1. By N V Ramana Group CEO, BASIX
BANKING
IN THE
HINTERLAND By
N V Ramana
Group CEO, BASIX

2. PRESENT SCENARIO
India compares favourably with other developing countries both in terms of the geographical area covered as well as average population served per bank branch.
The vast majority of rural poor still does not have access to formal finance.
Nearly 45% of the rural lending in India is by moneylenders and the trend is actually on the rise.
Inadequacy of formal credit
Efficiency and innovations of the
moneylenders

3. CONSTRAINTS IN BANKING – BANKER’s POINT OF VIEW
Banks have always feared the uncertainty about the repayment capacity of poor, whose incomes are subject to numerous vulnerabilities.
In the absence of reliable credit information and costly monitoring, banks fear a high default risk.
Poor people’s lack of collateral
The transaction costs of rural lending in India are high
small loan sizes,
the high frequency of transactions,
the large geographical spread,
the heterogeneity of borrowers, and
illiteracy.

4. CONSTRAINTS IN BANKING – CUSTOMER POINT OF VIEW
In many banks, there is
Borrower-unfriendly products and procedures,
Inflexibility
High transaction costs
numerous visits to bank
long wait of time
Time-consuming process
The requirement of a minimum balance and charges levied, although accompanied by a number of free facilities, deter a sizeable section of population from opening/maintaining bank accounts.

5. Challenges in providing financial services in low density and remote economies
Small volume of activity per customer
Geographically disaggregated
Low literacy and awareness of products and services
Needs aggregation of a large number of customers for reducing transaction costs
Inadequacy of infrastructure influencing the credit absorption capacity
Need for innovations in products and delivery processes to make access convenient and affordable
Repeated pleas for loan waiver

6. How did BASIX address these issues
By providing a package of livelihood services
Including financial and technical assistance services
Providing these in a sustainable basis and
Thereby attracting a greater amount of mainstream capital and human resources into the neglected sector.

7. Package of Financial Services
Savings
Insurance
Credit

8. Savings Functions Challenges Solutions Builds capital
Provides leverage for borrowing
First line of insurance
Challenges
Customers want to save small amount in higher frequency
Customers geographically scattered
Solutions
Community based institutions e.g. SHGs
Mobile Banks

9. Credit Needed for To be provided Income generating activities
Consumption smoothing and
Contingencies. e.g health risks
To be provided
Collateral free (security provided through social collateral)
Cash flow based repayment

10. Credit Plus Credit is necessary but not sufficient
Credit Plus services include
Productivity Enhancement
Market linkage
Risk mitigation e.g. preventive vet care services
Risk management services

11. The Livelihood Triad IDS LFS Ag/BDS
Organize producers into their collectives.
Establish functional linkages for inputs,output & know how.
Formalize : the legal status
Help set up enabling systems: operating,HR and information systems
Revive defunct community organizations
LFS
Savings, Credit, short-term as well as long-term
Insurance, for lives and livelihoods
Fund transfers
Commodity derivatives
Financial orchestration ranging from grants to equity for livelihoods
Ag/BDS
Productivity enhancement
Risk mitigation (non-insurance)
Local value addition
Alternate Market Linkages - Input supply, output sales
Remove the cetnral triange

12. Collaborative polygon
We believe in collaborating with players having domain expertise to…………….
Enhance competencies, Increase outreach, Reduce transaction costs and Reduce risk for BASIX and its customers
Financial Services
Input Supply
Training & Extension
Customer
Output Market
People’s organization
Research & Technology

13. OPPORTUNITIES Introduction of negotiable warehousing receipt system
Offering ATM-enabled credit cards convertible to smart card with a view to reduce transaction costs and improve customer service
Business facilitator and business correspondent models for increasing the outreach
Besides traditional banking services, people in the rural and semi-urban areas are expressing interest in liability and investment products

14. Inputs for facilitating penetration of financial services
Active Banking infrastructure
Intermediation by Community Based Organisations and Micro Finance Institutions
Leveraging Information technology for
Improving efficiency
Reducing transaction costs and
Delivering multiple services
E.g. e-Sagu, STEMS

15. STEMS not Branches! In the existing model we did business through
Branches (Units).
Now, we propose to do it through
STEMS – Single Terminal Enabling Multiple Services
A wider network for livelihood promotion providing – with integration of micro-finance, business development and institutional development services, using the information and communication technology extensively

16. From Kiosks to STEMS
A number of IT kiosk projects have been set up in different states by Governments, NGOs and Corporates:
AP e-Seva, Karnataka Bhoomi, MP Gyandoot, Rajasthan- e-Mitra,
Development Alternatives- TARA Haat,
Drishtee.com, NFCL iKisan.com, ITC e-Choupal, ICICI Bank
These IT Kiosks provide services such as
Collection of electricity bills, house-tax, revenue, etc.
Land records, other documents
Agricultural information – clinic, weather, prices
Procurement of commodities
Remittance of money and sale of insurance policies
Our proposal is to integrate these services at the rural retail level into Single Terminal Enabling Multiple Services (STEMS).

17. How would it work? Backend Servers Backend Servers Backend Servers
AP Dairy Fed
Backend Servers
E-Seva
BASIX Server
Exchange
Backend Servers
ICICI Bank
Backend Servers
BAIF
Response
Request
E-BASIX STEMS
Computer with links to backend servers,
ATM, Inputs Shop, Godown,
Commodity buying point, courier
Cash from ATM
Physical delivery of
Commodities by
farmers and milk producers
Registration
Physical delivery
cattle feed, vet medicines,
AI services

18. Business Model
STEMS will be run by trained and authorised Operators, who will eventually own the STEMS. S/he will be provided a loan for the STEMS infrastructure by BASIX. Various services will be provided by specialist agencies through the STEMS:
Financial services:
Savings, money transfers– ICICI Bank
Life Insurance : AVIVA, ICICI Prudential
Livestock Insurance: Royal Sundaram, ICICI Lombard
Weather insurance: ICICI Lombard
Credit (up to Rs 10,000) by BASIX group of companies
Commodity trading - NCDEX
Business Development Services
Input supply – Fertiliser and seed companies like NFCL
Commodity sales – ITC e-choupal
Retail consumer products - HLL E-Shakti
Consumer durables – bicycles, TVs on hire purchase by TI Cycles, Philips
Internet Kiosk services ( , word-processing, rail/bus/Tirupati ticket booking, computer training, matrimonial, photo) by the Operator.
Institutional Development Services
Strengthening of Self-help group and Cooperatives with accounting, rating and registration packages
E-ducation and training, such as by Azim Premjee Foundation, NIIT
E-governance applications – respective state and district administrations

19. THANK YOU