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Financial Inclusion

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Won 3rd Prize at Parchment, JBIMS Prayaag 2009

Won 3rd Prize at Parchment, JBIMS Prayaag 2009


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  • The agenda for the presentation:First, we will define financial inclusion, its benefits and have a look at financial inclusion as a business opportunityThen we will have a look at the existing rural and priority sector business set up of Bank of Maharashtra and how it is positioned to take a benefit of the sameThird, we will move on to the telecom based banking model that we proposeAt the end we will have a look at some numbers to assess the viability of the business model which will be followed by a Q&A session
  • Financial Inclusion is the delivery of banking services at affordable costs to vast sections of disadvantaged and low income groups.
  • Focus on Income GenerationFor example, a woman may borrow Rs. 2500 to buy chickens so she can sell eggs. As the chickens multiply, she will have more eggs to sell. Soon she can sell the chicks. Each expansion pulls her further from the devastation of poverty.
  • Look at Financial Inclusion as a business opportunity than as a social obligationSwadharFinAccess has set up small kiosks through a BC agreement with ICICI Bank in the urban slums at various places such as Kurla, Malad and Dharavi. They undertake banking operations such as account opening, deposit, withdrawal and credit cards, etc at the kiosks and provide smart cards to new account holders. The smart card, complete with their name, thumbprint, and photo, acted as a identify card, and when combined with the adored ICICI logo, one that commanded respect. India does not have a national ID card. The smart card, in effect, provided them with an identity. Some of the users said that If you are going at night and you clash the police then you can show them this card and they wont trouble you. These comments reveal that a sense of dignity and self-respect were the unintended benefit of the bank cards, and therefore, well worth the 200 rupees for many clients.
  • The Bank has established a trust in the name of Maharashtra Agricultureal and Rural Development Foundation (MARDEF) to undertake various projects and rural development programmes. MARDEF is imparting training to farmers  on various subjects in agriculture viz., Dairy, Emu farming,Goat rearing, cultivation practices in grape farming, application of fertilizers, agriculture credit schemes etc.  Two Rural Development Centres are established by the Foundation. Maharashtra Self Employment Training Institute (M-SETI) is an innovative step taken by the Bank in co-ordination with the Government of Maharashtra for imparting training and providing self employment opportunities to the youth. The Bank has set up 5 such Institutes at Pune, Nagpur, Aurangabad, Nashik and Amaravati. The last one was set up in May 2009. The programmes are very successful in capacity building.  So far 4605 youths are trained. Training programmes on computer hardware & networking, photography, audiography & videography, beauty parlour and fashion designing are very popular. Over 72 per cent of the youths trained are settled in gainful occupations in and around their villages. This is enabling them to find avenues by remaining in their own villages. This is helping to increase job opportunities in rural areas and mofussil towns thereby to entail the inflow of  rural youth to urban areas for employment.The Bank has established GraminMahilaBaBalakVikasMandal,  with UNICEF Assisted Action Research Project for development of Women and Children in rural areas.  This Mandal is considered as a mother NGO since 2003. It has established two shops for strengthening marketing support to its self help groups. This NGO has so far facilitated 19,994 SHGs of which 17,919  SHGs are credit linked with outstanding advance of  Rs. 30.86 crore
  • Beyond LendingMicrofinance institutions offer business advice and counselling, while clients provide peer support for each other through solidarity circles. For example, if a client falls ill, her circle helps with her business until she is well. If a client gets discouraged, the support group pulls her through. This contributes substantially to the extremely high repayment rate of loans made to microfinance entrepreneurs.
  • Collaboration or CompetitionLeveraging Brand BoMControl over quality of creditInterest spreadCustomer Reach & Loyalty
  • General WorkingEach FactorDescription – Need – Advantages - Disadvantages
  • Transcript

    • 1. Financial Inclusion
      Banking on the Unbanked…
      By:
      Prasad Shahane
      Chetan Ganatra
      24 Nov 2009
      Mumbai
    • 2. Agenda
      Financial Inclusion - The Business Opportunity
      Bank of Maharashtra – Facilitating Rural Growth
      The Business Strategy
      Products
      Delivery Channels
      Points to Ponder
      Crunching the Numbers
      Summary
      Q&A
    • 3. Financial Inclusion – The Business Opportunity
      Around 65% people in India do not have a bank account
      87% of India’s poor depend on private moneylenders that charge unreasonable interest rates
      The insurance penetration in India is as low as 5%
      An average urban Indian pays 8% for credit whereas an average rural Indian devoid of formal credit pays 48%
      The number of mobile phones in rural India is more than the number of borrowers from banking system
    • 4. Financial Inclusion – The Business Opportunity
      What is Financial Inclusion?
    • 5. Financial Inclusion – The Business Opportunity
      Fortune @ the Bottom of the Pyramid
    • 6. Financial Inclusion – The Business Opportunity
      The default rate of the bottom has been observed to be between 3%-5%.
      In 20 years, rural Indian market will be larger than the total consumer markets in countries such as South Korea, Canada & would be more than 4 times of the size of current urban market
      How to Target BoP? : Micro-Finance
      Focus on income generation
    • 7. Financial Inclusion – The Business Opportunity
      Benefits – Lender
      • 40% Priority Lending
      • 8. Government Bonds at 7% or Micro-lending at 25%?
      Benefits – Borrower
      • Access to credit at relatively reasonable rates
      • 9. Income Smoothing through micro-lending
      • 10. Reduced vulnerability to disasters through micro-insurance
      • 11. Sense of security and Identity
    • Bank of Maharashtra – Facilitating Rural Growth
      Advantage Bank of Maharashtra
      • 782 Rural and Semi-urban Branches
      • 12. Rs. 3037 Cr. of credit outstanding to MSMEs (9%)
      • 13. Rs. 12236 Cr. credit outstanding to priority sectors (41%)
      • 14. 3 Lakh Kisan Credit Cards involving Rs. 1429 Cr.
      • 15. 50743 SHGs formed involving Rs. 131.67 Cr.
      • 16. Maharashtra Agricultural and Rural Development Foundation (MARDEF)
      • 17. Maharashtra Self Employment Training Institute (M-SETI)
      • 18. GraminMahilaBalakVikasMandals
    • Bank of Maharashtra – Facilitating Rural Growth
      Advantage Bank of Maharashtra
    • 19. The Business Strategy
      The Foundation of Business
      Simplicity
      Value
      Speed
      Flexibility
      Existing Products with Focus on Distribution
      Business Partnerships
      SHGs
      Post Offices
      Telecom Companies
      Direct or Indirect Microfinance
    • 20. The Business Strategy
      The Banking Solution
    • 21. The Business Strategy – Products
      Products are already available in market:
      No frills saving banks account
      Small Overdraft facility for general consumption
      Small limit credit card for income based activity
      Micro-Insurance for Life and disability cover
      Health/ Non-Life Insurance cover
    • 22. The Business Strategy – Delivery Channels
      Delivery Channel is the backbone of Banking System for servicing in rural areas
      Self help Groups (SHGs)
      E-Choupal
      Post Offices
      Telecom Networks
    • 23. The Business Strategy – Telecom Based Delivery System
      Rs 500
      Rs 100
      Rs 50
      Rs 10
      Rs 5
      Re 1
    • 24. The Business Strategy – Points to Ponder
      Challenges that need attention.
      Credit Distribution – A Costly Affair
      Background Check of Agents
      Cost of Carry of Cash
      Negotiation with Telecom Operators in Different geographies based on Subscribers base.
    • 25. Crunching the Numbers – A Case
      Model Village – Multai (District Betul – MP)
      Why Multai?
      First village in MP to have E-Choupal terminal.
      Number of families - 21715
      Telecom Service Providers – BSNL & Reliance.
      Literacy Rate – 66.71%
    • 26. Case Contd…
    • 27. Summary
      Deposit
      Withdrawal
      Money transfer
      Credit disbursement
      Premium Payment
    • 28. Summary
      Telecom Companies
      Post Offices
      Self Help Groups (SHGs)
      Bank Branches
      BC Agents
    • 29. Summary
      Interest on Overdraft & Credit
      Insurance Premium
      Fee based Income on Services
    • 30. Summary
      BC Commission
      Telco fees
      Cost of Carry for Cash with BCs
      Cost of Maintaining central Info System
    • 31. Summary
      Bank Branch
      Post Office
      SHGs
      BC Agents
      Telco Distributors
      E-Choupal
    • 32. Summary
      Telecom Infra
      Central Accounting System
      BC network
      System Security
      Deposit Coupon Management System
    • 33. Summary
      Individuals
      Enterprises (Small & Medium)
    • 34. Summary
      Bank Account
      Life & Disability Insurance
      Health/ Non-Life Insurance
      Event Insurance
      Credit cards
      Remittance
    • 35. Thank You