Relation Building with rural borrowers – Key to Business strategy

1. Relation Building with rural borrowers – Key to Business strategy S Thomas Punnoose Member of Faculty, CAB, RBI, Pune 11-04-2013

2. Financial Stability:

3. Inclusive Growth: Inclusive growth as a strategy of economic development has received renewed attention in recent years owing to rising concerns that the benefits of economic growth have not been equitably shared. Growth is inclusive when there is equality of economic opportunities. Financial inclusion makes growth broad based and sustainable by progressively encompassing the hitherto excluded population.

4. Financial Inclusion and Financial Literacy DEMAND SIDE SUPPLY SIDE

5. Characteristics of rural markets:

6. Customer Relationship Management

7. Customer Relationship Management • A customer service approach that focuses on building long-term and sustainable customer relationships that add value both for the customer and the company

8. 3 Important Points • The Most Important Goal is – CREATE & KEEP THE CUSTOMER • Not To sell – Help Them To buy • People love to buy – Hate to be sold

9. Top 20% contributed to 150% profit, while the worst 40% results in 50% profit reduction 1 2 3 4 5 6 7 8 9 10 Why CRM ? Twice the normal turnover 50% profit reduction Profit Customer segments

10. Customer focus Present a single face to the customer Customer focus win and retain loyal and profitable customers

11. Advantages of customer focus • Accurate view of internal operations • Service to customers • Information • Across product lines • Across geographic locations • Across subsidiaries, business units • Across multiple channels

12. Why are loyal customers more profitable? • Acquisition costs incurred once only • Benefits accrue from • Loyal customers referring other new customers • Loyal customers tend to purchase more over time • Loyal customers are less price sensitive • Loyal customers incur fewer administrative costs over time

13. The customer perception • Keys to shaping customer perception • Develop customer profile • Look at your business with customer eyes • Be aware of over promising • Do not cheat your customer - Just to sell the Product • Your Image – Representing Your company • Problem – great opportunity to win a customer

14. Important Points: • BE RELIABLE- consistent performance is what customer wants from us • BE CREDIBLE- if the customer buy the product, he wants to safe and guaranteed. • BE ATTRACTIVE- body language • BE RESPONSIVE– accessible, available and willing to help customer whenever the customer has a problem. • BE EMPATHETIC- to be in customer’s shoes and grasp his point of view

15. Some facts:

16. Financial inclusion broadly refers to theprocess of ensuring access to appropriate financial products and services needed by all sections of the society in general, and vulnerable groups such as the weaker sections and low income groups in particular, at an affordable cost, in a fair and transparent manner by mainstream institutional players. What is Financial Inclusion?

17. Perceptions about Financial Inclusion • A potentially viable business proposition • Money at the bottom of the pyramid • It seeks to bring into the fold of banking services a huge untapped market

18. Demand Side Factors

19. Financial Needs: Savings, Credit Credit, Cash Management, Insurance Savings, simple pension products Short/Long term credit facilities or savings services Remittances Asset/illness/death insurance

20. Outcomes: • Enhanced ability to manage planned financial needs • Enhanced household capacity to manage shocks and vulnerabilities • Improved social, educational and financial status The “unbanked” need and use a range of financial services (not just credit) and are willing to pay the “right” fee for these services

21. High-income savvy customers graduating to a mobile life The poor cherish the most basic features

22. Poor people make decisions on the basis of 4 variables: • So the poor want……. • Frequent opportunities to transact • Small amounts in • Conveniently located outlets of • Trustworthy / secure institutions

23. Factors that determine demand for services: • Migration of poor to urban environments – remittance • Dependence on weather, rainfall, landholding, market-demand influence financial needs – credit or insurance • Accessing State benefits

24. Influencing Demand for Banking:

25. Influencing Demand for Banking:

26. Supply Side Enablers

27. Supply side enablers: Multiple Technology options available today hold the promise of supporting FI at large scale

28. Success stories – low value high volume goods:

29. Success stories – low value high volume goods: • Industries falling in the value-chain (buyers to sellers) of agro-sector • Mobile operators developing paper vouchers of very small denominations and subsequently electronic airtime top-up of any-value, providing the flexibility of paying for mobile services as per cash at disposal

30. Cost-effective & sustainable distribution of services

31. Financial Literacy

32. What is Financial Literacy? • The capacity to have familiarity with and understanding of financial market products, especially rewards and risks in order to make informed choices • It refers to the ability to make informed judgments and to take effective decisions regarding the use and management of money • Lack of FL is a major impediment in the process of FI

33. Scaling up Financial Literacy efforts: • FLCs and all rural branches to conduct outdoor FL Camps at least once a month • FL efforts to be reviewed in SLBC / DLCC meetings • Bank’s HO to review effectiveness of FL efforts • Bank’s Top Management to ensure that all rural branches and FLCs prepare a calendar for conduct of camps in the beginning of the year • Ultimate objective is to make FI a viable business model by capturing untapped business opportunities

34. Focus on: • Recognizing the actual objective i.e. behavioral and attitudinal change • Organize meetings of the financially excluded with the financially included and have honest discussions about what, why and how – both how difficult and how easy – of financial products already being used by people who were until recently financially excluded will provide large dividends • Repetitive messages in an environment they are comfortable with – peer learning is most effective in a group mode

35. Conduct of Financial Literacy Camps: • Programme to be conducted in three stages to be spread over a period of three months, comprising of three sessions of minimum two hours each • 1st session: creating awareness on financial concepts • 2nd session: (a fortnight after 1st session): • 3rd session: (2 months after holding of 2nd session)

36. Direct Benefits Transfer

37. Introduction: • 43 districts identified (on the basis of higher Aadhar enrolment figures) in 16 States / UT • 26 schemes selected on the basis of higher incidence of beneficiaries with bank accounts and where flow of funds were found to be relatively simpler • 26 Public Sector Banks, 12 RRBs and few Private Sector and Cooperative Banks are on board for roll out of DBT

38. Direct Benefit Transfers: • Are programs that transfer cash directly, generally to poor households, with or without conditions. The purpose could be:

39. DBT Objectives: • DBT envisages a switch from the present electronic transfer of benefits to bank accounts of the beneficiary to transfer of benefits directly to Aadhaar seeded bank accounts of the beneficiaries. • The other objectives are: • Accurate Targeting • De-duplication • Reduction of Fraud • Process Re-engineering of Schemes for simpler flow of information and funds • Greater Accountability

40. 26 Schemes implemented for DBT:

41. 26 Schemes implemented for DBT:

42. Thank You