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Doug Johnson Branch Less Banking
Doug Johnson Branch Less Banking
Branchless Bankings USP: Reduces cost of servicing clients for banks while increasing convenience for clients leading to greatly increased financial inclusion.
Branchless Bankings Risks: Increased risk of fraud as agents are smaller, less easily monitored, and (potentially) less concerned about their long term reputation than banks.
Results 19 million new accounts opened in only four years (Brazilial pop = 200 mn) Total flows in 2006 > $100 bn
* Source: Planet Finance
Details of the Business Correspondent model Banks permitted to outsource to outsource transaction processing to nonprofits (section 25 cos), co-ops, post offices, societies, trusts, and exservice-people All transaction information must be updated in banks CBS by end of day Agents must be located within 15 kms of a partner bank branch It was hoped that the model would allow banks to offer financial products, especially savings accounts, to previously unreached populations.
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Partner bank
Wages
NREGA workers
FINO agent
Greater convenience for beneficiaries Increased empowerment for female beneficiaries Reduced leakage due to fewer duplicate / fictitious beneficiaries
All while being profitable for the agent and only marginal extra cost for the government.
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Programme NREGA Indira Awas Yojana National Old Age Pension Scheme SGSY Conditional Cash Transfer to the Girl Child
Total
*Updated budget estimate as of October, 2008. Original budget estimate was 16000.
ALW and FINO in regulatory limbo Only companies which can both develop the technology and disburse payments on the ground can deliver government benefits in this way
FINO
Technology transfer fee
Semiindependent section 25 co
Payments
Beneficiaries
With some government programmes, social audits could provide additional information on functioning of agents
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Why this would lead to much greater use of branchless banking for delivery of government benefits
Disbursing government benefits would be a natural fit for many large MFIs and deposit taking NBFCs.
Unlike technology companies, MFIs already have presence in rural areas and capacity to disburse cash in these areas In some cases, field staff visit villages according to exact same cycle as government benefits are disbursed
Still, incentive structure should be carefully calibrated to ensure that agents can make profit.
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Leveraging payment processor model to increase financial inclusion in the long term
RBI could take a wait and see approach to payment processors, gradually lifting restrictions on what type of transactions they are permitted to conduct if and when it deems prudent.
RBI would gain better understanding of their own capacity to monitor these agents
RBI would get a better idea of which types of organisations can be trusted
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