Banking for Everyone
FIA Technology, a Haryana-based Millennium Alliance awardee, works on financial inclusion by taking banking services to the doorsteps of customers from underserved sections.
For Massachusetts Institute of Technology (MIT) Sloan Fellow Seema Prem, working in the social sector has always been a passion. “At MIT, we crystallized the idea of how we could bring more people, especially from rural and other underserved areas, into the banking system. And that’s where the idea of FIA was born,” says the co-founder of Haryana-based FIA Technology Services Private Ltd.
In India, while mobile phones may have become ubiquitous, many low-income households are yet to get connected to the banking grid and often don’t have access to savings accounts or the different government schemes for families below a certain income level. FIA seeks to close the gaps between these individuals and financial institutions by reaching out to communities, educating them about basic banking procedures like opening an account, and ensuring that they understand how such institutions can provide various benefits.
Prem and her team drew inspiration for FIA from models like Grameen Bank in Bangladesh. “Our analysis showed that while the Grameen Bank model in Bangladesh was a phenomenal idea, people still did not have basic bank accounts because this was purely credit-based. The Indian government policy was geared more toward meaningful financial inclusion by helping people set up bank accounts, social security schemes and credit plans.”
FIA decided to partner with private and public sector banks and offer their products to customers. The company works in all states across 625 districts in India. It handles about 200,000 transactions a day and works with over 30 financial institutions. FIA sets up centers in different suburban and rural areas, where FIA Mitras or friends, usually local micro-entrepreneurs, are trained to help people access financial services and products. A large number of these centers are run by women.
“Opening a bank account requires basic documentation, like address and identity proofs and two references, which people often find difficult to put together,” explains Prem. “Banks in these areas often have very few staff members. Also, these transaction amounts do not usually exceed Rs. 5,000, which does not make it a profitable venture sustainable for the bank.” The Reserve Bank of India (RBI) has policies that relax these requirements, while keeping risks low. The RBI sets these policies and the banks design their products accordingly. FIA acts as the implementing agency; disseminating information about the products and helping customers access them.
Initially, it was not easy to convince customers to trust a financial intermediary. But, as Prem says, “The government has been very good about the communication around no-frills banking.” FIA held community meetings with bank managers, the Gram Panchayats and local block development officers to explain the benefits of banks and financial institutions to people. Account opening camps were also organized. Gradually, as people experienced the benefits for themselves and saw that the bank account passbooks reflected the amounts deposited, trust in FIA’s services grew.
Financial literacy is an important component of the marketing campaign around the establishment of FIA centers. FIA has also recently started mobilizing loans at reasonable interest rates to help small entrepreneurs start new commercial ventures. “These are customers who are credit invisible,” says Prem. “We have new ways of ascertaining the credit worthiness of individual loan applicants.”
FIA is a recent Millennium Alliance awardee. The alliance is a consortium of partners including the Government of India, the United States Agency for International Development, Facebook and others. “FIA’s award-winning model for financial inclusion combines a state-of-the-art mobility-based platform and a multi-level distribution network to bridge the huge demand-supply gap for banking in underserved geographies,” states the Millennium Alliance website. It adds that FIA’s target segment mainly comprises marginal farmers, landless laborers, self-employed and unorganized sector enterprises, tribals, urban slum dwellers, migrants, ethnic minorities, socially excluded groups, senior citizens and women. “The grant helped us focus on some of the poorest areas of the country,” says Prem.
There have been many wonderful moments in the past seven years. A bank account for 92-year-old Pyarelal in Choulhada village in the Baghpat district of Uttar Pradesh was among the first accounts opened. “At the Uttarakhand-Nepal border, there was a 100-year-old lady who was bedridden. A FIA Mitra was able to get her old age pension delivered right to her doorstep, through biometric transactions,” says Prem. “Young people who have been with us from the start have also grown in confidence, as they work to take these products to people who need them, like the elderly and the marginalized.”
Paromita Pain is an assistant professor of Global Media Studies at the University of Nevada, Reno.