How unbanked population is receiving benefits from Agency Banking

Bill Gates once said – The world needs banking, but it does not need Banks. Maybe that quote was taken a bit seriously by Banks, and we do see phenomena of Agent Banking happening!
Why is Banking a Need?

What are the advantages of banking services? Does it help people? Let’s take a closer look onto the rewards offered by banking –

• Motivates people to SAVE
• Channelize household savings into productive capital
• Facilitate productive use of surpluses to generate employment and promote economic welfare
• Provides risk-free income to depositors
• Facilitate “loans” for business and personal use
• Options of micro-financing
• Enhances financial literacy
• Provides safety to savings.

Who needs Banking? Who are the probable beneficiaries of Banking Services?

Does banking belong to the elite group? Or is it for a labor working all day in a factory? Banking is needed by one and all!
Unfortunately, the rural class has minimum access to banking services than the people living in the urban areas. For simple reasons like –

• Banks are located at a far location, and the cost of commuting and availing services may not make it lustrous for people in rural areas.
• The Charges applied to banking services make them a costly affair.
• Banks due to high infrastructure cost are not located in rural areas.

For couple of these reasons Banking is a DIRE NEED for people in rural areas where

• One of the family members is in another city and wants to make instant money transfers.
• One of the members is studying elsewhere, and they need to pay for the fees
• Farmers/traders who want to buy the stuff available at a distant market.
• Individuals who receive funds from government /government schemes in the form of pension or grants.
• Individuals who could keep their excess cash in banks and could gain interest.
• Individuals who need to avail services or pay bills like electricity or phone recharge.

How Agent Banking is affecting the Social and Economic Conditions ?

Opening a Savings Account in India

Let’s pick an example, Arvind who is a farmer and the head of the family has three kids, one studying in college, and other two in school, his wife a homemaker has a monthly income of 5000 INR.

Type Of Expense	Amount
Household	2500/-
Kids School Fees	500/-
Kid College fees	1000/-
Amount Left	1000/-

Opening a Bank Account – The bank accounts now offer a minimum of 4 % interest rate with minimum balance of 2500 /-, so assuming he saves the amount for 2.5 months he could open a bank account that would earn him a minimum interest of 100 /- annually.
And if we compound the savings say
Money deposited every month = 1000 /-
Interest Rate = 4 %
Time = One year

Year	Year Deposits	Year Interest	Total Deposits	Total Interest	Balance
1	12000/-	363.83/-	14,500.00/-	363.83/-	14863.83

Effective Annual Rate = 4.06 %

Opening a Fixed Deposit in India

Minimum Fixed Deposit could be made of Rs 1000 for 15 days. Say Arvind opens a
Fixed Deposit of 10000 /- at an Interest rate of 6 %.

Principal	ROI	Period	Frequency	Maturity Value	Interest Earned
10000 /-	6%	One Year	Compounded Quarterly	10613.64 /-	613.64/-

Other Investment Strategies

How about Arvind starting a SIP [that usually has a minimum value of 500/- or 1000/-] to see his money grow?
Indeed this would be bit hypothetical as not all agents would have enough SIP options to their customers.

Availing Loan Facility

Just in case if Arvind needed to buy equipment for his farming or need money for his kid education, or his kid wants to start a business over internet he could also avail a loan from the Agents, at quite low-interest rates making it a fair deal!

So we saw with some basic facility and with the power of compounding, the rural areas would have a positive effect. They would not only gain financial independence but would also assist them in making an intelligent and informed decision about money.
By bringing banking services closer to the customer, it is saving a lot of time, providing employment to the youth, opening doors to start a business and above all educating people on how money could grow with time.

Indeed many of the researchers and studies have clearly shown that as agents gain more power and cover more geography it would help in providing more exposure to the customers.