i nc lu s i ve f i nanc e i nd i a re port 2014
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can either pay lump-sum, where an additional Rs. 50 is
charged per customer per year for conducting unlimited
transactions. Alternately, customers can pay each time
they transact, and are charged Rs. 2.
A study of Cashpor’s business model
21
found that the
project has earned lower revenues than costs incurred in
the initial 20 months. The BC model was a low-return,
high-cost model where scale and efficiency would be
critical to achieving profits. Financial viability of the
model was a major concern.
While the bank wants to retain the fee because of
the need for financial sustainability, the poverty of the
clients has been a barrier to opening accounts. The sav-
ings product was thus demotivating to customers: when
depositing Rs. 20 into their account, only Rs. 18 would
be credited since Rs. 2 (10 per cent of the total deposit
amount) would be taken up as a transaction cost.
There are assertions in many quarters that even poor
people are prepared to pay for savings services. Despite
the apparent success in mounting a savings facility on
the existing infrastructure for MFI lending at Cashpor
it appears that the introduction of such a fee-based
facility
22
is not generally accepted. This especially so
since the universal provision of basic savings bank deposit
accounts with several attractive features and products is
being implemented by banks on a priority basis under
the financial inclusion mission.
The aforementioned examples highlight the man-
ner in which private banks have tried to create business
models that externalize the risks and costs of financial
services delivery to the poor and excluded clientele in
their attempts to extract the fortune at the bottom of
the pyramid. In the case of lending operations—the
alleged win-win proposition—the NGOs and non-profit
MFIs engaged find themselves having to move away from
their role as development contractors, while being com-
pulsively involved in risk-taking as part of their efforts
to provide the financial services generally being denied
to their constituents under the classic direct SHG-bank
linkage type of programme.
23
While the banks are able
to extract a more or less assured return on their portfo-
lio of about 13 to 14 per cent, the lending to SHGs is
B
OX
3.8
IndusInd Bank: Financial Inclusion through Win-Win Model
Financial Inclusion, for IndusInd bank, is not simply a one-time intervention but it signifies a comprehensive bouquet of various
services and products which can make meaningful impact in enabling the poor segment scale up the ladder of poverty. With this
philosophy in mind, it engaged Cashpor Micro Credit, a Varanasi based MFI, as a BC for intermediating and offering an array of
financial services on behalf of the Bank. Cashpor had developed certain key knowledge, understanding, systems and methodologies
for dealing with the BPL segment in this part of the country in a sustainable and scalable manner.
The IndusInd BC arrangement with Cashpor commenced in May 2012 covering 4000 villages, spread over 11 districts. Till date
the bank has extended more than 2.72 lakh loans. Currently, around 1.25 lakh customers loans from IndusInd. Close to 50,000 of
these customers have also been offered savings accounts and eventually the entire customer base would be covered under the savings
account facilities. The arrangement is a win-win situation for all the stakeholders as below:
Customer
• Low cost credit in a convenient and transparent manner at their door steps.
• Continuous and uninterrupted credit flow as Bank is in a better position to ensure the fund flow
• Savings account enabled through convenient mobile solutions
• Access to other services like insurance, pension and money remittances in future
Cashpor
• A reasonable revenue sharing thus ensuring commercial viability of its intermediation
• Easing of capital burden as the fund flow is being taken care of by Bank
Bank
• A cost effective and efficient way of reaching out to the segment which, otherwise, would have been very costly through a branch
network
