A bandhu they can bank on

The tiny drops promise to swell into an ocean of profit, as FINO handholds the poor to deposit their faith and money in the banking system..

Every pie counts: Sushma Devi deposits her husband's savings into her bank account using a smart card. - Rasheeda Bhagat

For many of us who effortlessly shop for things, transfer money or pay utility bills with a click of the mouse, it is virtually impossible to even imagine the trauma the illiterate, the rural and the lower middle-classes face in doing these simple tasks. Mind you, these are not the abjectly poor; they make a decent income.

So, at the office of FINO (Financial Information and Networks Organisation) Ltd at Dharavi, touted as Asia's biggest slum, in Mumbai, the sense of empowerment was palpable as Sushma Devi walked in with her month-old baby in her arms, and her three-year-old daughter clutching her finger.

She proceeded to the counter where Shahida, a FINO banking correspondent or bandhu, was seated with a small hand-held device into which went the woman's biometric or smart card bearing her bank account details. The machine confirmed her identity after she placed her index finger on the monitor, and she put Rs 300 into her account. The money came from her husband's earnings and it was great to note that it went into the wife's bank account!

The transaction took barely a minute. Sunita Singh, who runs a small business nearby, came in next to deposit Rs 5,000 in the Union Bank of India account of one of her workers. “This money will be withdrawn by his parents living in a small town in UP. He sends them Rs 5,000 every month like this,” she said.

Arvind, a fruit seller, followed. He sells cut fruits on his handcart; “it is Ramzan, and in the evenings there is brisk business. I'm making good money, so I'm putting this (Rs 1,000) into my account before I spend it,” he grinned. This month has been good and he has already saved Rs 6,000.

Manish Khera, FINO's CEO, who in 2006 quit his secure job as a joint general manager at ICICI Bank, Mumbai, to set up the organisation, watches with quiet pride the efficient working of the system where money is either put in or withdrawn.

“We saw that banking in general is concentrated on the urban middle-class and we were not really serving the masses. And it was not even a niche bank.” The bulk of the customers living in remote places and the expensive physical infrastructure to reach them were major obstacles preventing such customers from engaging with banks.

He looked around at global initiatives to solve this problem; the Brazilian model of business correspondent (BC) was just taking off, and there were initiatives happening in South Africa and Indonesia.

So he zeroed in on the idea of the BC (today FINO has over 10,000); “instead of banks setting up branches, the agent or bandhu goes to the doorstep of the client and with little or shared physical infrastructure the business model becomes feasible.”

Government payouts

Over 90 per cent of FINO's 18.5 million clients are in rural India, and “as we talk, 50,000 additional clients will come in today,” he says.

The biggest component of FINO, which operates in 23 States and 80 districts, comprises Government payouts, social security pensions, health insurance for the BPL (RSBY or Rashtriya Swasthiya Bima Yojana) and NREGA. “In rich States such as Haryana and Punjab, where NREGA hasn't really taken off as the private players pay more, we execute social security pensions in a big way,” says Khera. The Haryana government pays a monthly old-age pension of Rs 700 to the BPL, and FINO has over one million of these customers.

But its biggest customer-base — 9 million — comes in the RSBY category, where the Government provides cashless insurance to people in the BPL category. The Government pays the premium and servicing is by private or public insurance companies. The annual cover is up to Rs 30,000. “Our job is to issue cards to the customer, install devices in hospitals where customers can get healthcare facilities using their smart cards. We provide the technology and the insurance company pays us for the service.”

Next comes NREGA with 5 million customers; the bulk in Andhra Pradesh, where FINO works well with the State government, followed by Madhya Pradesh and Rajasthan. Those who earlier shunned NREGA work, either because of delayed payment or partial payment as the money was siphoned off, are getting into the FINO system as full payment is assured on the third day. With 1.5 million new NREGA customers every month, by the end of this financial year, the total will exceed 10 million.

Encouraging savings

So, is FINO encouraging the poor and the lower middle-classes to save?

Yes, “a subtle shift” is happening, he says. “With NREGA-like people being our larger customer base… earlier they used to get the money and spend it. Now, with a bank account they think they should retain a little money for times of need.”

On the recently started remittances model, mainly domestic and foreign on a pilot basis, he says that unlike in other money transfer systems, the advantage of a bank account is that beneficiaries don't have to withdraw all money at one go; some might even save a portion. Ultimately, when the banks see some money remaining in the account, they might offer them other financial products like loans. In domestic remittances, which average around Rs 5,000 a quarter, money goes from urban centres such as Mumbai, Delhi and Surat to villages in poorer States like Bihar, MP and Orissa which witness a lot of migration.

But are banks really interested in micro-customers dealing in tiny sums?

“Yes and no; today there is a systemic push on the banks to reach these people. Deputy RBI Governor Dr K.C. Chakraborty did a great thing by recently getting all banks to submit a formal financial inclusion plan approved by their boards. Having given something formally to the RBI which is being monitored, there is pressure on them to comply.”

He adds: “If you go into the maps of this business, it makes money. Only you have to be persistent, have a large base and the right products for the customers, so some banks are now also pursuing this as a profit motive, because though each customer brings very small sums, the aggregate value adds up.”

Like in Mumbai alone, FINO's daily cash collection is Rs 2 crore. The next step, says Khera, who hopes to come out with an IPO by 2013, is to convert his customers' smart card into “something like an India Card, which like Visa or MasterCard, can be used for purchases, paying utility bills etc. The possibilities are immense.”

FINO's first target is 25 million customers in five years. “We'll do that before the deadline, and our next milestone is 100 million in the following five years,” adds Khera.

Engaging the farm sector

The organisation, which recently won the Financial Times Sustainable Banking award in the ‘Achievement in Banking at Base of the Pyramid' category, is now forging a partnership with the farm sector. “We have opened bank accounts of all the farmers who supply milk to the NDDB. Along with a savings bank account they get bank loans and cattle insurance, all coupled in a single product.” It has started in Gujarat and UP and will expand to other States soon.

Verghese, a FINO client, runs a watch repair shop in Dharavi.

Verghese, who has a tiny watch repair shop in Dharavi, now banks on FINO to send his family in Kanyakumari a monthly allowance. “But I hope they will soon hel me get a loan to expand my business,” he says

At the FINO office, Arvind, the fruit seller, completes his transaction and says, “This is so much quicker than a bank, where you have to first fill a form, take a token and then wait for the sahibs to return from their coffee break! And then they'll tell us ‘ aaj computer me gadbad hei!' (Today the computer is not working.)”

I next watch Pervez withdraw the entire amount of Rs 17,400 from his SB account for expenses related to his brother's wedding. Arun Mandal, a civil works supervisor, comes in to send Rs 3,000 to his parents in Jharkhand.

But what brings tears to the eye is 16-year-old Pintu Kumar, who works as an electrician in Mumbai, sending Rs 2,000 to his parents at Satsena village in UP. “I left my school two years ago to come here; my boss taught me the work and I'm happy to send money regularly to my parents from here,” he says cheerfully.

Source:-FINO