rebooting bankingg for rural empowerment and true financial inclusion- manoj rawat

Development, Digital and Human Touch. Rebooting Banking for Rural empowerment, true and lasting financial Inclusion! 2016

1 Manoj Rawat | Head Agribusiness RBL Bank, Mumbai | [email protected]

Banking for Empowerment! In the age of Digital Touch, Banking does need a strong Development Touch and a human touch when it comes to Rural, marginalised & eternally Excluded ! Steps have been initiated, but still way to go.

A serious matter of concern is while IT, Digital & Manufacturing world is seeing waves of innovations, Agriculture & real rural sector in India has hardly drawn any attention despite India still being the "hunger capital" of world.. It’s critical that Indian banking should address the genuine & crying needs of Rural India, Farmers, Artisans, wage works, women who feed the Urban India, Build our Cities, Clothe us & ferry us. We all Agree that Rural is massive opportunity yet most of have made not so concerted efforts to bring the Rural India within the fold of institutional financial services. It is paradoxical that still "1%" people’s opinion & perception decide the needs, products, options, choices and experience for “99%” people who are out of the ambit of theses discussions & decisions. We need to place ourselves in their shoes ? Bankers count on "numbers" . But in many a cases they may not be reflecting the real picture, telling a correct story. Probably they are hiding more than revealing. 1. It's a Banking economy. Is it delivering enough for Rural ?

Today's Economy is actually the "Banking Economy" and will remain so for many more years. But we can no longer see banking as a branch, ATM, Micro ATM, Mobile Phone app, Tablet, B2P,G2P, UPI, BC point, paper or ledgers. It is much beyond...including the smart technological interventions. Things have changed.

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One thing which still has not changed is the "exclusion of millions of poor". Banking system has much bigger role & responsibilities, which it needs to deliver for bringing true financial inclusion. It needs to shift gears & genuinely change the course to deliver holistic financial services to the "deprived" after giving a serious thought why "so many million" still remain deprived despite having massive "Institutional Framework". We have hundreds of banks, thousands hundred thousand plus co operative societies, Microfinance Institutions, NBFCs and so on. Still the people are waiting for want of genuine banking services, which helps receive them remittances, credit at affordable cost, insurance & investment services and thereby help in creation of sustainable livelihoods and bring them in mainstream of economy. 2. Banking system needs to retain a soul, not be driven only by algorithm

"Banking System" in the current scenario has to be about being seen as an agent which helps unlock the potential of economy and becomes an empowering force for the citizens especially the "deprived" ones of the country. There are millions of them.

Given that existing banking system has left lot to be desired, when it comes to Rural & Urban poor, we need to consider creating a banking framework that has a soul which is sensitive, guiding, enabling, empowering and uplifting. Banks are not corporate houses and should not be allowed to become one, given the catalytic role & responsibilities it has for the nation.




3. Banking can enable access to equitable opportunities Banking shall truly succeed by the Bank helping its customers see a "dream", enable them to implement an "idea", empower them create the enterprise & livelihood opportunity, secure the

farmer rightful value for his produce, support the poor rise to secure basic meals on sustainable basis, help people available meaningful education for kids to grow into nation builder, help poor with Pucca house to live safely with his family, help elderly with a life of honor, provide confidence that every country man can realize his dreams to take this country forward and make the country free from “poverty”

through equitable distribution of "opportunities" and Not "wealth". The banking system can play a critical role in helping the deprived "access to opportunities". 4. Transitioning banking system to a "indifferent" & "dispassionate" technological interface

"Banking System” cannot really become to strong backbone of economy unless it works as critical support system for every " poor individual citizen" and seen as an integral part of the eco-system. The banking "cannot" be made dispassionate and “indifferent” to its customers especially when most of them are illiterate, are still to be brought in the fold of mainstream

banking. They need to guided, handheld and offered the right kind of services. Unfortunately Rs 15000-25000 ($200-$300) credit being dispensed through microfinance to "bottom of pyramid" customers can hardly provide help them create any sustainable livelihood, when a single milch cattle costs Rs 60,000 ($1000) or cultivation till harvest of 1 acre of land cannot be done below Rs. 6000-75000($1200) loan or a small business setup would need Rs. 60,000 to 100,000




($1000-1500). Unless the Rural customers, farmers, artisans, lease land cultivators are given credit which helps them create sustainable livelihood and income generating activating 5. Quest for easiest technology for the poor. But aren't they mostly passive users?

Debates are abound about what the easiest form of technology is for poor people to use as a channel for accessing financial services. The "poor customers" seem to have not much preference for one technology over another as they are always mediated by an agent. Be it smart card, mobile app, micro-ATMs, the poor people still tend to hand it over to intermediary. "Rural Poor" are mostly passive users of technology without

enough direct interaction with the technology to have a preference. Therefore there is an imminent need to explore potential ways of providing holistic financial services, such as livelihood based credit services, emergency loans, savings accounts, mutual funds and insurance products. They need to be aware of balances, what services they can avail through the accounts and how to access any of this information, without being "passive: user. If this does not happen the profound hope of financial inclusion that all of us are aspiring for will become a game of "count", to pat ourselves. The technology has to be used to provide the services more seamlessly and in much more holistic manner. 6. Banking cannot be built on "subsidies, subventions and obligations" As we are aiming to propel India to next trajectory of growth, Banking system has to be built on

beyond "subvention & obligation" approach otherwise it will create “unsustainable & unprofitable banking framework” which shall adversely the economy. To make “Banks become vehicle” of change for Rural India, the focus will have to be on bringing down the cost of delivery of services, a good credit culture and proper financial literacy. As far as mass banking and especially rural banking is concerned client “centricity & sensitivities”




will become far more critical, if we need to effectively bring them in mainstream banking and development channel.

The bank should be seen as a "Friend, Guide and Service provider " working on a viable and profitable model. However the lurking fear of "debt waivers" which vitiates the credit culture and is used as a political tool needs to be addressed, even if it means making suitable recommendations to Election Commission and Judicial System.

All the benefits including waivers , subventions and subsidies should be transferred through DBT ( directly) to farmers, artisans, below poverty line people, so that there no leakage and the beneficiary gets benefits of Government Schemes 7. Rural Strategy has to be "Integral" part of Bank's Digital Strategy

As most banks are in various stages of their digital journey, tweaking digital strategies and in process of planning to build the so called “Agile” business models, the journey will remain “halfway” if "Rural" is strategy completely eliminates "development & human touch". Machines will replace humans, transactions will churn faster and

services shall become efficient. This is true if we sit in the boardrooms, think about digital disruptions that we imagine & perceive, shall change the world in next few years. However we will need to re-examine our assumptions based on aspirations of many & plenty (majority), Rural, Poor, illiterate, deprived.

It is therefore important to understand the banks cannot get completely swayed away by "digital disruption" alone. They shall have to assimilate digital into their culture to trigger a positive evolution and create a better customer experience.




Ironically some these barriers may ultimately technology, lead to widening the inequality among the Rural India. Its unfortunate that as many as 60% small and marginal farmers do not have access to credit. The other enablers like credit and debit card are yet to make in-roads, ATMs, Micro-ATMs, cost effective BC network needs to be in place. Probably we may need to reorient & realign the banking to address the needs of Rural India. Its needs to be

right priced and made a profitable proposition but it needs to act as growth engine for Rural and support the poor. The Digital Touch is great initiative but it needs to closely inter-twined with a Development Touch and we should ensure that "human" touch is not lost in the process. 8. Digital Financial Inclusion Policy should have "Small, Marginal & Tenant farmers" at its “Heart”

More than 2/3rd of India’s population is dependent on Agriculture and allied agriculture activities. Bulk of our farming community belongs to Small and marginal category who own 83 % of the farmers are small and marginal. Any Financial Inclusion framework which is not aligned to these facts and ignores to

genuinely take care of the interests of agriculture and of the small & marginal farmers, may never deliver the real “Inclusion”. As long as "human being" cannot come up with an alternative to “Food” and “Water”, the smart-phones, tabs and apps will only be information tools & transaction tools. Food has to still to be grown on "soil & fields, irrigated, harvested, de-husked" by farmers and wage earners who only earn a small fraction of the final value. These digital tools, apps,




gadgets, data cannot be poured to “Quench thirst” or sliced to “Feed a hungry stomach”. The day it happens there will no need for Banks. Give the right opportunities and with banking system playing the role of catalyst, every farmer who grows food, every wage earner who builds, every mechanic who repairs our gadgets, every rickshaw puller who earns wages are "Bankable". They can be a worthy & loyal customers for a bank, which is ready to make a right kind of product offerings , an institution that has its "heart" in the right place to make the difference with a well thought on-field implementation strategy to take this forward. 9. Opportunity is massive Digital & Human Touch will have to work together for Development and Lasting Financial Inclusion in India. The opportunity is massive as Rural contributes 50% of GDP of country. The institutional credit flow to Rural Segment is more than $ 220 bn per annum and has to grow by 20%. The Agriculture sector which today has $120 bn per annum banking credit, has to grow at 7.5% if as a nation we really want to be self sufficient in our food needs.By 2030 we will be more than 150-160 bn nation, adding another 30 bn mouths to feed. A country where 290 mn people still sleep hungry, the pace of growth of Agriculture & Rural Sector has to faster than the pace of digitization. It will need massive capital investment besides a slew of measures to make farming more profitable to keep the farmers in farming.Its a matter of time the scales will tilt in favour of Rural India. 10. A matter of serious concern A serious matter of concern is while IT, Digital & Manufacturing world is seeing waves of innovations, Agriculture & real rural sector in India has hardly drawn any attention. The hard fact is India is considered the "hunger capital" of world yet no new & path breaking innovations on productivity, nutrition, irrigation, water, soil, moisture, intensive farming, solar & renewable, mechanisation, post harvest handling, health....are really being seen, incubated, promoted or propagated. The new age innovators are trying to catch the attention for thoses who are in category of "haves" and not one who fall under"have nots". Most of them are focussing on delivering the existing stuff faster and quicker and all of them are focussing on getting a slice of same "pie". The real challenges to be addressed are far more serious, far more bigger, widespread and above all related to basic human survival & dignity. The "pie" has to grow to include the Rural India to be part of this "catchy" & "headline making" growth story. "Free data, Free calls, free remittances engines, free touch screens transactions, unlimited apps download" cannot give you "free food, water & healthcare". They can just help you become




more informed. But then food grows on the fields and takes six months of toil to give you harvest and water formed over a million of years has to be sucked out by puncturing the "mother earth". The farmer still gets Rs. 1700 per acre per month ( $25 per month). The "Digital apps" on your mobile make all of this look an instantaneous affair or at the max "half" an hour. Do we need to think beyond, shatter quite a few glass ceilings and get "Real"? Views expressed here are purely personal. Manoj Rawat | India

The views expressed in this article are purely personal. @TheManojRawat http://www.manojrawat.com [email protected]


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rebooting bankingg for rural empowerment and true financial inclusion- manoj rawat

Economy & Finance