant respondents being married – 74% of the Rajasthan migrants in Gujarat. Education levels were particularly low for these migrants – nearly 40% of the respondents had no education, and a further 17% noted that they had attended school just up to class three. “A high proportion of Gujarat-Rajasthan migrants (45%) were living without their family members at their destination points… This was probably due to the relative proximity of their home villages and to the type of work undertaken. Even so, 21% of these migrants were living with their wife/husband, and 33% were living with varying combinations of other family members, many of whom were also working at the destination points”, the study adds.
The study says, “The Gujarat-Rajasthan study illustrates how the small land areas owned/cultivated by the origin point families of the migrants give an initial indication of the imperative to migrate. Of those migrants able to provide a measure of land area (some stated this in terms of the seed needed to sow the land), the average was 1.44 hectare with a range of 0.16 to four hectare. Moreover, most of this land is unirrigated, with poor quality soils, and often jointly owned with siblings, thereby effectively reducing the per household land areas even further.”
As to the type of work they do, “in Gujarat, the majority (48%) of the tribal migrants from Rajasthan were engaged in construction work, while 19%, 14%, 12% and 5% of these migrants worked in other services (e.g. cleaners), hotels and restaurants, transport (drivers) and trade (shop assistant) respectively. Just one of the Rajasthan migrants was employed in a factory. In Himatnagar, the factory owners specifically mentioned that they preferred hiring labour from more distant parts of India, as, compared to the Dungarpur tribal migrants, they were less likely to be here one day and gone tomorrow. Only six (14%) of the 42 tribal migrants were self-employed: two running tea stalls, one running an ice-cream stall and one a pan shop; two were drivers.”
In fact, the study says, “The migration histories for the Rajasthan migrants in Gujarat showed that there were opportunities for mobility and advancement, most notably in the construction sector, for tribal migrants traditionally regarded as occupying the lowest rungs on the migration ladder. For example, some migrants started their work as labourers, progressed to undertaking more skilled building work, and then became labour contractors. Two migrants started work as tea stall helpers and then set up their own businesses. However difficult it may be, migration initiated as a coping mechanism does not always preclude mobility and advancement.”
The study further says, “When giving reasons for their migration, the Rajasthan migrants in Gujarat emphasized negative aspects of life and work in the village e.g. little income and work , little and poor quality agricultural land, the need to finance major events (e.g. marriage), and calamitous events in the family (e.g. deaths of both parents). They also emphasised what they thought were the more positive aspects of life and work at the destination points e.g. the ability to obtain regular work, the ability to earn cash, etc. Some of the Rajasthan migrants in Gujarat reported unexpected/unplanned setbacks like ill-health and accidents (especially on building sites), which reduced their ability to save and remit.”
A striking example of financial exclusion of Rajasthan migrants into Gujarat was that just two migrants (5%) had active bank accounts at their destination points. “Another four migrants (10%) held bank accounts which were no longer used. The great majority (86%) of this migrant group held no bank accounts where they were working. At the destination points, the reasons given for this included having little money to deposit, the paper work and documentation required to open an account, and the fact that they were remitting any spare money home, and the main reason given for having no account in the village was lack of money. A number of the migrants without any schooling noted that they did not want to ask others for help in filling out forms.”
The study says, “The Rajasthan migrants in Gujarat indicated a rather wider set of uses, some of which had important productive elements, significant when we consider that remittances for this type of migrant stream are often associated purely with consumption activities. Thus, although the largest number of migrants (23) reported that the main use of remittances was for household expenses and food (15), a number of migrants reported remittances back home being used for farming activities (13), medicine (6), education (5) and paying back informal lenders (4). Moreover, all these migrants reported that it was important/very important to send money home and many felt pride and happiness when they were able to do so”.
Yet, “only two (5%) of the Rajasthan migrants remitting money home from Gujarat had used a bank account to do this; they were mostly carrying cash themselves or using others (e.g. fellow-villagers, family members) to do this for them. In a few cases, some of the migrants used a bus company employee (driver or conductor) to take money back to their home district. One relatively well-to-do migrant, if his parents needed money urgently, would telephone moneylenders in his village, and he would pay them later for providing such funds.”



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