Financial Inclusion Through MGNREGS: Problems and Prospects

Abstract

Access to finance for those belonging to poor and vulnerable groups is a prerequisite for poverty reduction and social cohesion which become an integral part of our efforts to promote inclusive growth. In fact, providing access to finance is a form of empowerment of the vulnerable groups. MGNREGA, the flagship programme of the UPA government, was revolutionary in its promise of inclusive growth and financial inclusion, the right to work and the dignity of labour and a rational, participatory relationship with the State. While the importance of financial inclusion is widely recognized, the literature lacks a comprehensive measure that can be used to measure the extent of financial inclusion across economies. This paper attempts to fill this gap by proposing an index of financial inclusion (IFI) through MGNREGS. The IFI is a multi-dimensional index that captures information on various dimensions of financial inclusion in one single digit lying between 0 and 1, where 0 denotes complete financial exclusion and 1 indicates complete financial inclusion in an economy. The proposed index is easy to compute and is comparable across states. This paper also attempts to analyse various methods of wage payment systems of MGNREGS.