Credit led Full service BC-MFI Approach

1. Business Correspondents: A Potential Model” Credit led Full service BC-MFI Approach Mukul Jaiswal MD

2. It is now widely known fact thatmost of the BCs are struggling in scaling up of their BC operations and to make it financially self-sustainable due to several reasons, prominent among them are - Limited product basket with mainly liability products- mostly, No frill savings accounts’, enabling G2P payments or remittances within NFA; Wafer thin margins that are made available to BCs by banks for such products. Near absence of Micro credit products through BC channel for unbanked population Several recent studies, research and surveys by the industry experts point out the above situation and this requires a re-look in to the model and to take initiatives to explore ideas how it can be made financially viable & scalable.. Present Issues under BC Model

3. CREDIT LED FULL SERVICE BC APPROACH A Good, Viable & Scalable Option • Existence of Potentiality to become financially sustainable and scalable Model- (a) Credit and Savings both products are delivered • Core Product of NF Savings account is layered with thick inner layering of suitable Micro Credit Products and outer layering of other financial products, like RD/FD, remittances, micro pension, micro insurance, etc. • Possible by appointing right kind of Eligible MFIs as BC-MFIs (2) BC-MFIs can Not only Open No Frill Savings accounts but can also originate, recommend and service micro credit products as BC for Banks-

4. CREDIT LED FULL SERVICE BC APPROACH A Good Option to choose (3)Positive Steps of Regulators- (a) Banks already allowed to pay reasonable fees to BCs for their services- (b) Acceptability of 12% Margin Cap for MFIs for meeting Operating Expenses- (c) Service tax exemption on Fees paid to BCs by banks- (4) Existence of Large Number of Good and Eligible Not For Profit MFIs / SHPOs- (a) Opportunities for banks to choose Good Not for Profit MFIs SHPO as a BC- (b) Opportunities for MFIs/SHPOs to become BC-MFI

5. CASHPOR’s INITIATIVES (with Credit led Full Service MFI-BC Approach) • Savings followed by Credit Initiative as a BC of Bank- (1) Launched in July 2011 on Pilot Basis in 4 rural branches with the following two Strategic Objectives- (A)To show that given the opportunity and suitably designed savings products, significant amount of savings can be mobilized from BPL borrowers as a BC for the bank, and with that proven, bank may be convinced to lend substantial portion of such savings back to the BPL borrowers for productive purposes through CASHPOR as a BC and by the fully utilizing the loan for income generating purposes BPL borrowers would be able to generate additional surplus income and would be able to build more savings and this would turn in to a cycle with win-win- win situation for client, bank and MFI-BC with the objective of achievement of full financial inclusion. (B) To provide access to suitable savings products to BPL borrowers at their doorsteps in the villages long demanded by them.

6. CASHPOR’s INITIATIVES (with Credit led Full Service MFI-BC Approach) (2) Roll out in 7 districts of Eastern UP and Bihar through 131 branches and 462 CSPs (Center managers) in next 11 months. (3) Mobile phone based USSD technology of EKO- requires both CSP and client to have mobile phones. (4) Support from Grameen Foundation, USA- Technical support on required capacity building for taking up savings as a BC and transformation of the company from credit driven organization to multiproduct organization for the poor.

7. Savings followed by Credit Initiative as a BC of a Bank-Performance Metrics • No. of Savings Account Opened- 66,754 2. No. of Active accounts- 52,622 (79%) 3. No. of Inactive Accounts (180 days)- 14,132 (21%) 4. No. of Accounts with balances- 43,264 (65%) 5. No. of Accounts with ZERO balance- 23,490 (35%) 6. Average Balance per account with positive balances- Rs. 425/- 7. Total Savings Balances (Savings Float)- Rs. 1.84 cr The above performance of savings account of our BPL borrowers in 11 months since its launch has been described by the bank and industry experts as one of the bests among the BCs and supports our approach for Credit led MFI-BC model, as we are now moving towards providing credit to our BPL beneficiaries under this BC arrangement.

8. (B) Credit followed by Savings Initiative- as a BC of another Bank- • Started engagement with the bank in September 11 on initial preparations, ground work, operational and financial process flows, Front end technology, back end technological integration, pricing, fee, etc; • Agreed to work as a BC in specified geography on exclusivity basis • Launched by the bank in May 2012. First loan disbursed at the end of the month. • So far Rolled out in 56 branches of eastern UP covering about more than 1,00,000 BPL borrowers of Cashpor. • About 50,000 customers have been enrolled for the bank since launch in May 12 and about 1300 loans have been disbursed by the bank with disbursement amount of Rs.1.50 crores. • Bank has started the process of opening of savings accounts of these borrowers as well and offer SB/RD/FD products.

9. Small Beginning, A long way to Go • With these two initiatives, Cashpor has taken the required lead to make this Credit led Full Service BC-MFI approach to make BC a scalable and financially sustainable model which is vital for achieving true financial inclusion of BPL Households in rural areas. • We fully understand that this is a small beginning and it has to go a long way to satisfy the expectations of all important stakeholders and make a mark in the full financial inclusion initiative. THANKS