Financial inclusion of Indian Muslim

Indian government has initiated several programs recently to expand the circle of financial inclusion. In August 2014, it launched Pradhan Mantri Jan Dhan Yojana, which makes the Guinness world record to open the highest number of bank accounts (18096130) in a week, and the overall number of bank accounts reached to 153015363 as on 29.04.2015 after launching this campaign. Accounts with zero balance and on the basis of minimum documental requirement attracted the particular poor segment of society who couldn’t have the access of banking services earlier. Similar number has been sharply increased earlier also during the previous government for making the compulsion of banking account for scholarship schemes, MGNREGA and other cash benefit schemes. Aadhar introduction was also the part of this banking inclusion exercise so that a bank account can be opened with minimum documental requirements.
After overwhelming response to Pradhan Mantri Jan Dhan Yojana, the government has initiated two new schemes, Pradhan Mantri Suraksha Bima Yojana and Pradhan Mantri Jeevan Jyoti Bima Yojana, towards the financial inclusion of poor people in the insurance sector by paying the nominal premium amount. Insurance schemes also have witnessed the overwhelming response by enrolling the 63276955 person as on 11.05.2015.
These steps of course have enlarged the banking and financial penetration level in India but the most important part is the extent of benefit level. Besides the number of account, level of transaction and availability of credit facilities should also equally reach at more micro level so that poor people can have the access of such services for their financing needs. Success of this campaign is also criticized due to the false promises of government regarding insurance security and the transferring of deposited amount in these accounts to facilitate the loan for the corporate.
Banking and financial services becomes the necessity to sustain in such a banking linked environment. Banking account is mandatory to avail the benefit of government schemes, making the online transaction and in many other occasions. In similar manner, other financial services like insurance are also becoming the essential part of routine life. Sudden demise of main bread earner has the dual effect on families, first is departing of their beloved one and another is their financial crisis due to not having the earning hand in family. Thus, the financial services become the basic needs like others. Theses government schemes would serve the purpose of widely excluded groups if implemented properly.
Muslims are largely excluded from mainstream financial services so far due to their internal and external reasons. Internally, they are reluctant to avail the mainstream banking and financial services due to involvement of the interest element in these transactions. Interest is strictly prohibited in the monetary affairs according to the Islamic teachings. Externally, they are unable to fulfill the standard criteria for scheduled commercial banks and their localities also lack the banking infrastructure. Therefore, banking penetration level of Muslims in comparison to other religious communities is very low as shown in the given table:
Community-wise Estimated Proportion of Households having Bank Account, Post Office account, Other Deposit account and, Kisan Credit Card (KCC) in India (January-December 2013)
Percentage of Households having
Bank Account
P.O. A/C
Other Deposit Account
Kisan Credit Card (KCC)
With banking access becoming easy through the aforementioned schemes, the government tried to take the financial services to each households of country including the Muslim. In response of such initiatives, level of registration in mainstream banking has increased tremendously in Muslim concentrated districts too.
Muslims are still in dilemma to avail the mainstream banking and financial services due to interest element but they are inclined to participate unwillingly due to its dire need in their routine life. In such Indian circumstances, Islamic banking and financing options are not going to be available institutionally in coming years while the bad experience of Muslim-run institutions in private sector further distanced the Muslims from interest free system. Failure of such experience is mainly due to lack of professionalism and not dealing with the true spirit of Islamic teachings. But its overall impact due to government hesitation or failure of Islamic NBFCs ultimately disappointed the common Muslim form the Shariah compliant alternatives. There are only two ways forward, either we develop our own such competitive mechanism within the laws of country to provide the alternatives of finance or we up to some extent allow to avail mainstream financial services.
For the financial inclusion of Muslim, there is a need to formulate multi-dimensional strategy by government and community members to enhance the access of banking as well as other sustainable financial services like insurance, money markets and other intermediaries. Tentative measure need to be adopted to include the Muslim in mainstream banking with subsidized loans and other provisions to fulfil their basic requirements till the faith based alternative products and services are introduced. Legislation or proposing an amendment in prevailing banking system seems a lengthy process. Successive governments are also not taking Islamic finance or banking seriously but alongside the government, community members itself can initiate some tentative measures under the existing banking and financial system by utilizing the community resources. Till ideal solutions come out, some allowances to take the advantage of these governmental sector schemes should be provided according to ‘objective of Shariah’ in such Indian context so that basic needs can be fulfilled.

Courtesy : Indiatomorrow.Net

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