Sunday, 20 November 2011

BUSINESS CORRESPONDENT MODEL - PROSPECTS


This post has a reference to following posts

WHY IS THE NEED TO PROMOTE FINANCIAL INCLUSION?
http://santoshbehar.blogspot.in/2012/03/need-to-promote-financial-inclusion.html

BUSINESS CORRESPONDENT MODEL - REPORTS
http://santoshbehar.blogspot.com/2011/11/business-correspondent-model-reports.html


Some of the possible considerations for success of Business Correspondent Model are listed as under:-
  1. A set of innovative financial instruments targeted at low-amount / high-volume savings of rural population may be helpful for success of BC Model. It may create an opportunity for rural masses to look for substantial savings in long term perspective. If supported with a healthy business environment, where the small savings can be diverted to become a part of capital for low risk investments, rural savings can contribute towards increasing economic productivity.

  1. To build on savings in the no-frill account, promotion of business of Microcredit though BC Model can be explored. Commercial banks are reluctant to lend to the poor largely because of the lack of collateral and high transaction costs. Success of microcredit is based on innovative ways of reducing transaction costs and developing a systematic support for trustworthy credit seekers to avail small loans without collaterals. To some extent, this helps in reducing asymmetry in capacity to get loan (through formal banking) between those who have collateral and those who do not have. The Grameen Bank of Bangladesh, the most prominent of the successes, now reaches over 2 million people, with cumulative lending of about $2.1 billion. Similar successful examples are known in Latin America (e.g., Banco Solidario in Bolivia), less so in Africa (the Kenya Rural Enterprise Programme is a good example).

  1. To encourage entrepreneurship, a comprehensive approach to facilitate availability of resource, develop entrepreneurial business environment and put efforts to engage people with aspirations for innovative, sustainable and productive business endeavours could be worked out. There is now considerable consensus that lending to the poor can succeed provided it is accompanied by other services, especially training, information and access to land.

  1. Coordinated efforts may need to be put up by the institutions in the private, public, and social sectors in synchronization with banking and telecom sectors for success of BC Model. Exploration of services (which can be provisioned through BC) used by the low income population could be helpful. Further, a strong logistical support and secure mechanism for cash handling to the remotest areas (to facilitate BC operators for transferring cash at economical costs) may need to be developed. 

  1. Simplicity in procedure to avail the banking services could make a big difference. A study by the International Fund for Agricultural Development (IFAD) has confirmed that complicated loan procedures and paperwork, combined with a lack of accounting experience, limit poor people's access to formal sources of credit.

  1. The window of opportunity for BCs to make a profitable business may be open for short period of time. With increasing telecom penetration and ease of adaption of mobile phones at all levels in India, a radical shift in favour of mobile based branchless banking model may soon start challenging BC Model. This is evident from a survey done in the Asia pacific countries, which shows that 42 percent of the mobile customers use the basic banking services, such as checking the account balance, on their mobile devices. 

References:
[1] http://www.grameen-info.org/index.php?option=com_content&task=view&id=42&Itemid=92&limit=1&limitstart=3
[2] http://www.siliconindia.com/guestcontributor/guestarticle/193/Branchless_Banking__Financial_Inclusion.html
[3] http://www.nextbillion.net/blog/building-markets-for-financial-inclusion-
[4] http://www.portfoliosofthepoor.com/book.asp

(Sites as accessed on 18 NOV 2011)
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