In the latest report on ‘Trend and Progress of Banking in India 2017-18’, it was revealed that India’s financial inclusion efforts have not succeeded in bringing expected results yet. This is forcing the Indian banking authorities to look for alternative means such as local kirana stores to tap rural areas.
In 2010, the Reserve Bank of India had directed Indian banks to adopt a three-year board-approved financial inclusion policy (FIP), which also laid out a detailed roadmap for opening brick-and-mortar branches and bringing in alternate modes of banking. It is an undeniable fact that the vision of financial inclusion has gotten a significant boost from the government’s Jan Dhan Yojana that added 30 crore new bank accounts, of which almost 60% were in the rural areas.
However, while the numbers paint a positive picture, we are still far from becoming a financially inclusive country. Even though 4 out of 5 adults in the country have a bank account today, as much as 78% of the total transactions continue to remain cash-based. According to research released by the World Bank, 48% of the country’s bank accounts have had no transactional activities in the last year.
To put things into perspective, the percentage of inoperative accounts worldwide stands at 25%. Moreover, only 13% of Indian adults borrow through formal lending channels, the rest rely on high-interest rates offered by local money lenders.
This brings us to the most commonly asked question, how do we reach those who lack both digital and financial literacy and have little or no access to financial inclusion products, including basic banking and credit facilities. The key is to offer financial services through a channel that masses can trust, that they are already familiar with, and can easily access. This is where the role of small local kirana stores as the locality’s financial service centre is gaining popularity.
Retailing in India is one of the pillars of our socio-economic structure, with retailers having a deep-rooted relationship in the communities where they are located. These centrally rooted local kirana stores are in a unique position to educate, empower and upscale their local communities and walk them into an era of financial inclusion. 90% of India, that’s technology shy and has been left out of most financial innovations, can be integrated into the formal economy through the help of these local kirana stores.
An assisted tech module, where these kirana stores are trained, tooled and equipped to serve their local communities with financial inclusion products are slowly developing into our answer for bridging the digital divide.
Withdrawing from and depositing money at your local kirana stores is as hassle-free as buying a toothpaste now. This is a boon, especially for the unbanked and underserved pockets of the country. In many parts of the country, this has already become a reality!
From money transfer to cash withdrawal, from insurance to bill payments, the nearby local kirana stores are slowly becoming a one-stop-digital-centre for all financial requirements. If the customers want to transfer money, they can transact with cash, and the store owner would transfer it to the recipient bank account through a digitized processing system. What’s more important is that all of this takes place in real-time, thereby providing immense value to the end-users.
One may wonder about its large-scale implementation and penetration to the remotest areas of the country. This is where fintech companies come into the picture. By leveraging their technology-based innovations, combined with the experience of their banking partners, fintech firms are successfully furthering this model in India, turning kirana stores into mini banks or digital service centres.
This is a win-win situation for all – customers have easy access to banking and other financial services, shop-owners get to earn commission on each transaction and are also able to secure more business through the increased footfall. Banks can interact with their customers remotely through such stores, without having to make investments for new branches or ATMs; and fintech companies have discovered a rewarding business module, where they are able to contribute to national development along with building a positive balance sheet business.
And lastly, in terms of financial inclusion, these kirana-store-turned-banks have the massive potential to ensure last-mile delivery of basic financial services and credit facilities. However, to turn this vision into reality all across the country, it is necessary to bring all stakeholders on board, including the government, regulators, fintech players, banks, local retailers, and ultimately, the end-customers. Through this, banking and other financial services can reach the masses across all regions of the country, thus scripting the story of India’s true inclusive growth.