Training bank staff increases lending to poor people in India

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 Universityof Reading, in the UK, and the Reserve Bank of India examines the development andimplementation of the training programme, and evaluates the results.

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

An earlier research project foundrural bank managers had negative attitudes not only towards poor people as bankclients, but also towards themselves and their work roles. These findings ledto the development of the training programme in collaboration with a number ofpartners including the Reserve Bank of India and the College ofAgricultural Banking (CAB).

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

Key indicators of the successof the programme include:

• The training was positivelyand enthusiastically received by the trainees.
• Immediately aftertraining, trainees had much more positive attitudes (for example, towards womenborrowers and towards lending to poor people as a profitable businessactivity).
• An impactevaluation carried out three months after training showed this improvement inattitudes was still evident.
• The evaluationalso showed that the level and quality of financial services offered to poorpeople in rural areas had improved.

The project has led tolong-term changes in training provision for bank staff in India. In response todemand from banks, CAB has now incorporated the training in its regularschedule.

Lessons from the projectinclude:

• Training canimprove the attitudes and behaviour of bank staff towards poor clients.
• This can lead toincreased provision of financial services to poor people and contribute towardspoverty reduction.
• Change of thiskind needs to be driven from within the banking sector, with outsiders playinga support and facilitation role.
• Training shouldbe designed in consultation with those involved, especially the banks and theirtrainers.