agent s of f i nanc i a l i nc lu s i on
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CRISIL Inclusix Report
. It is working with the excluded
segment even in better off districts.
Under direct model (BC/partnership) the bank had an
outreach of over 5.6 lakh clients spread over identified
geographies—9 states through 9 intermediaries includ-
ing MFIs. Credit bureau data is used effectively to work
in different geographical areas and to help selection of
MFI partners. From the time of implementation of the
partnership project in May 2012, the bank has carried out
more than 20 million low-value transactions smoothly.
The bank rewards the service provider for its services
through a service fee or commission which is paid both
in fixed as well as variable components. Care is taken to
ensure that the service provider’s revenue is adequate and
offers a good business proposition for sustainable finan-
cial inclusion as against the experience of unsustainable
BC models in the past. At the same time, a performance
security (or FLDG) component is built into the service
agreement which ensures that the partner/BC continues
to source and service the end-customers of the bank
as they would their own-funded clients. This structure
brings about risk alignment of objectives of bank and the
partner MFI. The bank does not attempt to charge other
than market rates from the client, though there is no pro-
cessing fee which results in an effective saving of about
1.8 per cent in terms of the rate of interest. Nevertheless
there has been a drop of 3–4 per cent in the rate of inter-
est to clients since it started business.
Sustainability of operations is paramount for the
bank. It is open to the legal form adopted by the
partner MFI and also prepared to work with whatever
group methodology—SHG, JLG or individual which
the partner prefers. However, it ensures that there is no
incentive for the MFI partner to undertake on balance
sheet lending. The bank does not view term lending
to MFIs favourably and prefers to lend through MFIs,
rather than to them, by adopting its own appraisal
methodology through KYCs, etc. Accordingly, it is not
even favour lending to the larger NBFC-MFIs. Under
the BC model the average loan size is Rs. 13,000 and
average repayment instalment is Rs. 325. Besides loans,
the bank is also facilitating voluntary savings through
normal SB accounts which are expected in turn to be the
basis for further diversification of products.
In the light of few big ticket equity investments in
large MFIs, and regulatory barriers to new entrants the
bank believes that the partnership/BC programme can
be a key enabler for the microfinance sector to expand
its outreach with little incremental capital required since
time-tested processes and systems have been built for
reaching out to the poor. The bank aims to capitalize on
such institutions while meeting its mandate of providing
access to comprehensive financial services to a vast num-
ber of un- and under-banked clients in the country. The
bank is optimistic about mobile technology emerging as
the key technology of the future even though it is open to
other technologies such as smart cards and POS devices
at the front end. It has used mobile technology for its
liability products but feels it is premature to extend it for
credit operations.
3.4.4 Cashpor’s Composite BC Model with
Fee-Based Savings
For Cashpor, a leading not-for-profit MFI, its BC work
with banks has become an important part of its total
business accounting for 21 per cent of loans disbursed
during the 2013–14 and for 22 per cent of the total
portfolio as on March 2014. A three-way partnership was
facilitated by Grameen Foundation between Cashpor,
ICICI Bank and Eko India Financial Services Private
Limited, the technology provider, to offer saving bank
accounts to Cashpor’s clients.
19
The savings function
as BC was added to Cashpor’s pre-existing role as MFI
retailer and BC in loan disbursement for IndusInd Bank
(Box 3.8). The existing credit infrastructure was used
to offer savings services with only marginal costs being
accounted for in the savings operation. Marginal costs
comprised of staff incentives, automation of the account
opening process, staff training and administrative costs.
Cashpor earned its revenues from commissions that the
bank paid on account opening, transactions and float
(for the balance maintained in the accounts). Cashpor
was guided by the ‘total customer profitability’ concept
in offering savings services whereby the total costs of
providing a basket of financial services to the customers
is covered through total revenue from that customer.
Under this model Cashpor utilized its existing credit
infrastructure of branches to offer saving services. Its
centre managers double up as CSPs.
20
Customers must
also pay transaction charges each time they deposit or
withdraw from their savings accounts. For this, they
