Canara Bank Bancon by alicejenny


									  Profitable models for Financial Inclusion,
      Agriculture & Rural Development

                                  Archna S Bhargava
                     Executive Director, Canara Bank                                Page 1
                           A brief prelude

                      Agricultural & Rural development and
                       Financial Inclusion - inter-related in the
                       context of Indian development
                      Progress by Banks - extending financial
The Context
                       services for agriculture and rural sector
                       in the last 40 years - Meeting the
                       mandates in lending to agriculture and
                       rural sector
                      But agri productivity explosion of Green
                       revolution-has reached a plateau &
                       beset with other issues affecting
                       productivity                                              Page 2
                                 A few pointers

                      Is the inclusion a new concept for banks?
                      Whether the support to the rural segments of
                       banking industry is found wanting?
                       The answer will be a No in both instances
                      Current extent of exclusion has been despite
  The                  the best foot forward in the last 4 decades by
Context                the Banks with regard to inclusive Banking.
                     A few initiatives of CB started many decades
                      Agriculture     Extension       Officers     before
                      Rural Development Trust for inclusive rural
                       development initiatives (Non financial support)-1983
                      Village adoption programme                                                       Page 3
                             A few pointers

                     The Banks, need no reorientation
                      …but innovations and modifications in their
                       approach,      and     an   amalgamation  of
                       appropriate financial instruments and making
                       use of the available technology to scale up
The Context            their rural centric efforts
                     Profitable business model –
                      to combine the best in Agriculture and Rural
                       finance with underlying inclusive theme
                      win-win proposition for the lender & target
                      Improve the income level of the poor with
                       livelihood enterprises finance which help in
                       business development                                               Page 4
                     Profitable models and alternatives

                       Profitable model as win-win proposition
                        for both the Banks and newly included
                       Financial    inclusion as window to
                        livelihood opportunities for the included
                       Focus on brick and mortar branches –
                        providing with a platform for interfacing of
                        the people with the bank
                       Alternative models of delivery of Banking
                        services to supplement the low cost brick
                        and mortar branches
                       Brick & Mortar branches-dedicated focus
                        on Financial Inclusion                                                Page 5
                     The excluded-characteristics

                      Financial illiteracy
                      Low and seasonal income
                      No or Minimal collateral
 Reasons              Lack of credit history
                      Lack of documentary proof of
                      General illiteracy
                      Primarily credit is for personal
                       consumption                                    Page 6
                       The excluded-Expectations

                     Financial services that reckon-
                      Seasonal     Inflow Of Income from
                       agricultural operations,
                      Migration from one place to another,
Expectations          Seasonal & Irregular stream of Income
                      Security and safety of deposits
                      Low transaction cost
                      Convenient operating time
                      Minimum paper work
                      Frequent deposits of small value
                      Quick and easy access
                      Product     suitable   to   income   and
                       consumption                                            Page 7
                        Enabling Environment-
                             for agriculture finance

                      Reasonable deal to the farmers
                      Capability    and capacity building -
                       enhance productivity in agriculture.
Agri-Finance          The Bank credit that comes with ‘plus
                       initiatives’ of enhancing the capacity of
                       the farmers
                      Farmers’ Training Centers
                      Canara Bank has about 23 Farmers’
                       Training centers’ as exclusive set-ups
                       in Bank run Self Employment Training
                       Institutes.                                             Page 8
         Alternative agri-financing models-Inclusive finance

                       Entry of Corporates and bigger entities
                        in - agriculture from ‘individual farming’
                        model to ‘agri-business farming’ model
                        Small     players-derive      the    scale
larger number          Credit to farmers through credible
  of farmers
                        intermediaries in agri-value chain-can
                        provide the reach and also the
                        advantage of technology to small &
                        marginal farmers
                       Post         production-storage         &
                        warehouses/Cold storage units as
                        intermediaries of financing farmers
                        (against good stored)                    Page 9
               Agriculture Credit-enabler for Productivity

                      Need      to    support      infrastructure
                       creation(On- farm as well as Off-farm)-
                      (i) increased farm level production (ii)
                       Minimizing post harvest losses
                      Support to private sector investment in
Productivity           post harvest facilities like storage and
                          (Save post harvest losses-about 25-30
                      Produce saved (from losses) = additional
                      Term loan - investment in allied sectors
                       can an effective risk mitigant –                                               &
                       fluctuations in agricultural production Page 10
                    Inclusive and Agriculture credit –
                a few Unique initiatives of Canara Bank

                      Agricultural   Consultancy Services (ACS)- An
                       unique set up established 1988
                       To facilitate areas of emerging agriculture-
                       business opportunities.
                       Handled so far more than 1000 projects involving
                       an outlay of more than Rs.5000 crores
 Inclusive            Hi Tech Agriculture Finance branches
  credit -
  unique               Changing environment         in ‘90s (including
initiatives            Corporatisation of agriculture) – responded by
                       opening specialized Agri-finance branches(10)
                      Micro-Finance branches – focusing on urban
                       financial inclusion(19)
                      Low cost brick & mortar FI branches – branches at
                       the door steps of villagers(125)                                                   Page 11
                     Delivery of financial services-
                           Profitable Models

                      Low cost Brick & Mortar branches
                        Direct interfacing of the community with
                       the Bankers builds up a strong human
 Financial            Canara Bank has opened 125 FI Branches
 Inclusion             during the current financial year, with a
                       minimum of 2000 accounts in each
                       branch, with a total business of Rs.100
                      Business Correspondents-essentially now
                       engaged for transfer of payments under
                       social security schemes and operation
                       through Smart card technology-can
                       increase the reach and array of services                                            Page 12
                       Simple model for low cost B & M Branch

                          Amt in Rs lacs               I year       II year     III Year
                          Deposits                           50           75          100
                          Advances                           50          100          200
                          1. Cost of operations              10           10           11
                          2. Interest paid (7.5%)          3.75         5.63         7.50
  Low cost
  Brick and               3. Interest on advances          4.75         9.50           19
Mortar branch               (9.5%)
                          4 HO Interest (+1.39%)           1.39         2.45         4.17
                          5. EBT + NREGA                        1       2.87         2.87
                          Net earnings                   (6.61)        (0.81)        7.54

                      Staff complement One Manager + One Clerk
                      Focus on financial inclusion products -GCCs, SHGs, KCCs , Gold
                      Can reach viability in 2nd year if Business Turnover is increased
                      beyond Rs.2 crore                                                                         Page 13
                          Micro Finance branch-
            a special Financial Inclusion delivery Channel

                      • 19 Micro-Finance branches opened in 13
                      • Specific     focus   on   inclusion   through
  Brick and
mortar Branch
                       Micro-finance for sustainable livelihood
 specialized           opportunities
Micro Finance
   Services           • Activities   generally cover     simple but
                       critical Non-farm occupations for gainful
                       self     employment-Flower/vegetable/fruit
                       vending, road side shops etc                                                Page 14
                      Special initiatives through our
                         Micro Finance Branches

                      • Jewellery making, jute products

                      • Terracota, garment designing & stitching

 Inclusion for
                      • Candle making, Paper products
 occupation -         • Chemical products/agarbathi
Economic Self
                      • Beauticians, screen printing

                      • Photo & Videography

                      • Data Entry Operation                                            Page 15
                     Delivery of financial services-
                           Profitable Models

                      Issues like (a) appropriate remuneration
                       (b) adequate population to be served (c)
                       uninterrupted connectivity      (d) inter
                       operability     and online transactions
                       have to be addressed by all the
                      After the initial phase, these BC model
                       can be channels of extending other
                       financial products including insurance
                       and pension
                      Developing a Comprehensive financial
                       services plan involving insurance
                       companies, NABARD and all Banks                                             Page 16
                     Delivery of financial services-
                           Profitable Models

                     Holistic-Financial inclusion
                      To include-Apart from Credit and
 Financial            Micro Insurance
                      Micro-pension
                      Easy remittances
                      Focus on transactions
                      Aadhar enrollment for giving
                       identity to the people to get Govt.
                       benefit.                                       Page 17
                     Delivery of financial services-
                           Profitable Models

                      Mobile Technology
                          Penetration of mobile phones in rural India -
                       Secure money transfer through the BCs –
                       through bio metric identification
                      Exploring Incentivized savings of the newly
 Financial             included     A simple Term deposit to No-frill
 Inclusion             account holders, with a preferential rate-the
                       additional cost of interest can be compensated
                       by the sale of such savings instruments through
                      Products for the excluded
                         ldeal products-General Credit Card, debt swap
                       Schemes including insurance, pension and
                       business facilitator services also to have better
                       remuneration and viability                                                     Page 18
                     Delivery of financial services-
                           Profitable Models

                      Credit facilities encompassing for
                       consumption, production and
 Financial             investment purposes- best served
                       by the SHG credit linkage model
                      Micro    finance    to   gradually
                       address      diverse    livelihood
                       opportunities, rather than mere
                      Personal & asset        insurance
                       products by partnering with
                       Insurance partners               Page 19
                              Contract Farming /
                     Tie-up arrangements in agri buisness

                        Sugar Mills
                        Lift Irrigation Projects ,
Agri-Finance            Financing for Harvesters & Transporters,
                        Farmers against their sugar receivables
 - Model to
reach larger            Gherkins, Dairy , Aqua Ventures
 number of              Spices Processing, Rubber Farming
                        Winery Units, Seed Industry                                                  Page 20
                     Non Financial services support for inclusive
                     development - Canara Bank way

                       Canara Outreach Utsav
                       12 states, 14 Utsavs conducted to bring awareness
                          about the Financial Inclusion
                         Rural self employment training Institutes
                         To strengthen the rural economy, promote self
Development               employment in rural areas and address the
                          problem of urban migration,
                         The Bank runs 30 such Institutes, trained so far
                          1.36 lakh youths; 15 new Institutes out of 30 were
                          opened during last one year.
                         26 similar Institutes (RUDSETIs),co-sponsored by
                          the Bank have trained 2.67 lakhs so far.
                         About 70% of these youths are settled in gainful
                          occupation (self employment).                                                       Page 21
                  Canara Gramin Vikas Vahini
     Inclusive Growth vehicle-an initiative of Canara Bank

                                              35       vehicles
                                                operating in 35

                                              We propose to

                                                increase it to
                                                50           for
                                                Inclusion plan                                           Page 22
                     Bio-metric ATMs

                                        Bank       has   23
                                         Bio         metric
                                         ATMs and

                                        This   will      be
                                         expanded to 50
                                         shortly.                                        Page 23
                     Non Financial services support for inclusive
                     development - Canara Bank way

                       Financial Literacy and Credit Counselling Centres
                         The Bank has, through a Trust, set up Financial
                          Literacy Cum Credit Counselling Centres (FLCCs),
                          in 11 districts.
                         Rural Health Clinics-Scheme since 1983-
                         550 clinics assisted
                         Farm     Digest-   a    journal   for    information
                         Canara Bank – out of 1615 villages allotted,1370
                          are Gram Panchayats- thus giving an edge for
                          effective non-financial services with great ease.
                         Brick & Mortar branches under FIP in 125 Gram
                          Panchayats.                                                         Page 24
                               To sum up-

                      An inclusive agriculture and rural credit that is
                         timely, adequate and can be accessed along
                         with simple insurance products shall be the
                         agenda of all delivery models, which offer a
                         win-win proposition to both sides.
                        Low cost brick & mortar branches
Way Forward             Support of various non-credit factors - Banks
                         can     play facilitating role by timely and
                         adequate credit.
                        ICT Based payment system- leveraging
                        Gram Panchayat as a Unit for development of
                         financial inclusion & agri -development
                        Concept of Micro Finance branch for urban
                         Financial Inclusion                                                     Page 25   Page 26

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