by Shloka Nath
Nov 10, 2010
Another experiment is the e-kiosk. IT company Drishtee has tied up with State Bank of India to provide kiosk banking across rural Assam. ATM maker NCR Corp. has launched a cash dispensing machine called EasyPoint 70 Tijori, designed for small grocery stores to act as banking touch points for the low income group.
For the first time in India’s history, everyone from politicians to entrepreneurs to technology gurus are converging on a common theme — to take the benefit of banking and finance to India’s neglected millions
Another experiment is the e-kiosk. IT company Drishtee has tied up with State Bank of India to provide kiosk banking across rural Assam. ATM maker NCR Corp. has launched a cash dispensing machine called EasyPoint 70 Tijori, designed for small grocery stores to act as banking touch points for the low income group.
Infographic: Sameer Pawar
Perhaps the most widely anticipated technological advancement in India is the Unique Identification (UID) or ‘Aadhaar’ project. An estimated 600 million residents are to receive Aadhaar numbers over the next four years. The system will be backed by an online biometric authentication service. In all likelihood, Aadhaar will become the default KYC requirement in the country. “We really see Aadhaar and financial inclusion being joined at the hip,” says UID boss Nandan Nilekani. “We’re also planning to roll out a micro ATM or a device which works in a business correspondent like a kirana store. A person with a bank account goes to this BC, authenticates himself using Aadhaar and withdraws his money. It will be a multi vendor micro ATM with interoperable transactions so it doesn’t matter which bank you have your account in.”
The mobile phone is already becoming the preferred banking platform for hundreds of thousands of poor people. Several companies like Eko and A Little World have started projects based on this. And the big telecom companies are not far behind. “mPayments and mCommerce will revolutionise the concept of cashless transactions for several advantages including vast reach, simplicity and ease of use, 24X7 availability as well as lower transaction costs,” says Atul Bindal, president of mobile services, Bharti Airtel. Airtel is keen to facilitate money transfer and withdrawal, which RBI has not yet allowed it to.
Money-transfer firm Western Union is hooked on too. Initially the company tapped the ubiquitous post office network to reach rural clients. Later, it decided to take the MFI route and tied up with Spandana Spoorthy Financial in Andhra Pradesh. Another example is Eureka Forbes, which launched AquaSure, a storage-water purifier and tied-up with Basix, India’s oldest MFI. It also introduced a loan product with a year-long tenure. (The product’s sales zoomed by 20 percent.)
The business of money is now also attracting all the money men. About two dozen MFIs have attracted private equity investment. In fact, in 2009, a third of all microfinance private equity investments globally were in India. Between January and June this year, MFIs have attracted PE investment totalling $84 million. (The high interest rates and excessive profits of MFIs have not only attracted private equity but also concerns whether they exploit the poor. “You would really like to see interest rates much lower than they are,” says Thorat. “They must cover costs reasonably but it can’t be the case that they result in so much return to shareholders [but] you are not reducing interest rates to borrowers. It’s very ticklish.”)
Meanwhile, insurance companies are also latching on to the concept of financial inclusion.
Since early 2010, Bajaj Allianz has sold a customised insurance and savings product to the almost 400,000 members of Punjab State Cooperative Milk Producers’ Federation (MILKFED). Heart surgeon Devi Shetty has designed a health insurance plan for farmers and an experiment in Thanjavur in Tamil Nadu seeks to offer insurance through the microfinance route.
This multitude of experiments clearly reveals one thing. Perhaps the world’s largest movement in financial inclusion is right under way in India. It is for this reason that the world is watching the action. “India is a learning place for us. And what we learn here, we share those lessons globally,” says Gregory Chen, regional coordinator for CGAP (Consultative Group to Assist the Poor), an independent research organisation set up by the World Bank. He says India has shown the world how to scale up microfinance to an order not seen earlier. Similar lessons could arise from the experiments currently on, he says adding, “India has become a financial inclusion hot spot.”
