The report discusses the nature and extent of the impact of COVID-19 on the revenue, transactions, and operations of business correspondents (BCs) in India. It explores the coping strategies adopted by BCs to effectively deliver financial services, particularly the “Emergency Direct Benefit Transfers (DBT)” announced by the government while mitigating the risk of transmission. The report also provides policy recommendations to support the delivery of financial services through BC agents in India.
As of 2ndJune, 2020 10:06 am CEST, the COVID-19 pandemic reached 216 countries across the globe, infected 6,140,934people, and claimed 373,548 lives. Despite the unprecedented global effort, the now infamous curve of COVID-19 shows no sign of “flattening”. Governments across the globe continue to struggle as they impose containment measures to reduce the spread, keep the health infrastructure up and running, and manage the fragile economy. In this unprecedented situation, donor agencies and research agencies across the globe are doing their bit by trying to equip policymakers with ground-level data for evidence-based decision-making.
In the past three or four months, we have seen the publication of multiple research reports. These research exercises focused on different aspects of the crisis, namely health behavior, food availability and consumer behavior, economic impact and finances, and government responses, among others. At MSC, we have a deep understanding of the poor, their household-decision making and gender dynamics, and the relationship of these factors with governments, regulators, and private sector players. The pandemic made it imperative for us to spearhead efforts to support policymakers with evidence and generate recommendations for decision-making through a series of synergistic research studies.
Five key lessons
One common challenge in all these studies was our inability to conduct face-to-face interviews to gather evidence. The uncertainty around how long the crisis will continue and how long we would have to wait to return to normal life made the process of planning the research difficult. Our solution was the tried-and-tested telephonic or online surveys. In this blog, we explain five key lessons from the research conducted by MSC in the past two months.
Collaboration: Given the seriousness of the situation and the need to allocate resources optimally, donor agencies have been collaborating to minimize the duplication of efforts. In India, two major donor agencies have joined hands to create a “COVID-19 Research Network” for researchers to come together to coordinate, share knowledge and innovations, pool resources, and communicate their efforts. These efforts should maximize impact and establish ethical and equitable research practices. Globally, we also see a growing argument in favor of open research and data collaboratives to ensure ease of access to insights from completed research studies, and thus to minimize redundancy.
Technology: The pandemic has paved the path for increased use of technology for research. We have seen several channels and platforms assume greater significance. These are here to stay even in the post-COVID-19 scenario:
Virtual data quality assurance mechanisms, including telephonic spot checks and back checks as well as reviewing audio recordings of interviews;
Project management through the greater use of platforms like Basecamp (to track projects)and Zoom or Microsoft Team (for training sessions and meetings);
The rise of webinars and dashboards (based on Tableau or Google Data Studio) for dissemination.
Innovation: As the dilemma continues between sticking to textbook robust research methods and their feasibility in a time of continuing lockdowns and social distancing, innovations have flourished. We have optimized the length of questionnaires for telephonic interviews, dropped unnecessary questions, and brought about a disciplined focus that was often missing in previous surveys. We have seen an increased use of the snowballing method to source telephone numbers for interviews, increased use of consumer panel databases available with survey agencies, and use of customer databases of implementing agencies and financial service providers.
We have also used implementation staff, such as MFI managers and loan officers, as data collectors to utilize the existing rapport that they have with respondents. We have seen the rising use of mobile phone data to track population movement and location data to identify communities at risk. Another interesting trend is the increased use of high-frequency data collection methods like financial diaries.
The need for speed: Policymakers need rapid and regular data insights to understand ground realities. Yet there is an important trade-off between rigor and usefulness. Randomized Control Trials (RCTs) might provide academic rigor, but quick policy recommendations substantiated by data are the need of the hour. We just cannot wait for months or even years to see the impact of changes in policy. The rapid identification of successes and loopholes in the implementation process is as important for policymakers as the impact itself.
Thus, agile monitoring and feedback loops are essential, as are the channels to provide insights to key decision-makers. This also highlights the need for country-level research systems that can respond to this type of emergency by providing high-frequency monitoring data to policymakers. For years, MSC has been providing rapid feedback to the Government of India to identify successes and failures in policies and to do course correction as needed.
The successful implementation of DBT in Fertilizer in India is one such example where we provided rapid and iterative feedback to the government for it to modify parts of the program as it was scaled up across the country. Similarly, MSC created an index to rank states to provide rapid feedback on COVID-19 to the Indian government based on the states’ initiatives.
Process optimization: A fast turnaround time is crucial for gathering evidence during this difficult time to inform policymakers. We have therefore seen a lot of process optimization in researches. We streamlined the processes by:
Shortening the preparatory phase by cutting down the slack time between the initial preparation, development of the research framework, and its conversion into a tool;
Reviewing the in parallel by multiple parties and incorporating all possible suggestions in joint calls.
The report structure is prepared ahead of the data collection commences and analysis syntaxes are readied before the data starts coming in, based on the data structure decided in the beginning. This is setting a new benchmark for the industry, and even in the post-COVID scenario, we can expect results within a similarly rapid turnaround time.
Several words of caution
Research agencies are competing with each other to reveal results before anyone else. In the process, they sometimes miss important nuances. We are seeing many “percentage values” that are offset with inadequate discussions of the story and the drivers behind them. A meaningful research story often depends on the collection of qualitative data, which is much harder to do effectively over the phone and requires skilled moderators. Recitation of data, without answering the “why?”, “where?” and “so what?” questions that flow from it, short-changes policymakers.
We have also seen that where pre-enrolled panels of respondents are used, these have often answered too many quantitative and qualitative questions already and suffer response fatigue—an upshot of the plethora of research underway.
Another challenge is the fact that sometimes these insights come at the price of compromising statistical robustness—a challenge that the reports themselves do not acknowledge adequately.
Moreover, there is a high chance of making technology-driven data collection the “new normal” in the post-pandemic scenario. Yet that will widen the already existing exclusion of peoples’ voices from the ground, as we depend evermore on survey agencies that offer access to pre-enrolled panels of respondents, which are typically designed to provide rapid feedback to FMCG companies. Hence, these panels are therefore typically drawn from the affluent and middle classes rather than the poor and vulnerable communities that have been hit the hardest by the pandemic.
Moreover, the entire population, which largely lacks access to the phone or internet, is by definition completely excluded from these insights. These very people are most vulnerable to the pandemic. It is therefore essential to be selective in choosing panels and to force these research companies to focus on gathering voices from the poorer and marginalized corners of society.
Just as we have changed the way we conduct our lives in a fundamentally different way after COVID-19, research protocols, too, are likely to undergo a seismic shift as the world looks toward the long path of recovery.
The panelists included Amitabh Kant, the CEO of NITI Aayog; Rajnish Kumar, the Chairman of SBI; Greta Bull, the CEO of CGAP; Dilip Asbe, the CEO of the National Payments Corporation of India; and Hari Menon, Country Director—India at the Bill & Melinda Gates Foundation.
Graham Wright, the Group Managing Director of MSC, moderated the discussion.
The panel discussed the role of India’s digital financial infrastructure in enabling direct benefit transfers worth USD 7.5 billion to 420 billion poor people during the current pandemic. It took India almost a decade of concerted efforts toward financial inclusion and setting up a robust digital financial infrastructure to enable this scale of cash support payments.
The panel focussed on the following five key topics:
The role of digital financial infrastructure in situations such as the COVID-19 pandemic;
Establishing a digital infrastructure in India;
Practical insights from the rollout of emergency cash support transfers, covering both CICO agents and the payment infrastructure;
Lessons from India for other developing nations;
Ways in which countries can build digital infrastructures amid the COVID-19 crisis.
The network of business correspondents has become indispensable for delivering financial services at the last mile across India. In light of the COVID-19 pandemic, our note highlights the challenges BC agents face while providing services in far-flung areas with limited access to banking infrastructure.
The welfare and economic growth of a nation depend greatly on how well its citizens can access financial products and services. While all the entities in the banking industry have been making tremendous efforts to bring everyone into the fold of formal financial services, there is still a significant gap between the understanding of policymakers and the actual ground reality. In this note, we talk about the business correspondent (BC) agent network in India that has become the backbone of delivering financial services at the last mile across urban and rural centers.
Less than 15% of villages in India have a brick-and-mortar bank branch. In the remaining villages, BC agents are the only transaction point for customers. COVID-19 has magnified the importance and agility of this network. With close to 1 million agents who cater to approximately 340 million people in face-to-face transactions, the agent network in India has become particularly indispensable in the current scenario.
Following the nationwide lockdowns that started from 27th March 2020, the Government of India announced two relief packages amounting to ~USD 260 billion, an estimated 10% of GDP, for the vulnerable communities in the country. This was a part of the Pradhan Mantri Garib Kalyan Yojana (the Prime Minister’s welfare program for the poor) to minimize the difficulties faced by the poor amid the lockdowns. The government classified BC outlets as an essential service to ensure timely and hassle-free payments to the beneficiaries.
Ongoing research by MSC (MicroSave Consulting) indicates the footfall of customers at these BC outlets in the aspirational districts has increased, or even doubled in some instances. In such times, BCs are taking immense risks to provide financial services, especially owing to limited access to resources to ensure safe and smooth operations. While the citizens praise the efforts of BCs, their struggles and hardships go unnoticed.
Due to the limited mobility of people during the lockdown, access to financial services has suffered in unbanked villages where beneficiaries usually have to travel upward of 5kms to reach an agent point. District administrations have placed the responsibility of providing financial services in such villages on BC agents.
In Nandurbar (Maharashtra) and Sonbhadra (Uttar Pradesh) districts, for instance, some agents have taken up these additional responsibilities. They travel periodically to designated panchayats to provide cash-in cash-out services. This has led to an increase in travel expenses, increased trips to the bank branch for rebalancing cash floats, and resulted in the loss of opportunity to cater to customers who throng their fixed agent kiosk.
With increased footfall, despite the staggered DBT payment plan, overcrowding is a challenge and poses a greater risk of infection as well as security. Ensuring social distancing and hygiene protocols has become cumbersome but essential for the BC agents. The banks and the district administration have issued numerous guidelines for customers queuing at agent points to access their government payments. While agents are using disinfectants to sanitize the biometric authentication devices, not all of them are well-equipped to handle the crowds.
The administrations of the aspirational districts of Bahraich (Uttar Pradesh), Dhubri (Assam), Kalahandi (Odisha), and Sheikhpura (Bihar) among others, have taken extraordinary steps to provide agents with police support. Yet in most instances, agents have to fend for themselves and use volunteers or hire additional help to ensure that customers follow social distance and hygiene protocols. Along with regular overheads, such as rent and electricity, agents incur costs to hire additional support at kiosks, buy masks and sanitizers, and make increased trips to rebalance at the bank.
Health risks to agents are real. On average, BC agents interact with 80-100 beneficiaries per day, making them extremely susceptible to COVID-19 alongside scores of beneficiaries. In the eventuality of an infection, the agents’ source of livelihood will be at risk. In contrast to health workers (ASHA and Anganwadi), only a handful of agents have insurance cover.
At a time when everyone from the government to banks has been hailing the extraordinary efforts of BC agents, we believe banks and BC network managers (BCNMs) must offer them greater support to serve the last mile. Ensuring that agents remain motivated and receive adequate support is important. If agents were to shut shop, banks will be unable to handle the added pressure of customers.
For instance, the Khillod block of Khandwa district has a population of over 48,000. Currently, one bank branch and several BC agents serve the block. If all BC agents were to shut down, the bank branch will not be able to handle the surge of beneficiaries wanting to withdraw money. We estimate that without agents, approximately 4,000 beneficiaries will line up at the branch each day in this block alone.
We list a few focus areas that the government should consider for the welfare of agents. Some banks are already taking initiatives, but there is a need to standardize and scale these efforts so all BC agents get the requisite support. We also provide examples from the field on what has worked in a few aspirational districts and can be replicated in other districts.
1. Concerted efforts to manage liquidity and security
The Kursakanta block in Araria (Bihar), for instance, has 28 BC agents who cater to a population of 149,231, with only two bank branches in the block. Large-scale withdrawal transactions mean that agents run out of cash frequently. This hampers their rebalancing needs even in pre-Covid-19 times and has made these times of high cash withdrawals especially difficult to manage. In this context, two practices are helpful and should be enshrined in policy by all banks:
Banks and BCNMs must extend additional float or overdraft limits to agents. Some banks, for example, the Central Bank of India have allowed OD limits or float limits of up to INR 100,000 (~1300 USD).
A few bank managers make it easier for agents to withdraw cash at the branch. Priority service ensures that agents are back at their kiosk faster.
In different aspirational districts, the administration has asked the police to support agents and provide them security. However, this is available only on a call basis. In Goalpara (Assam), the district administration has roped in members from youth-based organizations such as Nehru Yuva Kendra. Other districts should also rope in such institutions as well as civil society organizations to assist them in managing security at the agent point.
2. Incentives to motivate agents
Several banks have provided a variety of incentives and grants to their BC agents. Some banks have offered agents a one-time payment to cover the costs of protective gear, such as sanitizers and masks. For instance, the Maharashtra Gramin Bank has provided INR 2,000 (~29 USD) to allow agents to purchase masks, sanitizers, and gloves. The State Bank of India, UCO Bank, and Bank of Baroda have also announced similar incentives.
Some banks have also announced additional payments as incentives. For example, the Bank of Baroda pays INR 100 (~1.3 USD) each day the agent is active to help cover the cost of transport for rebalancing. Similarly, some banks provide insurance cover to agents. For example, the Bank of Baroda has provided a health cover of INR 60,000 (~790 USD) and ex-gratia payment of INR 1 million (~13,000 USD) in case of loss of life to each BC agent.
While these incentives are helpful, different banks have adopted different policies. This also includes scenarios where a bank may not extend any incentives to agents at all. Given that all agents provide similar services and are crucial in the efforts of the government to provide “near-by” banking services, some level of uniformity in the support or incentives they receive is essential. It is also imperative to note that the incentives currently on offer are for a specific, limited duration. The incentive packages must continue for as long as the health emergency continues.
This is also an opportunity to revisit and restart old but relevant debates centered on increasing commission rates for processing government payments and hence improving the viability of agents. MSC’s ANA India Report in 2017 found that agents’ revenue ranged from USD 2 to USD 770 (INR 150 to INR 58,000). While the top earners might be earning in six digits, many agents are still on the poorer side of three-digit income. Low commissions coupled with low footfall have resulted in agents having to shut shop in some rural areas, especially in the aspirational districts.
3. No touch transactions to reduce risk
Given that many users are uneducated, biometric authentication becomes a necessity. There is, however, a need to develop and popularize non-touch authentications that may work for uneducated people. For instance, IPPB has retained the OTP option for authenticating transactions at the last mile. Another way to limit the risk of infection would be to forgo agents’ fingerprints before every transaction. QR codes could be used both to identify customers (similar to merchant QR codes) and to conduct transactions. Near-field-communication, facial recognition, or voice authentication, or a combination of all three methods can be tested.
4. Respond to queries and grievances to maintain trust
The transactions carried out by BCs have increased significantly during the lockdown. This has put an added load on bank servers—there are multiple instances of interrupted transactions due to such server downtimes. In this case, instant grievance resolution support should be provided to the agents quickly and easily. Our experience in aspirational districts is that customer service executives are not equipped with information about pro-poor schemes and government support measures. Training executives to provide accurate information about scheme details, schedule for withdrawal of cash transfers would help reduce information asymmetry and build trust among customers. Further, district administrations as well as banks must ensure that bank-led customer service numbers are widely available to the beneficiaries.
5. Support agents to motivate them to stay the course
Lastly, agents would need and appreciate proactive support by managers of banks and BCNMs. Agents are under pressure and are putting in extra hours to keep up with increased footfall. Empathy and encouragement from line managers will help maintain their motivation. Some empathy will go a long way in establishing goodwill with these frontline workers as they continue to deliver critical financial services.
Despite all the difficulties in these grim times, BC agents are working hard to ensure that the poor do not suffer. Both the government machinery and banking infrastructure need to identify ways to incentivize the additional work and travel that agents have been forced to do. Providing agents with adequate insurance cover and physical security will enable them to discharge their responsibilities more effectively. This would not only ensure that India is prepared better for any impending national emergency but would also provide higher levels of financial inclusion consistently across the country.
A version of this blog was also published on the NITI Aayog websiteon 3rd of June, 2020
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