Digital finance services (DFS) was launched several years ago in Indonesia but has not scaled without agent networks. Recent regulation in 2014, begins to pave the way for different players to build their networks and could be an exciting catalyst for the country, but players must approach this complex task methodically and strategically which does not yet seem to be happening for the most part. The research is based on qualitative agent interviews carried out between October and November 2014, in seven locations on Java island, Jakarta, West Java (Bogor & Cirebon), Yogyakarta, Central Java (Gombong), and East Java (Surabaya and Pasuruan). Read the full report here
Blog
Assessing the most ambitious public financial inclusion drive in history An Early Dip-Stick Assessment of Bank Mitr’s under Pradhan Mantri Jan Dhan Yojana
The Department of Financial Services (DFS) in the Ministry of Finance, MicroSave, and the Bill & Melinda Gates Foundation designed a survey to understand the coverage and quality of Bank Mitrs across a sample of SSAs; and to understand customers’ experience with PMJDY. The study was conducted in November and December 2014 across 41 districts in 9 states. A total of 2,039 BM locations and 8,789 beneficiaries were surveyed. BMs were assessed on dimensions such as availability based on the physical address and contact details provided to DFS by banks, transaction-readiness and branding. The customers were asked questions about their experience on aspects such as first bank account under PMJDY, receipt of RuPaycard and availability of Aadhaar and its linkage in PMJDY account. 69% of Bank Mitrs were physically present at the stated location, 48% were transaction ready and 11% were untraceable. 86% of PMJDY account holders reported that this was their first bank account and 18 % have received Rupay card.
Lessons from the Costing Study on BC Networks
The IFN discusses some of the main findings from the costing study done on 4 BCNMs in India. As part of the costing exercise, we reviewed BCNMs using different technological models (computer-enabled kiosks, mobiles and POS machines) to conduct banking transactions and assessed their cost structure. For BCAs also we considered different technological models with special focus on rural and urban agents.The note discusses how some of the lessons learnt from the study can be used to develop a sustainable delivery model to offer financial services to the financially underserved population in India.
Small Finance Banks – Risks and Challenges of Transformation of MFIs/NBFCs
The second note in the series of publications on Small Finance Banks, the IFN titled “Small Finance Banks – Risks and Challenges of Transformation of MFIs/NBFCs” explores the key challenges, and the potential deal breakers for MFIs and NBFCs intending to transform to SFBs. Overall, as highlighted in the first note of the series, MFIs/NBFCs are best fit to transform into SFBs given the lucrative business proposition and the potential opportunity. However, the institutions have to be cognisant of the risks of transformation. Transformation to SFB entails changes in the business model, organisational structure, capital structure, product suite, IT/MIS, and others. These changes will lead to risk and challenges for the institution and it is important that the institutions must carefully think if transformation would be a sound strategic move for them. MFIs/NBFCs should conduct a thorough review of their business plans, product suite and their competence to transform and manage banking business before embarking on the journey of the transformation.
Small Finance Banks – Is there an Opportunity for MFIs/NBFCs?
First in the series of publications on Small Finance Banks, the IFN titled “Small Finance Banks – Is there an Opportunity for MFIs/NBFCs” explores the possibilities for MFIs and NBFCs as intending to graduate to SFBs. The note identifies two cardinal target segments: (a) low income households and (b) micro and small enterprises, especially in under and unserved regions in India. The low income segments not only have a demand for low-cost financial services but also present a profitable business proposition for financial institutions. The note deliberates on the possibilities and opportunities that Small Finance Banks offer to NBFCs to transform. The note also reflects on the benefits in transformation as SFBs, such as option for product diversification, leveraging low cost structures, brand differentiation, possibility to alter capital structuring, and ability to counter political risk faced by NBFC in the local microfinance sector. SFBs can ensure sustainability through low cost structures in comparison with banks. The transformation also poses greater operational ease for the existing set-up of MFIs/NBFCs as they get to work without constraining factors set for NBFC-MFIs by the regulator. Additionally, it also presents opportunity for greater acceptance in the formal banking sector as SFBs can be a part of the payment and settlement system as a direct member or a sub-member of a sponsor bank.
Can You Really Use Mobile Money for Microfinance? Lessons from a Pilot
Mobile money is receiving increasingly global attention as some observers hope that it will largely replace cash – in the long run at least. MFIs stand to gain immensely from the advent of mobile money as (inter alia) they deal with large amounts of cash. Our experience is that there are obvious benefits from partnerships between an MFI and an MNO to provide mobile money facilities to the MFI’s clients. Mobile money agents will also benefit beneficiaries of social benefit transfer schemes such as “Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS)” and “National Social Assistance Programme (NSAP)”. This, in turn, will lead to better remuneration for agents. However to realise these benefits, the business case for agents, that must form the backbone of this offer, has to be carefully analysed.