Governments across the world are putting their act together to combat the COVID-19 pandemic. India’s finance minister Nirmala Sitharaman recently announced that for three months (starting from April, 2020) an ex-gratia payment of ₹500 would be credited to nearly 200 million women Jan Dhan account holders. This decision merits a discussion on the intended versus the actual benefits that would accrue to the eligible last mile beneficiaries.

The Pradhan Mantri Jan Dhan Yojana (PMJDY) was launched by Prime Minister Narendra Modi in August 2014. The PMJDY scheme was successfully able to capture the imagination of the country’s 1.3 billion people, not only because it addressed the universal need of access to basic banking facilities, but also because it delivered on its promise by opening nearly 371 million bank accounts for the hitherto unbanked individuals. The unbanked are typically the people at the bottom of the pyramid, the weaker and vulnerable sections and low-income groups and providing financial services to them is a key global priority.

While the PMJDY scheme/initiative was almost unanimously hailed as a perfect means of accelerating financial inclusion and shaping a ‘new’ India by enabling universal access to basic banking services, usage of accounts remained low. In addition, reducing the gender gap in financial inclusion has been a tough nut to crack. This is so because in addition to various supply and demand side barriers (like remote availability of financial services, lack of necessary documentation and high cost of financial products, among other factors) women in developing countries such as, India, also face systemic barriers in the form of deep-rooted social and cultural norms that relate to women’s mobility and their interaction with members of the ‘other’ sex.

Why this move?

There has been little discussion on the logic behind the magic number of ₹500 per account. Though the amount per se is debatable, without getting into that discussion, let us attempt to answer a simpler question: Given the timing of this announcement, what could be the possible intention behind this decision?

It is obvious that the idea behind this decision is to do with putting money in hands of the poor and vulnerable sections of the society to help them mitigate the impact of the nationwide lockdown in face of the unprecedented Covid-19 pandemic. At a time when the pandemic has stalled all kinds of economic activity, it is not surprising that women in India are going to be disproportionately impacted, as almost 94% of total women workers are engaged in the informal sector in India. So the heart of this decision is certainly at the right place. And to put it simply, the government doesn’t want the poor and vulnerable people to starve to death amidst the lockdown.

However, various challenges plague its implementation and subsequently impede the benefits such a decision set out to achieve in the first place. For instance, the logistics associated with money withdrawals in times of lockdown is a big challenge. The timing of these payments doesn’t help either, providing the payments before (/after) implementing (/lifting) the lockdown would have helped the people and earned the government some brownie points.

With the banks starting cash transfers to Jan Dhan accountS, it is still not clear as to how will this move ensure that the dire needs of food and nutrition of the poor and vulnerable sections would be adequately met. In this regard it is important to look to the south and learn some lessons from the state of Kerala, which has a success story to share that can be suitably replicated pan-India.

The way forward: The Kerala model

Kerala government, as part of its COVID-19 relief package (of ₹200 billion), has started 1,255 community kitchens in all the 14 districts. The initiative aims to provide free food at the doorstep for the destitute, including the homeless, migrant labourers, bed-ridden, inmates of care homes and people residing in tribal hamlets. The idea behind doorstep delivery is ensure strict enforcement of social distancing guidelines. Presently, Kerala’s community kitchens are cooking and distributing around 2.8 lakh food packets a day. The community kitchens, in addition to providing free food to the most destitute and vulnerable people, also serve food on chargeable basis (₹30 per meal, inclusive of the food delivery charges of ₹5) to people suffering from age and disease related infirmities and can afford to pay the said amount.

Kerala is regarded as one of the most decentralised states in India, which means that the local self-governments (also referred to as the Panchayati Raj institutions) are empowered to take relevant expenditure decisions. Rightly putting their powers to use, the local self-governments in Kerala have committed to provide ₹30,000 as a one-time grant for community kitchen formed in each gram panchayat. In addition, the Kerala state government has suggested the local self-governments to find sponsors to support the functioning of these community kitchens and individual households are also being encouraged to give donations in cash or kind as a mark of their solidarity towards this initiative.

Kerala government’s poverty alleviation project, known as the Kudumbashree State Poverty Eradication mission has been at the forefront in implementing the community kitchen initiative with nearly 80-90% of the community kitchens being managed by the Kudumbashree members. Kudumbashree Mission is centered around self help groups (also called the neighbourhood groups), wherein each group works as a voluntary group of about 10-20 women members cutting across barriers of caste, creed and religion. Presently, Kudumbashree mission has a network of 4.3 million women who are organised into 270,000 neighbourhood groups. The strong convergence of Kudumbashree neighbourhood groups with the local self-government has been the primary reason behind the success of various welfare initiatives that are rolled out by the state government.

On an average, one community kitchen can distribute approximately 250 food packets a day, at an average cost of ₹30 per packet. So, if a community kitchen was to run for three months at a stretch, it would cost the exchequer about ₹675,000. With regards to payment of ₹500 per month to womens Jan Dhan accounts, it is hard to believe that this intervention alone would be successfully able to sustain a household. On the contrary, by spending equivalent amount of money (₹300 billion) in the community kitchen initiative, government can run close to 450,000 such centers, potentially saving millions from starvation. This would amount to running around 1300 community kitchens in the 340 worst hit Covid-19 Indian districts. And just like the Kerala model, the government could also leverage the vast existing network of Self-help groups (there are over 10 million self groups in India) to manage such community kitchens. Not to mention, community kitchens sow the seeds of service, brotherhood and fraternity among community.

So, if we were to ask the question – do the poor need cash or calories? Well, they need both, but given the present situation, the most compelling reason to invest resources in kick-starting the community kitchen model is to not only save people from dying of hunger, but to also avert the risk of riots over food. At the same time, investing in the community kitchen model in no way amounts to undermining the role of cash transfers. On the contrary, we need massive cash transfers that continue in the long-term until the economy gets back on track.

Post Covid-19: Fixing the financial inclusion gender gap

Once the COVID-19 pandemic has been addressed, and India returns to the ‘new’ normal, our efforts towards closing the gender gap in financial inclusion, must continue unabated. We mentioned in the beginning that implementing cash transfers to women Jan Dhan accounts is certainly a step in the direction, but only in the short run. Let us reflect on the key enablers that will help in reducing the gender gap in the long run.

Technology will indeed have a promising role to play by enabling access to and usage of digital financial services, such as digital payments. For instance, given the high penetration of mobile phones across countries (nearly 80% adults in emerging economies own a mobile phone), there is immense scope for realising the potential of mobile payments in bolstering financial inclusion. Yet, gender gap with regards to mobile phone penetration in India remains a major challenge. Going by the Global System for Mobile Communications, 2019 report, compared to men, women in India are 56% less likely to use mobile Internet and 26% less likely to own a mobile phone.

Apart from leveraging technological innovations to enable adoption of digital financial services, offering customised solutions built around the pain points of women, and spreading financial and digital literacy could certainly move the needle on closing the gender gap in financial inclusion. However, the long and up-hill battle against the deep-rooted social and cultural norms, traditions and gender biases will have to be fought in the minds of all the concerned stakeholders.

Views are personal.

The author is assistant professor of finance at Bhavan's SPJIMR

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