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In an interview with Sabyasachi Kashyap from CSDMS, Rita Soni talks about YES BANK’s foray into financial inclusion by banking and microfinancing through the Internet, ATMs, debit cards and mobile channels.
Inclusion through innovation
As per the latest census, almost one fourth of the population in India lives Below Poverty Line. What role do you see banking institutions like YES BANK playing here?
At YES BANK, we are working towards sustainable solutions to poverty through financial interventions by mainstream banking activities. Utilising sustainable and mainstream approaches allows us to reach the scale which is necessary to reach the 800 million Indians living on less than US$2 per day. In our young bank, we have chosen to focus on ‘Responsible Banking’, promoting financial inclusion and business solutions to social issues.
Where does financial inclusion fit into YES BANK’s scheme of Responsible Banking”?
YES BANK is committed to creating equal financial opportunities and enabling financial inclusion, but it is our emphasis on innovation which is making the real impact. For instance, in microfinance the vision is to go beyond offering plain vanilla banking to providing the industry access to the mainstream capital markets. This approach helps MFIs achieve scale at a lower cost of funds, thereby resulting in affordable financial products for the Base of the Pyramid (BOP). YES BANK has a two-pronged microfinance strategy to provide easy access to suitable financial products and services to un-banked/under-banked, low-income communities across urban and rural India.
As of March 2009, Wholesale Lending stood at USD 60 million with 16 MFIs, covering an estimated 500,000 clients in over 1000+ villages. YES BANK offers a comprehensive package of banking and advisory services, dovetailed with the expertise of relevant business units within the Bank to use structured capital market products to help MFIs leverage access to cost-effe
ctive funds from a broader pool of sophisticated investors. The Bank works as a holistic financial solutions provider working with different stakeholders, i.e., mainstream investors, rating agencies, policymakers and technology vendors resulting in an aggregation of services, cutting-edge innovation and thought leadership required to create a conducive environment for growth of the industry.
YES BANK also stands out for its focus on urban poverty using individual lending methodology in a market that has largely executed group lending to rural women. One of the ground breaking features of our model is the fact that in setting up the first institutionally sponsored direct intervention model for microfinance, the Bank has created a benchmark institution that becomes the reference point for what our wholesale practice strives for in terms of helping transform partner MFIs into commercially viable financial services providers for the BOP. Direct Lending is accomplished through YES SAMPANN (Hindi for fulfillment), currently in its pilot phase with a portfolio of 2000+ micro-entrepreneurs. The business is projected to reach a client base of a 1,000,000 with a portfolio size in excess of USD 100 million in 5 years offering products such as micro loans for working capital, insurance and savings schemes.
Across the world, there is widespread recognition that information and communication technologies (ICTs) have tremendous potential in facilitating the inclusion of the underserved/un-banked population into the banking network. Can you share your views about this?
Bridging the technology gap between the urban and rural population through ICT is undeniably a step in the right direction, however YES BANK feels that unless discrepancies in the content, standards and delivery of basic, primary/secondary education and vocational training programmes are proactively addressed, the effectiveness of ICT led initiatives will be greatly hindered. This opinion and mode of thinking has spurred YES BANK to begin forging working relationships with NGOs and social businesses currently working in the education and ICT space to develop effective educational content, especially in the realms of financial literacy, in order to enhance the national curriculum and skills development programmes in rural and urban India.
What are YES BANK’s initiatives in providing banking facilities to the underserved population in the rural areas?
In addition to the microfinance initiatives already mentioned, YES BANK also has a dedicated focus in the area of ‘Farmer Financing’. The Agri-Business, Rural and Social Banking (ARSB) team develops innovative financial models, which leverage the outreach of various stakeholders in the Agri Value Chain to address ‘last mile’ issues. In the last year, the Bank has disbursed approximately INR 700 crores in direct farmer financing, impacting approximately 140,000 farmers. ARSB works closely with Swiss Re and Agriculture Insurance Company of India (AIC) to facilitate the development and distribution of need-based insurance products for the agriculture sector, such as weather insurance for grapes in the Nashik region.
As an example, YES BANK recently announced its partnership with Zameen Organic, a farmer-owned producer company aimed at closer collaboration between farmers and companies to fortify inclusive and sustainable growth while building a transparent supply chain. This alliance intends to create equal opportunities for producers and workers who have been economically marginalised because of the conventional trading system. The business model empowers 6500 farmers to have effective and end-to-end control on the ‘Fair Trade Organic Cotton’ supply chain which has resulted in improved economic condition of farmers from the Adilabad (Andhra Pradesh) and Vidharbha (Maharashtra) region.
Could you elaborate a bit more about your experiences in the rural areas?
Within the Responsible Banking framework, YES BANK has a vision to address issues of rural India through the previously mentioned innovative financial interventions, complemented with expert advisory services and thought leadership. These practices in microfinance, ARSB, advisory and thought leadership go beyond the banking sector regulator, Reserve Bank of India’s (RBI) directed credit policy mandated through its Priority Sector Lending (PSL) requirement, and adopts the spirit of addressing poverty to the core. Below are specific examples where this combination approach has yielded results:
In 2008, YES BANK worked with Jain Irrigation Systems Ltd. (JISL) to reach nearly 50,000 small and marginal farmers across India. As a testament to this ‘business solution to social issue’, the BANK conducted a comprehensive sustainability report for JISL, outlining both the manner in which they operate as well as specific social and environmental initiatives.
Another important rural client is Buldana Urban Credit Cooperative Society. The financing from YES BANK reaches approximately 8,000 rural households across western Maharashtra. The Cooperative has a unique approach of ‘social banking’ which has built the institution and met the needs of its members. In addition to these financial services, the Bank conducted a detailed study of the approach, uncovering a gamut of best practices that can be applied by urban and rural banks.
The Bank also plays the role of thought leader in several areas including poverty issues. As an example, YES BANK and the American India Foundation jointly wrote a report highlighting the social and economic issues surrounding rural to urban migration in the country. A key feature of the report ‘Managing the Exodus’ is ways to provide rural populations employment opportunities and social services through the public private partnership model in a bid to mitigate their migration to urban areas.
In addition to financing Shriram Transport Finance Company Ltd. (STFCL), YES BANK facilitated an HIV/AIDS awareness programme for their trucker clients. This programme brought the Bank forward to form knowledge partnerships and synergies with the Clinton HIV/AIDS Initiative (CHAI) and the Red Cross. The programme has reached out to 14 locations, 10 states and over 10,000 truckers who have been sensitized since this project began in October 2007.
Are the branches operating in the rural areas providing ‘anytime anywhere banking’ facilities? If yes, could you share your experiences with this?
A standard feature in all our branches, urban and rural, we offer ‘Anytime Anywhere Banking’ through the Internet, ATM, Debit Card and Mobile Channels. Customers can also transfer funds at their convenience, from home or office, to over 53,000 bank branches across the country using the NEFT and RTGS facility. They are also given complimentary multi-city payable at par cheque books for ease of payments. Under the aegis of the ‘One Branch’ model, customers can access their account from any of the 117 state-of-the-art YES BANK branches, at no extra charge. We were also one of the first few banks to offer complimentary access to over 32,000 ATMs in the country. Our technology edge imparts ‘reach and easy’ access to our rural branches and our ‘anytime anywhere’ facilities have received encouraging response in rural areas.