Are Banks and Microfinance Institutions Natural Partners in Financial Inclusion?Research Papers Author: Ignacio Mas et al.
Published: May 01, 2012
Since 2006, when the Reserve Bank of India permitted to use services of third parties as business correspondents (BCs), banks have been trying to create a sufficiently large retail footprint to offer banking services to the last mile customer in a seamless and cost efficient manner. In order to achieve this objective banks have been following several approaches including partnering with existing retail franchises and prepaid airtime channels as well as with organisations with an established client base and service channels. Microfinance institutions (MFIs) have extensive outreach and experience in providing financial services to low income and rural populations. This report presents the case of MFIs as one potentially viable channel with which banks can collaborate to reach the base of the pyramid market more economically. It also details the top strategic and operational choices that MFIs need to make before they function as a BC as well as the way forward.