Banks in India have the potential to meet the financial needs of millions of poor people in rural areas. But the negative attitude of bank staff towards lending to poor people limits this potential. An innovative training programme in Madhya Pradesh has been changing the mindset of rural bank managers.

Research from the University of Reading, in the UK, and the Reserve Bank of India examines the development and implementation of the training programme, and evaluates the results.

Indian banks have extensive branch networks covering areas where millions of people live below the poverty line. Microfinance institutions have nowhere near the same reach, so changes to the banking system appear to be the best way to improve poor people’s access to financial services.

An earlier research project found rural bank managers had negative attitudes not only towards poor people as bank clients, but also towards themselves and their work roles. These findings led to the development of the training programme in collaboration with a number of partners including the Reserve Bank of India and the College of Agricultural Banking (CAB).

The training focused on the trainees as individuals (for example, their feelings about themselves and their work roles) and used participatory training methods. The research shows that the training improved bank staff’s self-confidence about performing their roles and their attitudes towards poor people as viable business clients. These changing attitudes were reflected in more positive behaviour towards poor clients, reported by both trainees and their co-workers.

Key indicators of the success of the programme include:

• The training was positively and enthusiastically received by the trainees.
• Immediately after training, trainees had much more positive attitudes (for example, towards women borrowers and towards lending to poor people as a profitable business activity).
• An impact evaluation carried out three months after training showed this improvement in attitudes was still evident.
• The evaluation also showed that the level and quality of financial services offered to poor people in rural areas had improved.

The project has led to long-term changes in training provision for bank staff in India. In response to demand from banks, CAB has now incorporated the training in its regular schedule.

Lessons from the project include:

• Training can improve the attitudes and behaviour of bank staff towards poor clients.
• This can lead to increased provision of financial services to poor people and contribute towards poverty reduction.
• Change of this kind needs to be driven from within the banking sector, with outsiders playing a support and facilitation role.
• Training should be designed in consultation with those involved, especially the banks and their trainers.

Source(s):
‘Training to Address Attitudes and Behaviour of Rural Bank Managers in Madhya Pradesh, India: A Programme to Facilitate Financial Inclusion’, Journal of International Development 19, pages 841-851, by J Howard M Jones, Marylin Williams, Esse Nilsson and Yashwant Thorat, 2007
Further details about this research project ‘Addressing attitudinal constraints in the provision of formal financial services for the poor in Madhya Pradesh, India’ can be found on the DFID Research for Development website Full document.

Funded by: UK Department for International Development (R7984)

id21 Research Highlight: 27 April 2008

Further Information:
Howard Jones
Department of Agricultural and Food Economics
The University of Reading
Whitenights, PO Box 217
Reading, Berkshire RG6 6AH, UK

Tel: +44 (0)118 3788904
Fax: +44 (0)118 9352421
Contact the contributor: j.h.m.jones@rdg.ac.uk

Department of Agricultural and Food Economics, The University of Reading, UK

Marylin Williams
Department of Psychology
University of Reading
Whitenights, PO Box 217
Reading, Berkshire RG6 6AH, UK

Tel: +44 (0)118 3787542
Fax: +44 (0)118 3786715
Contact the contributor: psychology@reading.ac.uk

Department of Psychology, University of Reading, UK

Esse Nilsson
Swedish International Development Cooperation Agency
SE-105 25 Stockholm
Sweeden

Tel: +46 8 6985300
Fax: +46 8 208864
Contact the contributor: esse.nilsson@sida.se

Swedish International Development Cooperation Agency, Stockholm, Sweden

Other related links:
'Finance and empowerment for slum upgrading in Mumbai'

'Personal contact could improve re-enrolment in Indian community-based insurance schemes'

'Testing the impacts of microfinance on women'