Creator: Mohit Ahuja | Credit: Getty Images/iStockphoto
The Retail Finance Distribution (ReFinD) Research Initiative, in partnership with the Inclusion Economics India Centre (IEIC), recently hosted an insightful webinar titled "Improving Last Mile Access to Quality Agent Services in India." This session brought to the fore critical challenges and opportunities within India’s financial inclusion landscape. It featured presentations from two of ReFinD’s grant-awarded projects and provided a platform for agents and stakeholders to share their experiences of delivering services to the last mile.
Key takeaways from presentations:
Speaking on Last-mile financial access and inclusion in India, Prof. Gaurav Chiplunkar’s1 noted that though India has made significant strides towards financial inclusion over the past decade, gaps persist, particularly along gender and locality lines. While there has been a notable increase in financial account ownership—rising from 20% for women and 45% for men in 2010-2011 to nearly 80% for both by 2021—other areas such as the use of credit and debit cards continue to show disparities. As of 2021, only 20% of women and 40% of men reported using debit or credit cards. In addition, the increase in the usage of financial services has been skewed towards the urban areas because of infrastructural and access barriers in the rural areas. Despite these challenges, the overall dependence on cash for wages and remittances has seen a sharp decline from 79% to 43% and 67% to 33%, respectively.
On the supply side, data from the Inclusion Economics India Centre’s (IEIC's) FinTech and Customer Service Points Censuses (2022 and 2024) revealed a dynamic market, with a net increase in Financial Service Providers (FSPs). Yet, this net increase in FSPs is not commensurately matched with growth in demand for financial services. This is because although there are fewer banks than FinTechs, customer trust for Fintech-led services remains relatively low, compared to bank-led services: 94% of bank customers trust their institutions, while only 60% of fintech users feel similarly secure.
He discussed an intervention that sought to tackle the gender gaps in adoption with the randomised introduction of 110 Bank Sakhis to enhance women-centred last mile banking. These Sahkis are ordinary women in their localities with minimal labour force participation, but more progressive thinking who perceive family support to be crucial for their work. Although riddled with a lower customer base and liquidity management challenges, preliminary results have shown that Sahkis serve a higher proportion of female customers than other service providers. Also, Sakhis report increased respect and agency.
He concluded that understanding the limitations of access and adoption is key to increasing financial inclusion at the last mile. Although introducing agents from the local ecosystem may be beneficial, targeting both demand and supply sided interventions may help to achieve overall equilibrium. A case in point is ReFinD’s pilot study by the Institute for Financial Management and Research (IFMR) which, motivated by misalignment and asymmetric information2 between customers and service providers, saw the training of both customers and local banking agents to bridge the information gaps. This pilot study trained FSP agents on best practices and certification. Customers were also trained to hold FSP agents accountable and be more aware of their rights.
Presenting on Banking the Underbanked—Capital investment and credit Constraints for SMEs, Prof. Kanika Mahajan3 noted that access to credit remains one of the major obstacles to the growth and expansion of small and medium-sized enterprises (SMEs). SMEs often struggle due to inadequate collateral, high cost of monitoring and the lack of information on the needs of SMEs. It is therefore essential to collect such information to inform loan officers for SMEs to access credit. Hence, physical proximity to SMEs is crucial. In this case, can a Business Correspondent (BC) in rural areas and villages —essentially an expanded arm of the bank branch providing banking services— be a conduit of the information needed by loan officers to facilitate SMEs’ access to credit?
Prof. Mahajan’s presentation explored the impact of the Branch Authorisation Policy (BAP) of 2005, which incentivised private banks to expand into underserved regions. The study found that an increase in bank branches in underbanked regions resulted in a 6% increase in capital expenditure. Additionally, there was a notable rise in credit uptake, particularly for smaller firms (those with fewer than 25 employees). Proximity to bank branches was found to be crucial for SMEs to access credit and grow, with smaller businesses benefiting most from the policy. Importantly, the expansion of private bank branches has reduced the distance for customers in underserved regions. However, no significant change was observed in proximity to government bank branches.
This suggests that the BAP or bank branch expansion via BCs enhanced the physical proximity of financial institutions to borrowers. Proximity helped to relax the constraint of the lack of information, as BCs collected the necessary information to ease the credit constraints faced by SMEs. This spurred capital investment in SMEs in the underbanked regions.
The webinar also featured a panel of field practitioners who shared various insights on “Improving the Quality of Agent Services at the Last Mile”. The panel featured Dr. William Derban, Head, Program and Partnerships, Digital Innovation Team, Opportunity International; Mr. Sunil Kulkarni, CEO, Business Correspondence Federation of India and Aiswarya Chandrashekar, Marketing Lead, FIA Global, India. They delved into strategies for improving last-mile agent services, with a particular focus on onboarding female agents and overcoming customer outreach challenges.
Key insights from the discussion included:
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Reaching remote customers: Reaching customers in remote areas is not a major issue in India. However, ensuring sustained usage of financial services requires products that are designed with a human-centred approach, tailored to the specific needs of the customer.
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Onboarding quality agents is essential: To improve customer trust, the quality of agent services must also improve. The process of onboarding agents must be streamlined to attract quality agents. Existing agents must be trained in ethics, how to operate their business efficiently, fraud prevention and dealing with customer concerns, etc. This should be done in a more structured and innovative manner4, not leaving agents to find arbitrary information online.
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Quality monitoring is essential to sustain customer trust: Beyond onboarding quality agents or BCs, the banks should effectively monitor the BCs’ operations to ensure that the products being offered are being done as required. This calls for regulatory bodies to ensure that quality monitoring is done by all banks.
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Infrastructure is key: The quality of agent services is directly tied to the quality of the public digital infrastructure such as reliable internet connection; poor infrastructure results in system downtimes, failed transactions and indeterminate transactions3. Addressing infrastructural challenges that lead to system failures is crucial to building customer trust and ensuring the reliability of financial services5. A robust infrastructure should also include comprehensive monitoring and control systems.
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Empowering female agents: The panel also noted that younger, more educated women tend to be more confident and perform better as BC agents. Also, since being a BC agent requires some initial capital, having support the family (usually, the father or the husband) is a crucial factor in securing the minimum capital to succeed in this role.
Conclusion: Enhancing Last Mile Access to Quality Agent Services in India
While India has made strides in financial inclusion, gaps persist, particularly for women and rural residents. Factors like low trust in fintech and limited awareness of financial products contribute to this. The webinar showcased the following that serve as use cases in improving access to quality agent services:
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Empowering local women as "Bank Sakhis": This initiative aims to bridge the gender gap by providing financial services through trusted local women. Early results show promise in increasing female customer engagement.
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Expanding bank branches via BC agents: Increasing physical proximity to financial institutions, particularly in underserved areas, helps SMEs access credit and grow their businesses.
It also highlighted the following as relevant interventions to improve last mile access
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Human-centered product design: Financial products should be tailored to the specific needs of customers to encourage sustained usage.
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Empowering female agents: Supporting young, educated women to become agents can improve service quality and reach.
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Addressing infrastructure challenges: Reliable digital infrastructure is essential for the success of digital financial services.
This webinar effectively presented the multifaceted nature of last-mile financial inclusion, showcasing both the progress made and the challenges that remain. By focusing on supply-side interventions and improving agent quality, India can further advance its goal of financial inclusion.
1 Assistant Professor, Darden Business School, University of Virginia
2 While customers opine that incomplete transactions and the lack of issuance of transaction receipts create avenues for fraud and operators deliberately violate pricing guidelines, non-bank service providers feel that locals prefer the services of far-off banks to their services and do not know their rights.
3 Associate Professor of Economics, Ashoka University, India
4Opportunity International has a chatbox that uses GenAI to interact with queries. This is a very adaptable, informative and cost-efficient way of training.
5This is when the agent cannot tell whether the transaction has been successful or not, thus requiring a long period of reconciliation.
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