Will the business correspondent model work in India?

Microfinance Focus, Oct. 27, 2009: Will the business correspondent model work to bring the poor in remote areas of the country into the ambit of financial inclusion?

First, the experiment with the no-frills accounts which the country’s central bank RBI has pushed ahead faced failure.
Now the BC model, which has the ability to serve the poor in rural and remote areas, has no inherent demerits but the implementation mechanism requires openness, according to speakers at the microfinance India Summit 2009 being held in New Delhi.

“There is no fundamental problem per se but operating and upgrading IT infrastructure is more important,” said Manohara Raj, head of Microfinance at HDFC Bank.

Bankers have expressed concerns over legal requirements which may slow down the pace while telecom representatives were confident to implement the model with less legal requirements like opening banks and then carry out cashless transactions.

Finally, the shot came from Vikram Akula, SKS Microfinance chairman, who was clearly against the RBI’s restrictive policies. “Allow MFI/NBFCs to be BC agents. If RBI is intellectually honest, it should allow us to be business correspondent agents. It will reduce risks involved in cash transactions in rural areas,” he added.