Business Correspondents:
A Potential Model”
Credit led Full service BC-MFI
Approach
Mukul Jaiswal
MD
Present Issues under BC Model
• It is now widely known fact that most of the BCs
are struggling in scaling up of their BC operations
and to make it financially self-sustainable due to
several reasons, prominent among them are (a) Limited product basket with mainly liability productsmostly, No frill savings accounts’, enabling G2P
payments or remittances within NFA;
(b) Wafer thin margins that are made available to BCs by
banks for such products.
(c) Near absence of Micro credit products through BC
channel for unbanked population
•
Several recent studies, research and surveys by the industry experts point out
the above situation and this requires a re-look in to the model and to take
initiatives to explore ideas how it can be made financially viable & scalable..
CREDIT LED FULL SERVICE BC APPROACH
A Good, Viable & Scalable Option
(1) Existence of Potentiality to become financially
sustainable and scalable Model(a) Credit and Savings both products are delivered
(b) Core Product of NF Savings account is layered with thick inner
layering of suitable Micro Credit Products and outer layering of
other financial products, like RD/FD, remittances, micro
pension, micro insurance, etc.
(c) Possible by appointing right kind of Eligible MFIs as BC-MFIs
(2) BC-MFIs can Not only Open No Frill Savings
accounts but can also originate, recommend and
service micro credit products as BC for Banks-
CREDIT LED FULL SERVICE BC APPROACH
A Good Option to choose
(3) Positive Steps of Regulators(a) Banks already allowed to pay reasonable fees to
BCs for their services(b) Acceptability of 12% Margin Cap for MFIs for
meeting Operating Expenses(c) Service tax exemption on Fees paid to BCs by
banks-
(4) Existence of Large Number of Good and
Eligible Not For Profit MFIs / SHPOs(a) Opportunities for banks to choose Good Not for
Profit MFIs SHPO as a BC(b) Opportunities for MFIs/SHPOs to become BC-MFI
CASHPOR’s INITIATIVES
(with Credit led Full Service MFI-BC Approach)
A. Savings followed by Credit Initiative as a BC of
Bank(1) Launched in July 2011 on Pilot Basis in 4 rural branches with
the following two Strategic Objectives(A)To show that given the opportunity and suitably designed
savings products, significant amount of savings can be
mobilized from BPL borrowers as a BC for the bank, and
with that proven, bank may be convinced to lend substantial
portion of such savings back to the BPL borrowers for
productive purposes through CASHPOR as a BC and by the
fully utilizing the loan for income generating purposes BPL
borrowers would be able to generate additional surplus
income and would be able to build more savings and this
would turn in to a cycle with win-win- win situation for
client, bank and MFI-BC with the objective of achievement of
full financial inclusion.
(B) To provide access to suitable savings products to BPL
borrowers at their doorsteps in the villages long demanded by
CASHPOR’s INITIATIVES
(with Credit led Full Service MFI-BC Approach)
(2) Roll out in 7 districts of Eastern UP and Bihar
through 131 branches and 462 CSPs (Center
managers) in next 11 months.
(3) Mobile phone based USSD technology of EKOrequires both CSP and client to have mobile phones.
(4) Support from Grameen Foundation, USATechnical support on required capacity building for
taking up savings as a BC and transformation of the
company from credit driven organization to
multiproduct organization for the poor.
Savings followed by Credit Initiative as a BC
of a Bank-Performance Metrics
1. No. of Savings Account Opened- 66,754
2. No. of Active accounts- 52,622 (79%)
3. No. of Inactive Accounts (180 days)- 14,132 (21%)
4. No. of Accounts with balances- 43,264 (65%)
5. No. of Accounts with ZERO balance- 23,490 (35%)
6. Average Balance per account with positive balances- Rs. 425/7. Total Savings Balances (Savings Float)- Rs. 1.84 cr
The above performance of savings account of our BPL
borrowers in 11 months since its launch has been
described by the bank and industry experts as one of
the bests among the BCs and supports our
approach for Credit led MFI-BC model, as we are
now moving towards providing credit to our BPL
beneficiaries under this BC arrangement.
(B) Credit followed by Savings Initiativeas a BC of another Bank• Started engagement with the bank in September 11 on initial
preparations, ground work, operational and financial process
flows, Front end technology, back end technological integration,
pricing, fee, etc;
• Agreed to work as a BC in specified geography on exclusivity
basis
• Launched by the bank in May 2012. First loan disbursed at the
end of the month.
• So far Rolled out in 56 branches of eastern UP covering about
more than 1,00,000 BPL borrowers of Cashpor.
• About 50,000 customers have been enrolled for the bank
since launch in May 12 and about 1300 loans have been
disbursed by the bank with disbursement amount of Rs.1.50
crores.
• Bank has started the process of opening of savings accounts of
these borrowers as well and offer SB/RD/FD products.
Small Beginning, A long way to Go
•
With these two initiatives, Cashpor has
taken the required lead to make this Credit
led Full Service BC-MFI approach to make
BC a scalable and financially sustainable
model which is vital for achieving true
financial inclusion of BPL Households in rural
areas.
•
We fully understand that this is a small
beginning and it has to go a long way to
satisfy the expectations of all important
stakeholders and make a mark in the full
financial inclusion initiative.
THANKS