By Tensing Rodrigues
According to a news report that appeared some weeks back, the postal department and the country’s largest bank, State Bank of India, are planning to team up to take basic banking services to the doorsteps of country’s rural millions who have no access to the mainstream banking system, covering more than 12,492 villages by 2012. The tie-up will see postmen acting as banking correspondents for SBI, in collecting deposits and offering small credit and remittance facility.
Bank on Bike
Two months earlier SBI introduced the ‘Bank on Bike’ initiative to reach banking services to remote villages in Andhra Pradesh. Launched in association with its banking correspondent, Geosansar, in this initiative, a person on the bike carries a laptop and a data card to access specially designed SBI Internet site for the purpose. The account holder can then access the banking services through a biometric interface, thereby facilitating transactions for illiterate people.
Towards September last year SBI announced a plan to set up kiosks at kirana stores, where one can open an account, deposit cash, withdraw or transfer money, and get a ‘pakka’ receipt for it. For this SBI has entered into an alliance with Oxigen, a bill-payment, mobile recharge and ticketing systems provider. With some 50 such kiosks already operational in Mumbai and another 20 in Delhi the model is already being tested. A person can walk into the kirana store with a photo ID and address proof and open a no-frills account, where minimum balance is not mandatory. The shopkeeper will capture a photo of the person using a webcam and also the fingerprints with a biometric device. This will go for the KYC. Even if the prospective account holder cannot produce an address proof, it will not hold back the account opening; the person can just declare his or her place of stay, provided the shopkeeper is convinced of it. Such an account can be opened with as little as Rs 20.
I do not know how much progress the schemes have made; I have been unable to gather information on the coverage achieved or their viability. But even if they have not gone too far, I believe that it is worth taking them seriously. Because they leverage the three vital elements that should drive any move for financial inclusion today : scaling down to the minimum viable size, tapping synergies in the environment and optimising the use of technology.
Operating through postmen as banking correspondents, a bank branch on a bike and kiosks in a kirana shop are excellent demonstrators of scaling down to the minimum viable size. This is something comparable to Rs 1 shampoo packs or Rs 10 mobile recharge paper coupons, both of which have worked a revolution in case of FMCG and telecom industries.
SBI has 5,000 branches and India Post has 1,50,000; imagine the leverage. Same is true of kirana shops; or even youth on bikes. The best part of these collaborative ventures is the fact that they will be sustained only if they are of mutual gain; which means that, once the basic business model is tested and proved to be viable, it will sustain itself without any subsidy or statutory push. This is not to say that the marriage will be easy and smooth. I can already foresee the difficulties of banking through postmen, motorcycle riders and shopkeepers. But, that does not invalidate the basic model; it only calls for improving the skill set of these intermediaries and strengthening the system security, both of which are not too difficult.
Technology has undergone a radical transformation; rather than adding to the costs, today, it reduces the costs. Just think of telecommunication; see how drastically the cost of communication has fallen over time. Today an instant message on a mobile phone or a chat on the internet costs much less than a post card taking days to deliver the message. The same is true of financial transactions. Technology is going to be the single most important deciding factor in implementation of financial inclusion, other than the will to implement it.