Microfinance in Areas of Ecological Distress-Evidence from the Field

Arunachal Pradesh poses problems to the efforts of financial inclusion development of the state. This paper examines the question of convergence in financial inclusion development during 2004-2014 using β-convergence and σ-convergence techniques. The tendency of low-financial inclusive districts to catch up with high-financial inclusive districts is studied through the unconditional β-convergence approach, and the operation of Galton's fallacy through growth-terminal financial inclusion development level regressions. The diminution of variance in financial inclusion development levels is tested by using the σ-convergence approach and the robustness of the results is tested by using alternative test statistics.

The results do suggest that comparatively low-financial inclusive districts, if not all, have been able to catch up with the high-financial inclusive districts, demonstrating β-convergence. Although the growth of financial inclusion drive varied across the districts, the average speed of convergence remained more or less equal during both the periods. However, inter-district differences in growths of financial inclusion drive have significantly declined in the state indicating σ-convergence. These tendencies are likely to continue in financial inclusion drive in Arunachal Pradesh unless mission mode approach adopted to speed up the financial inclusion drive. All stakeholders should jointly create an ecosystem so as to improve credit absorption capacity of people in Arunachal Pradesh.