Independent Research and Policy Advocacy

Reaching the Last Mile in Financial Services Delivery

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As part of Business Today Magazine’s 25th Anniversary issue, Bindu Ananth has written an article in the latest edition of the magazine. Below is an excerpt from the article:

I write this from the sidelines of my city’s (Chennai’s) worst flooding in 100 years that has rendered lakhs of people homeless and bereft of livelihood. As the daunting task of re-building looms ahead, one key issue, among others, is going to be how to provide people timely and reliable access to financial services? Can we rapidly honour claims related to life, accident and asset insurance, enable withdrawal from savings deposits to meet the immediate need for food and medicines, and provide people short-term liquidity to repair leaky roofs, pay school fees and re-stock inventory? These are “moments of truth” for those offering financial services and, unfortunately, we are too often found lacking. A lot of this can be traced to fault lines in the last mile of financial services delivery.

The last mile is the “plumbing” that connects financial product manufacturers – banks, insurance companies, mutual funds, etc – to their end-customers, that is, households and businesses. While for most of us who belong to the urban, salaried segment, this access is rendered through bank branches, ATMs and insurance/investment agents, the picture looks very different for the rural agricultural segment and urban informal sector workers. They rely far too often on friends and family and informal sources to meet their financial service needs, because as far as they are concerned, the last mile is broken – the nearest bank branch is too far and there is no reliable process to file an insurance claim. For instance, the All India Debt and Investment Survey (AIDIS) 2014 found that about 19 per cent small farmers rely on non-institutional sources for loans despite the well-documented concerns over the costs of such borrowing. It reveals that more than a third of non-institutional borrowing is at annualised interest rates higher than 30 per cent. The problems with the last mile can be broadly attributed to the high cost of providing the service and human resource challenges. I will briefly describe each of these.

To read the full article click here.

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