I had a fascinating meeting today with Gayathri, CEO of LabourNet Services that reminded me of some fundamental challenges in financial inclusion. So, here is a company deeply wedded to its mission of providing essential services and skills to urban informal sector workers. Over the years, they have realised that identity and basic financial services (savings and insurance) is an important need for the informal sector worker and started getting involved in facilitating access. However, 23000 accounts later, they find themselves in the familiar ‘bewilderment zone’ in dealing with multiple financial institutions and the lack of connect between existing products/processes and their sense of what their typical client requires.
This meeting reiterated for me the need for many-many more specialised distributors of financial services in India. These cannot be individuals or kirana shops, but formal institutions with the processes and understanding to effectively intermediate between the clients on the one hand and the product manufacturer (bank, insurance company, mutual fund) on the other. Like we are creating a set of new-generation distributors called KGFS to serve remote rural India, there is a similar need for high-quality distributors for the urban poor, for seasonal migrants and other demographic profiles with fundamentally different demand characteristics.
At IFMR, we think that pushing manufacturers to build last-mile distribution is a losing battle (one we have waged as a financial system for decades). Instead, we need to create several more institutional distributors in India with incentives aligned to the financial well-being of customers.