Source: Mint
Context
A NABARD study finds that less than 2% of rural households reported borrowing from fintech entities, despite India being the world’s third-largest fintech ecosystem. The expected breakthrough in last-mile financial inclusion through fintech-led credit has not materialised, even as banks expanded digital infrastructure and the government built robust Digital Public Infrastructure (DPI).
Key Highlights
- Core Finding
- Less than 2% of rural households borrow from fintech lenders. The main barriers are trust, awareness, and suitability, not digital infrastructure.
- What Rural Households Prefer
- Rural borrowers rely on PACS functioning as Common Service Centres (CSCs) because they are locally trusted, physically accessible, and offer multiple services, including input supply, procurement, deposits, and e-services.
- Fintech Market Context
- India is the world’s third-largest fintech ecosystem (after the US and UK), with the market projected to exceed $400 billion by 2028–29.
- Institutional Response
- Queries sent to the Finance Ministry, Rural Development Ministry, NABARD, RBI, and the Fintech Association for Consumer Empowerment (FACE) received no response.
Why Fintech Credit Has Not Penetrated Rural India
- Credit assessment models rely on digital footprints, salary slips and formal bureau scores that most rural borrowers lack.
- Thin-file and no-file borrowers — agricultural incomes are seasonal, irregular and undocumented.
- Absence of collateral recognition — fintechs cannot lend against land as cooperatives and banks do.
- Interest rates of digital lenders are typically far above subsidised KCC credit at 7% under the Modified Interest Subvention Scheme.
- Digital literacy and language barriers, plus reluctance to grant app permissions.
- Trust deficit, worsened by publicised illegal loan-app scandals, harassment and data misuse.
- Grievance redressal is remote — no branch, no local officer to approach.
- Smartphone and connectivity gaps persist despite high overall mobile penetration.
The Institutional Alternative Is Being Strengthened
- PACS computerisation: an ERP-based national project with an outlay of about ₹2,516 crore covering roughly one lakh functional PACS, though implementation is uneven across states.
- PACS are being converted into multipurpose societies delivering CSC services, fair price shops, PM-KUSUM, Jan Aushadhi Kendras and more.
- eKisanCredit (eKCC), a fully digital loan origination system for cooperative banks, PACS and RRBs, integrating land records, Aadhaar, eKYC and core banking; NABARD acquired a 10% stake in the developer, 24×7 Moneyworks, in 2025.
- NABARD is working with the RBI on the National Strategy for Financial Inclusion 2.0.
