Does the Use of Bank Accounts Vary across Gender and Region? Evidence from India on One of the World's Largest Financial Inclusion Scheme

Background & Purpose: In 2014, the Government of India (GOI) launched Pradhan Mantri Jan Dhan Yojana (PMJDY), one of the world’s largest financial inclusion programs. In line with the United Nations Sustainable Development Goal One on reducing poverty, the PMJDY aims to open bank accounts for all individuals with no access to bank accounts. The larger objective of the scheme is to provide affordable access to financial services, including bank accounts, remittances, need-based credits, pensions, and insurance. The success of PMJDY in reducing poverty depends largely on account usage. Limited research exists on account usage across gender and regions. Our research fills this gap by assessing account engagement among a representative sample of the state of Bihar, one of India's poorest states. Guided by the diffusion of innovations theory, we study two research questions: 1) What has been the trend in using bank accounts from 2016 through 2019? 2) Does the use of bank accounts vary across gender and regions?

Methods: We received secondary data (~7.3 million individuals) from the GOI on all the account holders in Bihar who opened their accounts in 2016, along with their usage patterns through 2019. Data on key financial behavior include the annual number of deposits, withdrawals, debit card transactions, and digital transactions. Regions are categorized based on where the banks are located - rural, semi-urban, urban, or metropolitan. Gender is categorized as women and men. We undertook three sets of multiple linear regression models: 1) account usage in 2019 regressed onto key demographic variables, 2) change in account usage between 2019 and 2016 regressed onto key variables, and 3) district-aggregated account usage in 2019 regressed onto district-level demographic variables.

Results: Between 2016 and 2019, the average total deposits, withdrawals, and debit card & digital transactions increased. However, about 87% made no debit card or digital transactions, 52% made no withdrawals, and 33% made no deposits. Women made significantly fewer deposits and withdrawals but made more debit cards and digital transactions than men. Those in rural areas made significantly fewer deposits and debit card transactions than the other regions; however, they made significantly more withdrawals and digital transactions than those in other areas. At the district level, GDP and literacy rate significantly predicted account usage.

Conclusion and Implications: Our results indicate both promising and concerning signs regarding PMJDY’s implementation. While account usage increased over time, we find strong evidence that many of the Bihar population is not using their PMJDY bank accounts each year. These households are unlikely to benefit from increased financial inclusion. Women had notable engagement levels, but growth is relatively slower than men over time, suggesting a trend toward greater inequality. Most promising are findings relating to those in rural areas. We find high account engagement levels amongst this traditionally underserved population, and their engagement is increasing faster than any other regional group. Overall, our findings indicate PMJDY has successfully reached rural populations, but future research should assess ways to increase account engagement overall and among women in particular.