Retail banking for the unbanked

On a ride on a Ola cab had a casual discussion with the driver. The discussion that day led me to realize how one company can bring about a huge change- a change which can help a vast majority of people who still do not have a bank account. While the Prime Minister Pradhan Mantri Jan Dhan Yojana is a great initiative in this direction, there is a lot of effort being done by various corporate who have done their bit

The Ola driver explained the business model. He explained about his journey with Ola and how the payment term and profitability has changed over the period. He said he needs to open a bank account which is linked with Ola and then based on rides done the amount is either debited from his account if most of the passengers pay by cash or credited if payments are done through Ola money. I asked him if he had a bank account before joining Ola for which he replied no. Now that is the cascading effect in a entrepreneurship model!!! Each entrepreneur has multiple effects on the economy at large

Joining Ola allowed him to join the mainstream banking services. His access to the banking services would help him in streamlining his savings and free him from the clutches of the money lenders.

Now just imagine the number of the cabs & auto linked with Ola or Uber across the country. While some might already have a bank account most of them would not have one. The other benefit of this would be that the income of these drivers would be tracked (while most of them would not like their income be tracked and taxed, it’s a fact that ambitious driver monthly income would be in 6 digits-yet all tax free). So the whole economy is benefitted.

The most important benefit in this would be for individuals who pay atrocious interest on the borrowed money.. Individuals who do not have access to the banking system borrow money from money lenders on an interest rates which is unimaginable..E.g. a vegetable vendor borrows Rs 1000 in the morning to buys the vegetables for business and repays Rs 1100 in the evening post the sales. Which is a whopping 365% interest pa.!!!.Can any bank (private or nationalized) dare to collect such an interest rate??. As the payment is cleared everyday paying a small sum will not actually affect the vendor hence he is not conscious of the interest rate. This was the thought behind the famous pigmy collection scheme started by Syndicate Bank.

In the pigmy deposit scheme a bank personnel would collect as low as even Rs 5 a day from the shopkeepers’ vendors etc from his place without he having to come to the bank every day. while a vendor could pool in Rs 5 every day. He could not pool Rs 1825 at once in a year. This daily saving deposit scheme helped the daily wage earners, small time vendors etc to save for the rainy day or for bigger capital requirements. These pigmy deposit holders could even borrow a loan with the pigmy deposit as a security and then pay it on a daily basis. This was a very large untapped community with the bankers and who had fallen prey to the money lenders for borrowings and chit funds for deposits. The pigmy scheme tapped it

While this scheme did help a lot of people enter the banking sector today’s entrepreneurs such as Ola/ Uber (taxi services) urbanclap, housejoy, bro4u (hyper local services) are making their contribution in this direction.

In the retail banking revolution this time it is the effort from a different industry which is contributing to the retail banking sector.

 

 

 

 

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