Agency Banking - teknospire

Financial Inclusion: What will it be like for years to come?

Vandana Kaul / 07/11/2018

Financial Inclusion helps lift people out of poverty and can help speed economic development. It can draw more women into the mainstream of economic activity, harnessing their contributions to society. – Sri Mulyani Indrawati, Indonesian economist, Minister of Finance of Indonesia since 2016 Economic growth of a country depends on factors like national income, per capita income & per capita consumption, technological advancement and even its political structure. An equilibrium between savings and consumptions is another factor which decides economic growth. Walter Bagehot, the famous classical economist, stated long ago that a strong financial system is crucial for economic growth and that the lending should be “quickly, freely and readily”. Translated to suit modern day scenario, to strengthen financial systems you need to encourage economic activities like Financial Inclusion, Digital Banking & Fintech. Let’s explore what and how Financial Inclusion can do and what it holds in the future for developing countries like India, Nepal, Bangladesh, and other African and Asian economies. Defining Financial Inclusion Financial inclusion can be broadly defined as the process of making financial services available to people, especially the weaker sections and low-income groups of the society. It includes the timely and adequate availability of a wide range of financial products and services like: Bank accounts for saving & transactional purpose Equity products Insurance Saving products Loans For economic growth in developing countries, this aim is furthermore towards ensuring financial inclusion to the unbanked and the underprivileged community who are either unaware of or unable to affordable financial services and products. Penetration of financial services to all sections of society at a swift pace can be achieved through Digital Banking and FinTech. Goals to achieve Financial Inclusion are: To maximize the use of the latest technologies to transform the existing traditional financial or banking service models. To better the existing products or services of the financial sector. Financial Inclusion – Impacting Economies of Developing Countries Impact of Financial Inclusion, especially via Digital Banking or FinTech, can be exponential. A survey report by McKinsey Global Institute, which has been endorsed by the World Economic Forum also, states that there are more than 2 billion individuals and 200 million businesses (small, medium and micro) with no formal access to financial services like savings or credit. Those who have access are often required to pay heavy fees or charges. It goes on to state that if through Digital Banking, financial inclusion is ensured then the following impacts are expected: GDPs of developing countries like, India, Ethiopia, Nigeria, and similar Asian economies will increase by 6%. The absolute value of such increase may reach a whopping $3.7trillion by 2025. This incremental GDP thus created will generate an additional 95 million new jobs across industries. Addition of 1.6 billion unbanked individuals will create a big pool of loan borrowers. Around $2.1 trillion of the loan amount to these individuals or small sized businesses is expected. Governments can bring down tax collection leakages and gain up to $110 billion per year. Governments stand to gain up to $400billion every year when they convert traditional accounts to digital accounts as they can now save 80-90% of cost on managing traditional accounts. Increase in customer base will result in an incremental revenue generation of $4.2 trillion. All these predictions sound exciting, right? Read on to know some of the many concrete benefits of financial inclusion. Concrete Benefits of Financial Inclusion The few of the many, main benefits of financial inclusion are: Better Penetration of Services With financial inclusion in place, reaching the rural populace will be made possible providing them easy access to bank accounts, cash payments, cash receipts, and account statements. The authentication and fulfillment of services can be done by fingerprint and online receipts respectively. Boosting Economic Growth The banking ecosystem will be strengthened as the cash economy will be reduced and the habit of saving will be inculcated in rural masses. Direct Subsidy Transfer The government subsidies will be directly deposited to the bank accounts of beneficiaries. The funds will thus reach the intended recipients instead of middlemen forestalling leakages and corruption. Encourages Entrepreneurship Financial inclusion will motivate formal banking and transparent credit availability which will release people from the clutches of unofficial money lenders. Adequate credit will prompt entrepreneur initiatives which will further enhance economic outputs and prosperity of the country. Financial Inclusion – Headway The progress of financial inclusion in the context of emerging economies like India has been substantial. The same has been highlighted in the Department of Financial Services GOI reports as: 35.5% of households availed banking services in 2001 which grew to 58.7% in 2011. This growth is significant in rural India –from 30.1% in 2001 to 54.4% in 2011. The CRISIL- Inclusix which includes branch penetration, deposit penetration, and credit penetration was 35.4 in 2009 and has grown to 40.1 in 2011 to 58.0 in 2016. IMF ‘Financial Access Survey 2018’ reported the following- Low-income countries like- Bangladesh, Myanmar, Guyana and many African countries have successfully used mobile payments for Financial Inclusion. These countries have more than twice the number of bank accounts per 1000 adults than the developed economies. What a sky-high improvement! Additionally, the IMF Financial Access Survey 2018 also reported an increase in the number of ATMs per 100,000 adults, branches of commercial banks per 100,000 adults, deposit and loan accounts with commercial banks per 1000 adults. Mobile money transactions number per 1000 adults was the most attention-gainer with a significant rise! Financial Inclusion does not mean only access to services but how those services are useful for the user. One of the parameters which are considered by various organizations while mapping FI is the safety and convenience of the financial service or product. A survey done by the World Bank Group, measuring the Financial Inclusion and Fintech revolution, reported that globally the percentage of adults using digital payments for receiving and making payments increased by 11% between 2014-2017. In developing countries, it is higher by 1% i.e. 12%.

Agency Banking

TEKNOSPIRE AGENT BANKING QUIZ

Samiksha Seth / 26/04/2018

In two years, India’s story of financial inclusion has shifted from account opening to account usage.Supported by enabling technology and focused policy moves, India presents a clear example of how policy imperatives can drive the agenda of financial inclusion. Take on our Teknospire Agent Banking quiz to know more.

Agency Banking

How Agent Banking is creating the Social Entrepreneurs and contributing to financial Inclusion.

Samiksha Seth / 07/12/2016

In the first post of our series on Agent Banking we spoke about how customers could benefit from Agent Bank and make “Banking a need” . The second post of the same series will highlight how Agents are the face of change to people’s financial security and independence. Who really is an Agent? An agent is mostly misunderstood as a mediator/broker who charges money to provide services. However, in the case of agent banking although an agent is a mediator but he does not charge anything from the customer. An Agent of Agent Banking is an authorized person by bank/non-bank who has the authority to provide banking services to the individuals via A kiosk set up at a remote place An individual who comes to your place with a handheld device equipped to perform banking transactions A supermarket/retailers/post offices/NGO’s/specialized microfinance institutions (MFIs) etc Although, the mode of operation may differ with each agent like – POS enabled Agent – The agent uses a payment card to facilitate banking transactions. Services via Mobile phone – The agent uses a smartphone to authorize customers and avail banking services Services via Mobile Wallets accessed by customers – The Agents are managed by the telecom and provide access to mobile wallets on the user cell phone. That helps users to send, receive, recharge, and buy stuff through the mobile phone. Services via Mobile Wallets accessed by Agent – The agents in this case also are managed by telecom; however, the agent has a bank account linked to the bank, where for every transaction done the bank pay a commission to the telecom. Why We Need Agents? We Need Agents because – Banks have to spend a lot to provide Banking services in remote areas that result in non-profitability of the business. A study conducted in 2012 shows that the cost per unit for any banking services was much higher when it was executed by a Banking/Branch Staff to when compared to Business Correspondent agent [BC]. With such high cost, it’s hard for the high transaction low balance account group to get the banking services. Cost Per Unit Transaction (in Rs) 1 Image Credit – Microsave Cost is incurred only when the transaction is successful – If we start setting up a bank in every remote area, we need to pay a fixed cost to the infrastructure and supporting staff. However, with agents, the costing only comes in the picture when the transaction is successful. Agents in a way help in reducing the cost per transaction and making a profit. Banking Anytime – As a person would you like to concentrate on your business or running to the bank to avail banking services? With agents offering OMNI channel execution, banking services could be availed from anywhere anytime. Banks could provide the customer with a seamless banking experience with the agent’s different channels like mobile, the internet or agents thereby making services available 24*7 How Agents Are Benefitting from Agent Banking? A lot has been spoken about customers and profit bearing business for banks, but what about agents? Are they getting their piece of cake? Agents who are technically bankers are also getting assistance to sell/market specialized products and services to customers in outlying areas, providing individuals and small businesses with the finance they need to stimulate growth. One of the comments of an agent sourced from the web says – “People here are doing it like daily contribution. They compel themselves to put in something into their account every day, no matter how small. Instead of patronizing the Esusu people, they come here to make a deposit, because my house is here and I cannot run away. I don’t retain their money and I do close on time so as to take whatever I collect to the bank. Sometimes, I use their money for my other business and ask the bank to debit my account in order to credit their account. The commission I receive from this business is enough to pay one of my children’s school fees in secondary school. You cannot do this business without knowledge of IT”. Talking about the numbers – If we look at the business generated by the agents [BC] in terms of deposits and advances, we could come to a point that an agent is earning an average of $100 and few of the successful agents are earning more than $175 a month. Benefits from Agent Banking Image Credit – Microsave So, if the agents are provided to assist with more services, it would surely help in an increase of the revenue for the agents. Agents are not just the individual members; they are the building blocks of Agent Network on whose reliable shoulders “banking is experiencing the digital transformation”. What is NDASENDA™ and eBazara? NDASENDA and eBazara are the service delivery platform which helps customers with Phone recharges, Electricity Voucher payment.They have an effective voucher dispensing system that is useful in providing Agency Banking Platform, Payment Solutions and could also act as Service Aggregator. NDASENDA and eBazara are not just doing business but they aim to help people at the bottom of the pyramid with their retail assisted model, that could Empower The Economy Financial Inclusion for people at the bottom of the pyramid Avail Banking Services at your doorstep Cash Less Economy Digitization Learn new skills and technologies No Risk of Theft Quick and easy access to monetary funds How to become an Agent? The Person interest to be an Agent with NDASENDA and eBazara need to follow these steps – Get in touch with FN Software Solutions Private Limited, 10, Cambridge Road, New Lands, Harare After an initial briefing and svetting, you would need to sign the contract If you have any other doubts you could reach to us at – sales@ndasenda.com with the email subject – ‘How to become an Agent’ The Benefits of Being an NDASENDA™Agent If you are looking to be an Agent and not sure on the benefits, here are

Agency Banking

How unbanked population is receiving benefits from Agency Banking

Samiksha Seth / 05/10/2016

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.