DESIGNING AND IMPLEMENTING LAST-
MILE SERVICE DELIVERY SOLUTIONS AND
INNOVATIONS: FINANCIAL INCLUSION
OF POOR THROUGH COMMUNITY
INSTITUTIONS IN INDIA
Livelihoods Story
Incomes Expenses
Wage Income 53% Food Expenses 58%
Farm 18% Healthcare 12%
Livestock 15% Personal 15%
Non Farm 14 % Interest Burden15%
Bleeding Livelihoods – Sheikwara, Gaya District (Birthplace of Bhoodan in Bihar)- Farm wages are paid in form of grain. NO WORK – NO FOOD.- All Bhoodan lands mortgaged due FOOD and HEALTH SHOCKS.- Lease-in land (up to 10 decimals) to GROW FOOD for own consumption.- FOOD LOANS repaid in kind or tied labour and/or produce.- MIGRATION offers plausible solution, but with heavy upfront costs .
Poor need financial products matching cash, income, expenditure and risk cycles in their life.
Livelihood projects made with Lego*
Social mobilization of poor
Building institutional platforms for the poor
Developing pro-poor financial sector
Access to entitlements
Linking with markets & services
Gender empowerment
* Lego ®
Investing on demand side:
Building access to markets agenda
Entitlements and Social Security
Food Security – PDS, Food Security Enterprise
Health Security – Nutrition, CMHS
Income Security – NREGA, Pensions
Risk Management – Insurance (Life, health, assets)
Access to Markets and Services
Productive assets and skills
Productivity Enhancement - SRI, SWI, CMSA, Dairy
Collective Marketing - Agri Commodities, NTFP, Dairy
Market linked Jobs
But Financial Inclusion has always
been a story of the Fox and the Crane
Both friends had an equal opportunity for nourishment, but each time one of them could not take advantage of the
opportunity.
Financial Inclusion Strategies
Building an inclusive financial sector
Making poor preferred clients for banking system
Monetize livelihoods economy of the poor
Reduction in high cost indebtedness for the poor
Financial education for planned investments
Leveraging investments from mainstream banks
Pro-active and systematic initiatives working on both ‘supply’ and ‘demand’ side of financial inclusion agenda
Lessons from banking with the poor
Initial engagement in AP, Tamil Nadu and Orissa
Saturation approach to SHG formation
Saturated training and sensitization effort
Coordination mechanisms: Govt, NABARD & banks
Sharing of MIS with banks and tracking credit linkage
Result: Initial inertia overcome, momentum picked up
Accelerated change in AP, Bihar and Odisha
Micro Credit Plan based lending
Community involvement for bank linkage & recovery
Livelihood innovations triggered financial innovations
Transformation in Delivery of Financial
Services to the Poor
Product innovations by the communities by
bundling micro-credit with livelihood services
Food Credit and Nutrition Credit
Co-production model for rural financial services
Relationship managers for the poor (Bima Mitras)
Agency arrangements for financial services delivery
New technologies and business models transform
last mile service delivery
IT enabled with Micro-insurance Companies
Smart Card based Payment Systems
Co producing Financial Services:
Innovations
Strategic Partnerships with Commercial Banks AP: New product development
Bihar & MP: Business process re-engineering
Bihar: Dedicated spear head teams
Product Innovations AP & Bihar: Bundling microcredit with Food & Nutrition
AP & Bihar: Health savings
Bihar: Swapping high cost debts – land and milk
Bihar: Loans for land and animal leasing
AP & Bihar: Loans against anticipated NREGA payments
AP: AP: Bank product for assistance food security line
AP: Bank assistance for Total Financial Inclusion (TFI)
Co producing Financial Services:
Innovations
Service Innovations AP & Bihar: Help-desks at Bank Branches (Bank Mitras)
AP: Branchless Banking for Social Security Payments
AP & Bihar: SHG Federations as Banking Touch Points/CSC
AP: SHG Federations as micro insurance franchisees enabling universal access to insurance by setting high standard of service delivery
Consumer Innovations AP: Savings from social security payments
Bihar: Poor use savings accounts of SHGs on CBS platform
to make and receive remittances at ZERO COST
Bihar: Micro Credit Planning as tool for financial and
business education
Co producing Financial Services:
Innovations
Service Innovations
Bihar & Odisha: Financial literacy and credit
counseling – Vitta Mitra
AP, Bihar & Odisha: Help desks - Bank Mitra
Alternative Banking Channels
Odisha: Mobile Van (UCO Bank)
Bihar: Kiosk Banking (SBI)
AP & Bihar: Dairy Banking (HDFC Bank)
Financial Inclusion
Building Informed, Empowered and Responsible Clients
Micro Planning
Financial Literacy and Counselling “Vitta Mitras”
Community Managed audit and recovery Mechanism
Enabling access to Insurance
Product Innovations using CIF as catalytic fund
Debt Swapping, Food Security Fund, Health Risk Fund etc.
Making Formal Financial Sector Deliver
Partnerships ( formal MoUs) with commercial banks & sensitization of local bankers
Placement of customer relations managers (Bank Mitra) to smoothen the transactions at the branch level
Alternate Banking Models for Total Financial Inclusion
Enabling access to a suite of financial services at the doorstep
SHG women as CSPs at the last mile
Bank Mitra – Help Desk
Outreach4500 Bank Mitras
across the Country
Impact• Transaction time
down from 2.5 hours
to just 15 minutes
• 95 + percent SHGs in
these branches are
credit linked
• NPA is less by at least
30%
Livelihoods Banking Pilot
HDFC BankBranch
Customer
Touch
Points
HDFC Bank’s
Maestro debit Card
with the Customers
EDC Terminal
HDFC DC
Connectivity to HDFC
Bank’s Data Centre
thru
Landline/CDMA/GSM
phonephone
Cash management thru
Nearest Branch
Center Operator as Business
Correspondent
for Cash Deposit/Disbursal
POS terminal at BC Centre to
capture customer transactions
Introduction of Hub ATMs
Payment of
Solatium/Relief
Claim village Call Centre located in
District Federation
Area Committee
Members
Commercial
Bank
AlertUS$ 125
Phone
Insurance Claim Settlement Process
• Area Committee completes documentation and sends e-Claim to Insurance Company via District
Federation
Community led Micro Insurance
Model
ATM
Learnings
Invest with a long term perspective
Investing in institutions requires experimentation,
failure and learning. We need to put risk capital in
and learn from failures
Invest in political economy from the beginning.
Governments need to see a political value
preposition
Need to invest in aggregate forms of social capital
and institutions to create a favorable investment
climate