IFMR Finance Foundation (IFF), which recently came out with a plan for commercial banks to deepen financial access using the Business Correspondent (BC) model , is now working on an action plan to roll out the model extensively across India. The action plan proposes to set up a large number of conveniently located village level touch points across the country to provide a full-range of services including savings, credit, insurance and payments that is viable for the BCs, the bank and the customers. The significance of the initiative can be gauged by the fact that of the 600,000 habitations in India, hardly 30,000 have a bank branch.
IFF is proposing two models – the minimum service model (savings, payments and insurance) and the full service model, which includes lending.
IFF, which is designing the models, including working out the business plan for the various models, is to be involved in identifying the BCs; selecting the training and technology partners; working out business plans for the various models that are being proposed; designing the channels, processes and products; and zeroing-in on appropriate geographies for implementation.
Key to the success of this massive BC programme that IFF is proposing for commercial banks is establishing healthy partnerships with institutions that have built strong track records in working with village based entities. CARE India, a Delhi-based humanitarian organization, is one such institution that connects with a multitude of village level NGOs and provides them with tools and facilities to effectively serve the rural population. The support provided by CARE, after a careful due-diligence, ranges from product design, training, and funding to advocating for policy changes in relevant areas of their work. Thus CARE’s partner NGOs could become potential BCs of the bank.
To explore the possibility of CARE’s partner NGOs becoming BCs, a workshop was conducted at IFMR’s Office at IIT Research Park on 18th May 2010. While the workshop was attended by 25 NGOs who work in as diverse fields as livelihoods, health and education, more than half of them were also into microfinance.
Suyash Rai of IFF set the stage of the workshop by providing an overview of the proposed BC model of financial deepening. The discussions that followed were extensive. While CARE’s Chennai head Devaprakash suggested that his organization could be involved in providing training tools and infrastructure, apart from actually being involved in training, the NGO partners flooded Suyash with questions ranging from implementation to impact. It was very obvious that the partners were keen to become BCs and wanted to clear doubts and concerns.
Suyash Rai presenting the BC model.
Interaction with NGOs after the presentation.
The questions and apprehensions flagged by the NGOs are significant inputs for IFF to formulate an effective, viable and successful BC model on the ground. Some of their concerns that included, “how will the BCs of one bank function alongside BCs of other banks in the same area?”; “will there be credit ceilings?”; and “how will the time spent by the BCs on rejected loan clients be accounted for?” provided insights into some of the operational issues that would be appropriately addressed for the proposed initiative to be taken to scale across the country. If you have ideas on improving the BC model, do share it with us in the comments below.
Asha Krishnakumar, Farzana Najeed and Kirthi Rao contributed to this post.