Jul 24, 2024
Introduction
Our great nation is filled with diverse cultures that can be found in every corner of India. Our population consists of people of various colours and religions who live in harmony. It is no surprise that India is one of the most diverse countries in the world. Generations of social norms, behaviours, beliefs, art, knowledge, languages, and laws have shaped our culture.
But culture also influences our attitude toward financial matters, especially for the diverse communities that are residing in India’s rural areas. People living in underprivileged parts of our land portray different behaviours when it comes to finances than those living in the cities or more developed parts of the country. Microfinance institutions (commonly known as MFIs) are helping people in these rural areas to overcome their monetary problems by providing financial assistance like group lending and retail loans. India’s total value of microfinance loans in 2023 was almost 3.55 trillion Indian rupees. These institutions are changing the way of life for many people who don’t have access to proper financial services. This includes empowering women from lower socio-economic regions to financially supporting low-income families, which uplifts their social status and contributes to our country’s economy as well.
Understanding Diverse Communities
Cultural Factors Affecting Financial Behaviours
Since there are many culturally diverse societies in India, people have different views on various things, including money. Most families have always handled financial matters discreetly. In rural areas, it is common for men to earn and women to manage household finances, but that might not always be the case because money is handled by people who are at the top of the family hierarchical structure, which might be due to cultural norms. Savings are also seen as a major source of security in our culture, but for low-income families, saving money might be difficult and prevent them from investing in any assets.
Challenges Faced by Diverse Communities in Accessing Financial Services
- Limited number of financial service providers for diverse communities that reside in remote locations.
- Women in rural areas face various restrictions because of traditional gender biases, which are preventing them from attaining financial independence.
- The people in rural areas are unable to access proper education and other information, which means that most of them are unaware of these financial services.
- Financial service providers often use widely known languages and might not use regional languages spoken by these diverse communities. Hence, people are unable to understand the information provided to them.
- Since people who live in rural areas don’t have access to normal banking services, they might have approached local money lenders and faced high interest rates. Hence, they tend to stay away from financial services because they think that MFIs also charge high interest rates.
Tailoring Microfinance Services to Cultural Needs
1. Language and Communication Considerations: People in India speak many languages in different states. These languages also include dialects and vary from region to region. Microfinance institutions offer their services in regional languages and reach more people to help them financially.
2. Customized Products and Services: Some rural communities in India prefer saving in groups rather than individual savings accounts. By understanding these practices and other beliefs, MFIs offer customized and flexible loans that match the needs of these communities for purposes like agriculture, small businesses, and for people who make handcrafted products.
3. Respectful Approaches to Community Engagement: MFIs use respectful approaches like building trust by involving community leaders, clearly making people understand the terms and benefits of financial services, providing information in local languages, offering financial literacy, and also designing microfinance products that cater to women.
Best Practices for Implementing Culturally Sensitive Microfinance
1. Addressing Biases and Stereotypes: Microfinance institutions provide training and education for their staff to make sure that they are able to identify and overcome various biases and stereotypes. This leads to a more respectful approach to customer service practices.
2. Regulatory Compliance and Cultural Sensitivity: MFIs make sure to follow the law – from local to national laws, by closely understanding various policies that surround diverse communities. These institutions also offer customized financial services that respect the different cultures.
3. Partnerships with Community Organizations: By partnering with local NGOs and other community organizations, MFIs establish trust and expand their networks to offer microfinance services that support the development of these communities.
Conclusion
Microfinance institutions in India are addressing the diverse cultures of our society by understanding the various cultural beliefs and practices of communities that live in rural areas. They are educating these people about financial services and building trust by involving community members from diverse backgrounds.
Chaitanya India is a microfinance institution that has been helping people in the underserved parts of India by communicating in local languages and has provided financial services to more than 1 million women who are from low-income families.
