Page 39 - Banking Finance March 2023

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impetus. It would enable lenders to leverage real time
cashflow data to reimagine end-to-end lending process and
"sachetisation" of products.

Role of Banks in Financial Inclusion:
Customize offerings to raise relevance and broaden
the reach of account adoption
While regulators in certain markets have required banks to
offer basic accounts, simplify onerous documentation or
allow correspondent banking (e.g., by post or phone). Banks
must structure highly relevant and possibly simplified
financial solutions that meet specific customer needs at an
affordable cost. They can do this by developing deeper
customer understanding and offering a compelling value
proposition. With the right mix of innovative products and Role of BC
services, institutions can earn the loyalty of new customers
Achieving the objective of financial inclusion requires a
and drive cross- and up-sell opportunities.
combination of organisational innovation and technology
application. Many of the ingredients for this are in place,
Innovate channels to reach more customers at
including the requirement that individual banks articulate
lower cost their strategy for achieving the objective. However, financial
Digital channels have been instrumental in helping providers inclusion initiatives will be unsustainable unless it is
overcome challenges related to infrastructure and commercially viable for all stakeholders - banks themselves
geography in many developing countries. and the entities they use as BCs to increase penetration.
The diversity of conditions across the country makes it
While digital channels may have the lowest operational costs, difficult to visualize a single approach to ensure viability.
effective financial inclusion will likely require a" bricks and General regulatory principles would have to combine with
clicks" distribution model that includes physical branches to adequate flexibilities to allow viable models to emerge in
build trust and confidence, perhaps supplemented by each region. In this context, the suggestion from some
correspondent agents (such as post offices and supermarkets). quarters is to allow banks to use corporates, including
Such a model can still operate efficiently if automation is telecom companies, NBFCs etc as BCs.
employed effectively with no-frills mini-branches, kiosks and
correspondent agents offering standard products. The BC model may evolve into two distinct patterns, viz. (a)
banks could enter into a separate agreements with
Creatively mitigate risk to address absence of corporates for using their retail network with specific
credit histories responsibilities and functions to be performed by the
corporate for a fee while the retail outlet is directly
Many financially excluded individuals and MSMEs lack the
financial track record that banks traditionally rely on to appointed as agent of the bank (b) banks could make the
support lending decisions. Nor do they necessarily have corporate itself as the BC with no direct privity of contract
access to proven identity, address, and security, which cuts between the retail outlet and the bank - in this model the
off their access to bank credit. Creative credit profiling and retail outlet is a sub agent of the corporate BC. Under both
models' banks have to be responsible for all acts of the retail
credit scoring analytics could help bridge this lending gap.
Some nonbanks use digital footprints related to e-commerce, agent as it is the point of contact for the customer where
social media, biometrics, and their customers' feedback on banking transactions take place.
product and service credibility as data sources to evaluate
business viability and creditworthiness Over years, these companies have developed efficient

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