Unbanked to banked: reintermediation role of banks in e-government services for financial inclusion in an Indian context
| DOI | https://doi.org/10.1108/JABS-10-2020-0420 |
| Published date | 31 May 2021 |
| Date | 31 May 2021 |
| Pages | 354-370 |
| Subject Matter | Strategy,International business |
| Author | Jessy Nair,Mohith Kumar Jain |
Unbanked to banked: reintermediation
role of banks in e-government services
for financial inclusion in an Indian context
Jessy Nair and Mohith Kumar Jain
Abstract
Purpose –The purpose of this study is twofold: first, to develop a framework to implement electronic
delivery systems for connectingfederal government with rural citizens using bankinginfrastructure as a
reintermediationplatform; and second, to understand the challenges facedby banks in reintermediation
for financialinclusion (FI).
Design/methodology/approach –This exploratoryresearch adopts case study method to gaininsights
of the challenges faced by banks in e-government services for FI. In-depth structured interviews are
conductedwith key respondents: branch managersheading banks in rural areas.
Findings –Preliminary results based on in-depth interviews with branch managers of banks suggest that
banks leverage facilitators called Bank Mitras (BM) (friends from bank as per the local language) to
disseminate services offered by the banks to rural customers at each village. However, a key challenge
faced by banks is the increased dependency on bank employees tocomplete the process of e-government
transactions by the beneficiaries because of trust factor.
Research limitations/implications –This exploratory research builds on the case study approach
using in-depth interviews with the branch managers of five banks as key respondents to develop the
preliminaryresearch framework for FI.
Practical implications –Policymakers can design banking systems to enhance transparency by
implementing technologiesand decentralizing routine transactions to citizens by enhancing the role of
facilitators(BM).
Social implications –FI aims to reach out and empower citizens with banking facilities for
disbursing e-government services. This process n eeds to be refined for the rural population of India
to understandand better use the e-government services and schemes.
Originality/value –Insights from in-depth interviews with key respondents of thebanks were collated
and augmentedwith literature to enhance the rigor of the exploratoryresearch.
Keywords E-government services, Financial inclusion, Bank intermediaries, Rural banking
Paper type Research paper
Introduction
India is the largest democracy in the world with second largest population. Rural population in
India accounts for 83% of the population and literacy rate of rural proportion a ccounts for 69%
(Census, 2011). Traditional model of government services (Figur e 1) is undergoing disruptive
changes with internet explosion, and e-commerce services are compelling public services
delivery system for government to adopt e-government services (Tat-Kei Ho, 2002; Ebrahim
and Irani, 2005). Government of India (GoI) reaches out to the citizens, specif ically the rural
mass through e-government services for communicating and dispersing su bsidies, loans and
information for financial transactions. The role of banking sector as an intermediary to the GoI
is significant in the process of diminishing financial exclusion of citizens who are deprived of
financial services. Financial inclusion (FI) is therefor e an important strategy for social and
Jessy Nair is based at the
Faculty of Management
Studies (MBA), PES
University, Bangalore,
India. Mohith Kumar Jain is
based at the Department of
Management Studies, PES
University, Bangalore,
India.
Received 27 October 2020
Revised 7 December 2020
Accepted 15 December 2020
We would like to profuselythank
the anonymous reviewers for their
rigorous reviewand insights
which have helped us re-shape
the research article.We are
indebted to their valuable scrutiny
of the researcharticle and hope
to have incorporatedthe
mentioned feedback.
PAGE 354 jJOURNAL OF ASIA BUSINESS STUDIES jVOL. 16 NO. 2 2022,pp. 354-370, ©Emerald Publishing Limited, ISSN 1558-7894 DOI 10.1108/JABS-10-2020-0420
economic progress of nations across the world including India enablin g sustainable
development (Varghese and Viswanathan, 2018). GoI’s initiative of every citizen having a
mandatory bank account has made the role of banks a transparent intermediary.
Worldwide governments are redesigning policies to leverage information and
communication technologies (ICTs) and digital technologies to implement FI and make
credit available to the needy. Europeannations have seen a high success of e-government
services (Rodousakis and Mendesdos Santos, 2008); analyses of e-government services in
Austria, Portugal, Malta and Slovenia point the significance of commitment from
stakeholders for the success of e-government services giving high priority to transparent,
efficient and quality services to citizens. Brazil’s initiative toward FI involved multiple
stakeholders: government policymakers, public and commercial bank managers, ICT
providers, retail managers collaborating with intermediaries called correspondent banking
outlets and the low-income group (Henrique Dinizet al., 2009). Their research pointed to the
importance of ICT infrastructure as an enabler in increasing the network to a large
section of deprived citizens. Mofleh and Wanous’ (2008) case study of Jordan suggests
that e-government services to citizens in emerging nations should focus on basic
services. The authors suggest that as online transactions are on the rise, based on the
needs of citizens, e-government services can be incremented and quality of services
enhanced.
Though banking services offered to citizens by banks has risen from 49 to 68% in urban
areas and 36 to 59% in rural areas of India (GoI Census, 2011), a vast majority of these
accounts are dormant (Varghese and Viswanathan, 2018). Weerakkody et al. (2012) call for
research in ICT e-inclusion as their study in UK showed that access to digital resources has
a significant impact on individual and at micro-level leading to social inclusion. With ICT-
enabled intervention, banking services can be leveraged in advancing the access,
enabling them to learn about financialproducts and services offered to citizens.
Though the primary objective of banks in rural areas is to meet the development goal of the
government, but this cannot be achieved by overlooking the customer inclusion aspect. In
recent times, customers in rural India are using banking services to avail government
subsidies and benefits that are dispersed through bank accounts. Bank executives face
several hurdles in communicatingand offering services to customers in rural areas. There is
an unmet need to enhance the scope of rural banks for effective e-government services
from transaction to transformation (Backus, 2001). Figure 2 summarizes the needs of a
reintermediation platformand the stakeholders.
Call for research contribution in developing a digital ICT infrastructure to measure the
impact of development on public goals while encompassing participation of multiple
stakeholders as measurement of promises made to people with respect to public services
is the key to monitor for under-delivery (Kumar and Best, 2006; Heeks, 2010). Yildiz (2007)
Figure 1 Traditionalfederal government services delivery model to ruralregions
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