April 2008

In Fact

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The use of ICT is inevitable to improve the usage of existing branch infrastructure to expand its the outreach of the formal financial system to the rural poor. The following are some initiatives towards achieving financial inclusion:

The International experience

The Bangladesh Grameen Bank model: The micro finance programmes of Bangladesh Rural Advancement Committee (BRAC) and ASA in Bangladesh have by now been widely studied. Similarly, the experience of Bank Rokyat Indonesia (BRI) Unit of Indonesia and micro finance experience of Philippines were path breaking efforts and ICT enabled innovations in their time.

Banking Correspondents in Brazil:  The Brazilian model is largely technology driven and uses kiosks or automated teller machines Another initiative in Brazil has been the use of the post offices network and post office staff to deliver banking services through Banco Postal.

ACCION's Service Company model of Latin America: ACCION International, a microfinance resource institution based in the USA and working in the American continents, has promoted the 'Service Company Model' to expand micro finance operations. The model has been successfully replicated by SOGE BANK/ SOGESOL in Haiti and Banco del Pichincha/ CREDIFE in Ecuador.

Teba Bank of South Africa: Teba Bank engages agents who are given hand-held mobile Point of Sale (PoS) devices. This wireless device has a built-in GSM modem, card reader and micro printer. The customer can use their debit card at the terminal to deposit and withdraw cash, make balance enquiry and transfer funds.

Jijenge Savings Account in Kenya: Equity Building Society in Kenya has developed the Jijenge Savings Account, a contractual savings product with an emergency loan facility.

Micro payments using text messaging: In Kenya, Commercial Bank of Africa in conjunction with local mobile operator Safaricom is enabling mobile subscribers to make micro payments from mobile phones. The majority of the people in Kenya do not hold bank accounts but purchase prepaid mobile refill cards. The technology allows settlement of bills by building up credit balance on the mobile phone and sending text message to make payments.

The Indian experience

Kisan Credit Card: The Kisan Credit Card, now popular all across India, is a financial product innovation of far reaching significance. The card enables the farmer to get loans over three to five year time frame as a revolving credit entitlement.

Pigmy Deposit Schemes: The scheme, which involved daily/weekly collection of tiny deposits at the depositors' doorstep by engaging local people as agents, was operated in the past. There is need to learn from this experience and devise adequate checks and balances and utilise IT tools to make any future initiatives less risky for banks.

Mobile banking: Banks have experimented with mobile banking in rural areas by several modes, including the use of mobile cash counters. The location and time of operation are usually synchronised with market days so that larger numbers of people could transact business

Local Area Banks:  Local Area Banks (LABs) were another initiative that was attempted to mobilise rural savings by local institutions and make them available for investment locally. Krishna Bhima Samruddhi, a Local Area Bank promoted by Basix in Andhra Pradesh, is the only LAB which is into the business of micro-finance on a large scale and has achieved operational efficiency in terms of profits and a high credit deposit ratio.

SHG-Bank Linkage: The SHG-Bank Linkage model is the indigenous model of micro credit evolved in India and has been widely acclaimed as a successful model with a fair coverage.

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