BEHAVIOURAL FACTORS THAT INFLUENCE THE CONTINUED USAGE OF FORMAL FINANCIAL SERVICES AMONG THE LOW INCOME HOUSEHOLDS

The need for Financial Inclusion is globally ascertained by the World Bank through its recent call for Universal Financial Access (UFA) by 2020. According to UFA goals, more than 55 countries have committed to provide access to transaction account through targeted interventions to the economically downtrodden civilians. The formal financial services such as credit services, payment services, business services, and digital services are far more efficient (with respect to wider range, transaction cost, and risk involved) than the informal financial services provided by the money lenders, credit unions, etc. However, several studies have indicated that the Low Income Households (LIH) prefer to use the informal financial services than the formal financial services despite being aware of its limitations. The reasons widely attributed for such behaviour are the objective factors such as income, literacy, accessibility, etc. which is based on the classical finance theories such as Life Cycle Hypothesis and Permanent Income Hypothesis. At the same time, the behavioural finance theories such as Behavioural Life Cycle Hypothesis (BLCH), Regret Theory, Prospect Theory, etc. state that the role of subjective factors (behavioural and psychological factors) also should be deliberated while explaining the financial behaviour pattern of the individual households. The researches in this spectrum are in the early stage of theory-building. Moreover, the majority of the existing research studies in this field are based on the Middle Income Households and Upper Income Households. So the dearth of researches on LIH and on the role of behavioural factors in the financial inclusion is the genesis for this research paper. The research objective of the study is to explore and identify the behavioural and psychological factors that influence the continued usage of the formal financial services among the LIH in India. Convenient sampling method is employed to collect the data from the target group. The statistical tools used in the study are the descriptive statistics and Factor Analysis. The suggested managerial implication of the study is to provide the insights for the policy makers to formulate appropriate financial inclusion strategies, and for the formal financial institutions to mould the behaviourally informed financial services.