December 17, 2013
Grameen Foundation and Grameen Foundation India has worked with Intellecap to create a 4-part blog series highlighting challenges and solutions for various aspects of the Business Correspondent Model. Click here for full studies about dormancy, the business model, channel innovation, or operational challenges.
People living in poverty need access to a full range of financial services, but until recently, microfinance institutions (MFI’s) in India have largely focused only on credit services due to regulatory and other issues. Then in 2006, the Government of India issued new regulations allowing banks to designate Business Correspondents to make transactions on their behalf. As Business Correspondents, MFI’s could provide greater outreach for financial inclusion for the poor.
With help from Grameen Foundation, Cashpor took the opportunity to convert its existing credit-oriented infrastructure into a channel for savings and other products needed by clients.
Since the Business Correspondent Model is new to the Indian banking sector, current on-the-ground efforts are largely experimental, and there are few documented successes. Grameen Foundation has published a full case study based on our experience helping Cashpor Microfinance transform itself into a business correspondent.
Here are just a few of the highlights from the full case study:
Focus on what works best for the customer
Customer centricity helped Cashpor focus all efforts on developing processes and systems that have the maximum impact on customers. This includes an improved account opening form and simple mobile applications that help staff view their targets and performance.
Manage the pace of change and innovation
The changes Grameen Foundation introduced at Cashpor were gradual and often sequential in their degree of complexity, so as not to disrupt existing operations. Whether it was staff capacity building programs or integration of saving targets in performance evaluation, Grameen stayed nimble and made adjustments as necessary. Most processes and systems evolved during the course of the project tempered by the realities of the field deployment.
The MFI should work as a channel and a trusted intermediary
The MFI should act as a channel through which the unbanked can be reached. Cashpor could act as an effective channel as its field teams had a long standing and trusting relationship with the customers that allowed the customers to feel comfortable in opening savings bank account and depositing money.
Leverage technology to ensure last mile outreach
Mobile technology is a cost effective way to ensure last mile reach. At Cashpor, mobile technology has been extensively and effectively used to provide savings services to poor women. It also streamlined internal reporting procedures for staff.
A successful channel innovation takes an immense amount of time, effort and resources
Donors, policy makers and supporting organizations need to be patient and invest with a long term view. It takes a lot of time and effort to devise an effective channel to deliver financial services, particularly since there are no ready-made models.
Additional details can be found in the full case study: Channel Innovation for Financial Inclusion. Please share your relevant lessons in the comments, so we can continue to learn from each other.