Access to financial service is important can be verified by this simple story of Santosh. When he migrated to Delhi, he had no bank account. He was lucky that that his landlord helped him open a bank account. He started depositing his and other unbanked migrant friends’ savings in his account. In a few years time, he took a loan from the bank and bought a truck. Today he is an owner of two trucks.
Every poor migrant comes to big cities hoping to achieve what Santosh achieved. However, many fail due to lack of proper access to financial services. I am not arguing that having a bank account can do wonders for the poor; however, having no access to formal financial system can definitely worsen the situation of the poor. Rajveer- another poor migrant in Delhi- has a voter’s id from his village and has been trying to open a bank account. However, his application is rejected because he is not able to provide local proof of address and a local introducer (someone who already has a bank account). He gives his savings to a trusted local shopkeeper and remits money whenever he or his friends travel to his village. Yet, he worries what if someone steals money from the shopkeeper or his friends.
Banks have their KYC norms and thus understanding the problems of many Rajveers, Reserve Bank of India (RBI) has introduced a concept of Business Correspondent (BC) model to increase the outreach of the banking sector. In Delhi, one can find BC counters in many areas- in fact, just a few streets away from where Rajveer and his friends were residing. However, Rajveer and his friends had no idea about the concept of mobile banking. Worse, they did not believe the authenticity of such a model.
In my opinion, business correspondent model can serve people like Rajveer, however, a bigger concern is that many Rajveers are not aware of such a service. Around 100 migrants whom we asked about the knowledge of BC model had no idea about it even though they were living and working right next to this mobile bank counter. When informed, almost all questioned the legitimacy of this counter citing that they had never heard any bank referring to it. Worse, all of them were potential customers as they had voters id, mobile phones, wanted to save and remit money frequently.
And this brings the bigger question- does the target audience know enough of the business correspondent model? Only BC agents reaching the unbanked populations and discussing the usage of this service might not help. Banks need to promote this model and create awareness that BCs are legitimate alternate channels of the bank designed for unbanked, only after that, people like Rajveer will start using it. Or else, what is the use of creating a model if the target populations are not even aware of it or do not even trust it?