A mobile app, the Mobile Kunji (Kunji being a simplified reference guide for students) breaks down the complexities of banking and finance into algorithms on bank processes such as writing a cheque and applying for a loan. Written in the pidgin, Hinglish, Kunji helped new shop-owner, 21-year-old Sunil Kumar, who was confused about a cheque a client had given him. I got a bearer cheque and didnt know what it was. Now, I know through Kunji that there are three types of chequesthe crossed cheque, bearer cheque and self cheque, he says, confident in his newly-acquired knowledge of the banking instrument.
Riding the crest of the mobile wave in India are newly developed applications like Kunji, aiming to boost financial literacy among youngsters on the cusp of entering the job market. Like Gurvinder and Mohammad, they may be the first in their families to be professionally qualified and could be looking to be placed in formal employment in the service sector. Developed by the American India Foundation (AIF), the Mobile Kunji app and game were launched a few months ago in AIFs 14 centres in north India, where a Market Aligned Skills Training (MAST) programme provides job placement to under-privileged youth. AIF country director Hemanth Paul says, At the genesis of innovating for the cellphone-as-a-financial-learning-tool were the challenges faced by MAST candidates once they were formally employed. They had little knowledge about opening bank accounts, using net-banking, applying for a loan or even considering investment options, and many of them slid back into subsistence living. The mobile applications reinforce AIFs financial literacy curriculum for the 3,100 youth trained in MAST centres and placed in formal employment, who, nevertheless, were often at sea regarding money management
Innovations are the game changers
In fact, technological innovation is emerging as the game-changer in bringing about financial inclusion in a country where 65% of the population does not have access to a formal bank account (World Bank Findex Survey, 2012), just 8% borrows from formal financial institutions, 2% uses an account to receive money sent by a family member and 4% uses an account to receive government payments. Low on the global index of financial literacy, India ranks below countries like Bangladesh, Malaysia and China. According to Reserve Bank of India figures for FY13, the countrys 157 banks have 1,04,647 branches, less than 40,000 of which are rural banking branches, and there are a total of 95,686 ATMs. Out of Indias 6,28,000 villages, just 2,68,000 have access to formal financial services. Such scanty infrastructure for a billion people, yet India has over 800 million mobile phone subscribers, points out Abhishek Sinha, CEO, Eko India. Eko India, the financial services company that operates as a business correspondent, leveraged this very discrepancy to make a success of its model of remote banking which works through a technological innovation for use in ultra-low-cost handsets.
Research by Nokia showed that while users of these handsets may not be able to read, they could turn on a mobile phone and dial a number. In addition, Eko found non-literate users in India relied on those close to them to get things done and learnt in the process. Also, they are well-versed with English SMSs like BAL for balance. Based on this understanding of peoples behavior, the company developed a universal digital syntax. Applied to a mobile-telephony based technology, this enables financial transactions among rural customers not serviced by any bank branch. Eko recreated the cheque book experience on the mobile without users having to install or download any application. By just punching in numbers that indicate features like customer-identity and the amount to be deposited or debited, Ekos customers can walk into retail outlets with which the company has partnered and carry out a cash transfer. The retailers, who are Ekos service delivery mediators, could be vendors who recharge prepaid mobile cards or even neighbourhood kirana store-owners. Reaching out to those whom banks do not serve as they do not consider it financially viable, Ekos technology works across all handsets, be it a top flight Blackberry or a low-end model, with every single transaction taking place through the customers mobile.
Technology, thus, is proving to be the great leveller that has democratised access to finance. It is powering inclusive growth through innovative financial literacy for those at the bottom of the pyramid and by providing low income customers anywhere in the country access to small value financial transactions. A growing spectrum of market players are developing technological toolkits directed either at the level of the customer such as mass mobile applications or directed at business correspondents. For instance, other than Eko which partners with retail outlets to conduct transactions, most of Indias 30 business correspondent firms use biometric smart cards. Business correspondent firm FINO PayTech brings about fast and simple money transfer through such cards issued to customers by agents known as bandhu who have a small hand-held device that enables transactions. The agents reach out mostly to financially under-served rural areas.
Technology is being used to bring about financial inclusion but critical to this is financial literacy that must convince people to change traditional behaviours like borrowing from money lenders or putting savings into purchase of cattle, points out Jatinder Handoo, senior manager, FINO.
The benefits of financial literacy are clear. Mohammad told his father to put his nest egg of R60,000 into a recurring deposit where he now enjoys a high interest rate of 8.5% on the previously idle money. Consulting the Kunji, Gurvinder has already worked out the economics of taking a loan to buy a Singer sewing machine even as she helps her sister in Delhi with net-banking. My brother-in-law, who works in Shimla, no longer has to wait and send money through someone coming here, she says proudly.
Business correspondents revolutionse banking landscape
In 2006, a huge innovation in Indias regulatory financial space took place with private independent agents, termed business correspondents, being allowed to work as bankers. The business correspondent (BC) model of banking was developed to address issues like banks having high costsof R45-55 per customer transactionpreferring to operate in metros, thereby not reaching out to poor customers with low-value transactions and preventing financial inclusion.
BCs are either individuals appointed by institutions or customer service points of banks managed by corporatessome corporates provide both manpower and technology while others like FINO provide only technology. With banks now preferring BCs to branches, there are 2,21,341 BCs empanelled by banks as of March 2013 as compared to 1,04,647 bank branches, according to RBI data. The 30 registered banking correspondents in India bring banking services to the doorstep of remotely placed customers and operate with very low transaction costs, reducing the overheads for customers and service providers alike.
The author is a Delhi-based independent journalist writing on issues of social development