FINO says banks’ apathy to financial inclusion is affecting its business

Financial Inclusion Network and Operations (FINO), the biggest third party financial services provider in the rural areas, said lack of interest from bankers to service micro credit consumers is heavily impacting its business.

While the regulatory push to the business correspondent model is encouraging, lenders are still wary of banking with micro credit consumers on account of the risk factor, says FINO chief executive officer Manish Khera.

FINO services more than 36 million customers across 386 districts, managing over 6 million transactions a month. The company provides services under the business correspondent model in government payments, government insurance schemes, savings banks accounts, recurring deposits and loans, among others.

About 80% of the Fino’s business comes from government payment schemes under the Mahatma Gandhi National Rural Employment Act, which makes banks an important contributor to FINO’s business prospects.

“Consistency of business and regular payments to the correspondents are a concern. Banks are still looking at it as compliance, because they feel it is still a burden; more involvement is needed from them,” Khera said, adding that payments, at times, are delayed by six months which hampers the cash flow.

Khera says that reputation too is a major concern for banks. Unlike the corporate client, even if the bank employs regular methods to deal with defaulters among below poverty line customers it turns out to be a big thing. 

Currently, FINO is acquiring 1.5 million customers every month; however Khera said with proper support it is capable of acquiring 3 million customers.

“We are comfortable with the pace with which we are covering the rural market. At times it’s difficult because we don’t only have to give the customer his account number, but also credit. And finding a business correspondent, accesibility to the remote areas and finding a viable technology are barriers that even banks face,” says P V Raveendran, general manager- retail banking, Central Bank of India.

There are, however, players like Dena Bank which prefer to enter the segment on their own.

“We don’t treat financial inclusion as compliance. As a bank we are more than happy to do our bit, and in addition acquiring customers is also not as difficult as it’s portrayed to be. The only issue is, there are not enough transactions taking place,” says AK Dutt, executive director, Dena Bank.