Impact of financial inclusion initiatives on agriculture specific business performance of financial institutions in Karnataka

Abstract

The present study attempted to analyse the possible structural change in the business performance specific to agriculture/ rural situation between period I (pre financial inclusion period) (between 1995-96 and 2004-05) and period II (financial inclusion period) (between 2005-06 and 2016-17). For this purpose, first, the growth rates in respect of important financial parameters such as number of agricultural credit accounts, number of rural bank branches, total agricultural credit and total rural deposits for both the periods were computed as indicators of change in business performance due to financial inclusion. Next, chow test was conducted to ascertain whether the growth rates were significantly different between the two periods. The results of this analysis are presented here under. The study found that, F values for chow test indicated that the growth rates during period II were not only of higher magnitude, but also were statistically significant from the growth rates of period I. This pointed out that because of financial inclusion initiative, there was a structural change in the business environment between the two periods, which resulted in significantly higher growth rates in period II.