Constraints to the promotion of financial inclusion in India: an empirical study of implementing agencies under Pradhan Mantri MUDRA Yojana

Abstract

PurposeThe study aims to discern the primary obstacles confronted by the implementing agencies in their efforts to foster financial inclusion through the “Pradhan Mantri MUDRA Yojana” (PMMY).Design/methodology/approachTo collect primary data, a semi-structured questionnaire was developed. Around 120 loan officers from the implementing agencies (Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), Small Finance Banks (SFBs), Non-Banking Financial Companies (NBFCs) and Micro- Finance Institutions (MFIs)) of Haryana were randomly selected to fulfill the objectives. To categorize the perceived problems into discrete factors, the “factor analysis” technique was employed. The scales were then regressed on factors linked to the demographic characteristics of the loan officers to validate the hypotheses.FindingsThe study highlighted the primary obstacles impeding the advancement of financial inclusion, which encompass a range of factors. These include challenges in management, infrastructure, politics, finance and technology. Furthermore, the study established the association of the explanatory variables, namely gender, age, educational qualification, location and experience of the officers, with the extracted constraints. Notably, the experience of loan officers emerged as the most influential variable contributing to the promotion of financial inclusion through the scheme.Originality/valueThe current body of literature lacks any empirical investigation focusing on the perspectives of the implementing agencies regarding the challenges they encounter in advancing FI. Given the significance of FI in India, where access to formal financial services remains a critical issue, this research adds value by addressing the gaps in understanding the problems encountered.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-06-2023-0462