Financial Inclusion

There is a large section of the Indian population that lies outside the realm of the banking industry. One takes things like having a bank account for granted. Maybe this is not the best time to blog about the virtues of putting your money in the bank, but its obvious that being part of the financial economy has huge advantages. Not only do you have a safe way of storing and accessing your money, but you can build your credit, have access to credit or access to "safe" and "reliable" investments. Well, most Indian's don't have these facilities.
The RBI has issued a policy for Financial Inclusion, directing banks to "voluntarily" provide banking services to the rural poor and bringing them into the banking system. This is not an easy task. First transaction costs are high. It's not easy opening branches in remote villages or setting up ATM's. Applying urban banking models to rural villages just doesn't work. But there are sustainable and scalable solutions to this problem, involving intelligent technology and innovative business models.
State Bank of India is currently exploring pilot programs to address this. Drishtee's rural franchises provide a ready network of entrepreneurs for this pilot. These franchises (or SBI kiosks) are given a small kit to sign up new customers. The technology solution is developed by A Little World (ALW) who are also partners in this pilot. For every account they open they get a small fee. The kit consists of a cell phone, bio metric blue tooth device and a blue tooth mobile printer.

Note the mobile printer, this right now is the leading contender in my own mobile printer evaluation. Its already proven to work in the field, and is pretty cheap. Anyways - back to financial inclusion. The cell phone comes with a camera, so they also take a picture of the person opening an account. The cell phone is connected to the web, so data can get uploaded and is already in the system by the time the paperwork forms with supporting documents reaches the bank. It's a great system. But the business innovation is that these SBI kiosks can operate as human ATM's. Once the bank account has been opened, the customers get a small card called a tiny card. Using this card they can withdraw or deposit money into their accounts. The tiny card just needs to be swiped to record the transaction (technically its a contactless card, so just needs to be waved). For each transaction the kiosk owner gets a small percentage (and Drishtee also gets a small share). These are very small cuts, but it is the transactions that make the model sustainable. Banks bring in customers and deposits and rural villages get to be part of the financial systems. Drishtee takes a deposit of Rs 15,000 from the franchises, and this protects Drishtee from the franchisee ever just running away with any deposits customers make through him. Fairly well thought through and has a good policy backing. Yup it all sounds great.

Here is a picture of Satyan (Drishtee CEO) opening a rural "no-frills" account





Come on, things can't be that easy. I spent some time in Assam talking to SBI kiosk franchises, and it was a litany of complaints. When we started the project things were going well. Kiosk owners were signing up a good number of rural customers and had a great steady income (~Rs 5000 - Rs 15,000 per month). Obviously this would plateau and we needed them to increase the transaction traffic instead. But the SBI has been slow in issuing the tiny cards. The ALW solution has had 2 to 3 software upgrades. I guess all to be expected in a pilot. But still frustrating for franchises and even worse for the end customer. Specially when you're building a new business, you can't tell a customer come back next week after he's been visiting you for a month to get his tiny card. What's even more frustrating is that they now have a new bank manager at the Sonitpur branch. And he's been sitting on all the paperwork for any new accounts. Saying they're short staffed at the bank. So forget issuing new cards, we can't open new accounts either. The business has by and large stalled! It's so frustrating. Unclear what the new manager's incentives are. It all comes down to relationship management and working with the local branch manager and ensuring he's happy and getting whatever he wants out of this. Disappointing and frustrating.
But I have to stay positive. The kiosk owners have bet their business on this model. It can work. It has to work!