Financial Inclusion in India: Progress and Gaps

The Reserve Bank of India’s Financial Inclusion Index rose to 64.2 in March 2024 from 43.4 in 2017, reflecting a steady growth rate of 5.75% CAGR. This progress has been driven by expanding digital financial services and credit growth, making financial products more accessible to a broader population. Yet, barriers like lack of awareness and procedural complexities still hinder formal financial access in rural areas.

We note that despite 78% of India’s adult population owning bank accounts (lower than Brazil, China, Russia, and South Africa), rural regions still lag in understanding and utilizing these services. Many rely on word-of-mouth and social networks for loan options, avoiding formal lending due to the perception of complicated paperwork and lack of awareness.

Agricultural families in rural India rely heavily on cultivation, wage labor, and enterprises for income. Though they have similar consumption levels to non-agricultural households, they exhibit higher savings rates. However, access to financing remains a challenge due to collateral requirements and complex application processes. While 44% of agricultural households have a Kisan Credit Card, a significant portion still lacks engagement with formal financial services.

According to NABARD’s Survey on Rural Financial Inclusion, over four-fifths of respondents preferred institutional sources when seeking loans. However, a significant one-fifth still rely on non-institutional sources.

The continued (albeit reduced) preference for informal, or non-institutional, loans amongst rural households (be it agricultural or non-agricultural) is a pressing concern. Several factors contribute to this:

• Ease of availability: Flexible repayment terms fit seasonal income patterns.
• Minimal or no interest: When loans are availed from friends or family, they are often low on interest or even interest-free.
• Trust in personal relationships: Borrowing from known sources feels secure.
• No documentation: Formal loans involve extensive paperwork, which can be a significant barrier.

These preferences highlight why rural households, despite improved financial inclusion, may avoid formal lending.

What needs to change?

To empower agricultural families, we need tailored financing solutions, simplified loan processes, and further non-collateral loan access. Financial literacy programs can educate rural communities on the benefits of institutional borrowing, and tools like the Kisan Credit Card can deepen financial inclusion.

Women in rural areas often face additional barriers to financial inclusion compared to men. Many women rely on male family members—such as husbands, fathers, or brothers—to conduct financial transactions on their behalf. This dependency is partly due to the lower number of bank accounts held by women and their limited access to financial services. Even when they do have bank accounts, women’s participation in financial decision-making tends to be restricted. Access to digital financial services is also a significant challenge for women, with many lacking smartphones or internet access necessary to make online payments. This digital divide further limits their ability to engage in the growing landscape of digital financial products and services, leaving them dependent on cash-based transactions and informal credit sources. Addressing these gender-specific barriers is crucial to financial inclusion.

Peer-to-Peer (P2P) Lending: An Innovative Solution

P2P lending platforms can bypass traditional barriers, reducing interest rates and collateral needs while making loans more accessible. This approach could enable rural families to invest in modern agricultural technologies, boosting productivity and income. Read more about Essmart’s recent efforts towards P2P lending in rural south India here.

The Challenge Ahead

Financial inclusion plays a crucial role in enabling people to save money, access credit, and secure loans. In short, it lays the foundation for long-term financial stability. The benefits of financial inclusion extend to increased wealth-building, job creation, and improved access to essential services like clean water and sanitation. However, several challenges persist, with technological adoption and lack of awareness being the most prominent barriers. In India, understanding socio-cultural and infrastructural differences in how money is perceived and loans are utilized is crucial in order to design products and policies. Addressing these issues can pave the way for sustainable economic growth for the country’s population.

Essmart is dedicated to empowering rural families by providing affordable loans and innovative credit solutions, facilitating the adoption of new technologies in agriculture. Through partnerships with cleantech and agri-tech sectors, we aim to eliminate financial barriers and promote sustainable growth for India’s farmers.

Sources:

1. Mishra, Deepak, et al. “Financial Inclusion and Its Ripple Effects on Socio-Economic Development: A Comprehensive Review.” Journal of Risk and Financial Management, vol. 17, no. 3, Mar. 2024, p. 105. DOI.org (Crossref), https://doi.org/10.3390/jrfm17030105.
2. Ramanathan, Shrinidhi. “Financial Inclusion Improves in India but Still Lags Global Peers.” BusinessLine, 19 July 2024, https://www.thehindubusinessline.com/data-stories/data-focus/financial-inclusion-improves-in-india-but-still-lags-global-peers/article68422028.ece. 
3. All India Rural Financial Inclusion Survey (NAFIS). National Bank for Agriculture and Rural Development, 10 Oct. 2024, https://pib.gov.in/PressNoteDetails.aspx?NoteId=153270&ModuleId=3&reg=3&lang=1. 

According to the Indian Brand Equity Foundation, by 2027, the AR/VR market in India is set to experience a CAGR of 38%. XR technology is dynamic in that it can be adopted across industries – in travel to create immersive marketing experiences for new destinations and make the booking process more seamless and transparent; by the fashion industry to create virtual storefronts and fitting rooms; by healthcare professionals for improved training and diagnostic processes. Additionally, the surging adoption of 5G technology and ever increasing smartphone usage – expected to reach 96% by 2040 – in the country is also thought to aid in the proliferation of XR in India.

Why is AR/VR relevant to the needs of rural India?

Limited access to resources and awareness is often chalked out as the key deterrent of programs and improved services in various rural areas in India. In turn, the inefficacy problem is multifaceted and lies at the intersection of various socio-economic, cultural, infrastructural, and financial hurdles. Hence, solutions to the same should take these ground realities into consideration in order to bridge the gap in the quality of products and services in rural areas.

But how does extended reality as a technology fit into this story? To understand this, we need to keep in mind the current challenges plaguing the sectors XR is trying to break into:

Access to healthcare in rural India remains a significant challenge, with time and distance being major barriers. According to Rajiv Pathni of Praar Consulting, rural populations face multiple obstacles—geographic, financial, and social—that prevent timely medical care. The scarcity of doctors, with one for every 1,457 people, and the lack of healthcare infrastructure further complicate matters.

Early diagnosis is crucial for better health outcomes, yet in rural areas, it is often delayed due to long travel times and limited access to diagnostic services. The result is a higher burden of preventable diseases and poorer health outcomes. Emerging technologies like AR, VR, and AI offer promising solutions to these challenges. VR is being used for medical training, rehabilitation, and mental health therapy, providing remote support where traditional services are limited. AR aids in remote diagnostics and post-treatment care, allowing healthcare providers to guide patients from a distance. AI can help with early disease detection through remote diagnostic tools and telemedicine, bridging the gap in areas with a shortage of healthcare professionals.

In all sectors, the use of AR/VR raises significant privacy concerns. The vast amount of data collected—whether from students, patients, or farmers—requires stringent measures to protect sensitive information, prevent misuse, and comply with regulatory frameworks. Ensuring robust data security is essential for the successful adoption of these technologies in any sector. Further, conducive policy changes are the need of the hour in order to safeguard privacies and regulate the burgeoning XR industry, as highlighted in a new study by the ISB Institute of Data Science (IIDS) and the Indian School of Business – Centre for Business Markets (ISB-CBM) on AI and healthcare in India.

Essmart’s Role in The AR/VR Ecosystem

A problem Essmart began to address more than a decade ago rings true and relevant in India; a lack of adequate research and distribution to meet the needs of the last-mile user far from the glitz of urban solutions. Given that XR is being applied in sectors where its applications are sensitive and long-lasting, it is imperative to gain a deep contextual understanding of the use case and the target demographic. Leveraging our decade-long experience with farming communities on the ground, our Insights team directly connects your team to the insights that matter the most.

References

1. India Virtual Reality Market Share & Research Report [2030]. https://www.fortunebusinessinsights.com/india-virtual-reality-market-107618. Accessed 28 Oct. 2024.
2. Guntukogula Pattabhi, Sandeep. AR, VR AND AI FOR AGRICULTURE: A MODERN WAY TO ADDRESS TRADITIONAL PROBLEMS. 2022. UNIVERSITY OF AGRICULTURAL SCIENCES.
3. IIT Madras Researchers Developing Virtual Reality-Based Education Model for Rural Schools. http://pib.gov.in/PressReleseDetail.aspx?PRID=1915889. Accessed 28 Oct. 2024.
4. “Revolutionizing Healthcare in India with AR, VR and XR.” Redington Group, https://redingtongroup.com/mea/blog/revolutionizing-healthcare-in-india-with-ar-vr-and-xr/. Accessed 28 Oct. 2024.
5. Patil, Ashok Vikhe, et al. “Current Health Scenario in Rural India.” The Australian Journal of Rural Health, vol. 10, no. 2, Apr. 2002, pp. 129–35. PubMed, https://doi.org/10.1046/j.1440-1584.2002.00458.x.
6. www.ETHealthworld.com. “Policy Gaps Hindering Widespread Adoption of AI in Indian Healthcare Ecosystem: ISB Study – ET HealthWorld.” ETHealthworld.Com, https://health.economictimes.indiatimes.com/news/health-it/policy-gaps-hindering-widespread-adoption-of-ai-in-indian-healthcare-ecosystem-isb-study/113331558. Accessed 28 Oct. 2024.
7. There Is 1 Doctor for Every 1,457 Indian Citizens, Reveals Government. 4 July 2019, https://www.timesnownews.com/mirror-now/in-focus/article/there-is-1-doctor-for-every-1457-indian-citizens-reveals-government/448668.
8. Tejaswi, Mini. “‘India’s AVGC-XR Sector to Become $26-Bn Industry by 2030.’” The Hindu, 10 Feb. 2024. www.thehindu.com, https://www.thehindu.com/business/indias-avgc-xr-sector-to-become-26-bn-industry-by-2030/article67832231.ece.

Post-harvest loss remains a major challenge for smallholder farmers, especially in perishable crops. Solar dryers offer a sustainable solution—helping farmers reduce spoilage, improve shelf life, and access new income streams through value-added products like dried fruits, vegetables, and spices.

For millions of smallholder farmers, spraying pesticides or fertilisers is still done with outdated or inefficient tools, leading to crop loss, high input costs, and health risks. Affordable, easy-to-use sprayers can change that—improving crop protection, reducing input waste, and supporting safer handling practices.

Chaff cutters are essential for improving livestock feeding efficiency on smallholder farms. In rural India, where most dairy farmers cut fodder manually, these machines reduce labour, save time, and minimise wastage—directly improving animal nutrition and farm income. Yet access to reliable, affordable chaff cutters remains limited across many regions.

In an interview with Forbes, chairman Ratan Tata attributed the downfall of the Tata Nano to its aggressive branding as a cheap car, which ultimately led to negative perceptions among the target customers. One might wonder how such a critical oversight could occur and, more importantly, how it could have been prevented. In this article, we explore the reasons that can contribute to product failure, especially when building for rural India.

1. Poor Product-Market Fit

It is a simple fact that any product is not made to sit on the shelf — its purpose is to find its way into the hands of the user and render some value. But for it to accomplish that, the product must fit into the market and meet the needs of its users in the first place.

2. Unchecked Creator’s Biases

Entrepreneurship is a journey that demands passion towards . However, when the finished product is intended for use by others, it is crucial to assess its relevance to the end user. This requires creators to set aside their biases and preconceived notions about how things are used, and instead, listen to the user’s needs and preferences.

3. Employing Ineffective Marketing Strategies

From Delhi’s Sarojini to Bengaluru’s Commercial Street, it is remarkable how shopkeepers try to lure in customers with their catchy slogans about the variety of products they have or its affordability. It is by doing this that a person just walking past these stores decides to pause, check out the clothes, and perhaps buy something too.

In essence, effectively communicating what you have to offer — and appealing to what the person in front of you has to gain — is crucial. This becomes even more critical during a product launch, where clearly defining your product, its target audience, and purpose is essential.

Human psychology works in interesting ways. At times, instead of focusing on the technical aspects of a product, zeroing in on the emotional quotient at work can actually lead to better marketing. For instance, consider the recent TVS Motor Company advertisement for children’s helmets. Rather than emphasizing the helmet’s strength or durability, the ad appeals to the customer’s emotions: why are you risking your child’s safety on the road, when you wouldn’t do so otherwise? This approach targets the Indian customer’s casual attitude towards children’s helmet use, effectively creating the product’s market fit.

Another factor to consider while designing a marketing campaign is to evaluate the differences in the rural vs. urban markets. Due to differences in ways of life, culture, and attitudes, the marketing campaigns both of them respond well to are also likely to differ.

Hence, copy-pasting marketing strategies successful in the urban region to the rural context is not advisable, and can lead to failure (Kompaniets and Rauhut, 2016). For example, consumers residing in rural areas might be more receptive to one-on-one marketing with hands-on involvement of salespersons, while in the urban context marketing needs to cater to segmented audiences. The mode of communication to be employed would also differ accordingly, and hence striking the right balance between traditional and digital media is important.

4. Lack of surety about after-sales support

From our 10+ years of experience in rural markets, we have seen time and again how crucial after sales support is for bridging the last mile gap.

Many times, clarity on what after-sales support one can expect plays a huge role in boosting the customer’s willingness to trust a brand or a product — it indicates accountability and provides an avenue for redressal. After sales support can include installation services, offering warranties and upgrades, providing maintenance checks, and having a reliable point of contact.

This kind of support actually goes on to reassure the customer that after the sale is done, they won’t be on their own when some issue arises. Addressing these concerns early on gives you a head start in building customer loyalty and trust.

5. Limited access to information about innovative products

A lack of information about a product can create a barrier to adoption; strategically communicating the value of the product is necessary. This gap in knowledge about the brand, product, and technology in use can lead to apprehension and a decisive lack of trust.

For example, at Essmart, we employ different strategies to address the gap in knowledge about the brand, product, and technology. We hold demos of new products as part of our Experience Centers with farmers and show them cost-benefit analysis to help visualize the long-term benefits of adopting clean tech. Being able to get the touch and feel of a product can also positively impact their decision to purchase by boosting trust. We ensure the farmer is sufficiently informed about the product and that credibility is established, by providing information using a multi-pronged approach.

6. Inadequate Market Research

All the points we have discussed so far, converge into one common issue — inadequate market research. Thorough market research before and during the early stages of a product launch can provide valuable insights into demand, product-market fit, marketing messaging, information gaps, and competition strategies.

Some insights and actionable pointers just cannot be accessed without going on ground and understanding how people interact with products. In their 2022 book “Winning Middle India”, authors Bala Srinivasa and T N Hari state that “The customer often does not have an affordability problem but a cash flow problem.” This is illustrated by the oft-quoted yet timeless example of Chik’s shampoo sachets. Designed specifically for low-income customers, Chik introduced shampoo sachets after noting how cash flow was a barrier for many to purchase larger pack sizes. Identifying a solution that let rural consumers try out a product for the first time led to customer acquisition and potential upselling as their income levels increased. This was hence an ideal solution for the customer and the manufacturer both.

By aligning your marketing and production efforts accordingly, you can use real insights to minimize financial loss and strive for a successful product launch.

Conclusion

Going back to the premise of this article, it is possible to state that the makers of Nano did not find out or take into account that Indians tend to perceive “cheap” as a compromise on quality, especially for purchases like a car — that has long since been a signifier of aspiration for millions of Indians.

By understanding their target audience better and positioning the Nano as a high-value, innovative product, rather than just a cheap car, Tata Motors could have potentially avoided the pitfalls that led to its failure.

References

Kompaniets, Olga Rauhut, and Daniel Rauhut. “WHY URBAN AND RURAL PLACE MARKETING STRATEGIES DIFFER: A THEORETICAL DISCUSSION.” Romanian Journal of Regional Science, no. 10, 2016, pp. 23–40.
Rai, Saritha. “Its ‘World’s Cheapest Car’ Tag Made The Nano Undesirable In India.” Forbes, 2013, https://www.forbes.com/sites/saritharai/2013/12/05/its-worlds-cheapest-car-tag-made-the-nano-undesirable-in-india/.
Srinivasa, Bala, and Hari T.N. “CavinKare — Shampoo Sachet That Was the True Pioneer of Middle India Market.” ThePrint, 12 Nov. 2022, https://theprint.in/pageturner/excerpt/cavinkare-shampoo-sachet-that-was-the-true-pioneer-of-middle-india-market/1209049/.