September 05, 2011

Eko India, banking for the poor via mobile and local stores

We’re pleased to welcome Yash Saxena as our soon-to-become Ambassador in India! Yash explains how Eko is organizing banking for the poor via mobile platforms and in partnership with local retailers, ie. Kirana Stores.

Many business model innovations in India are a product of two socio-economic aspects of the country- Aspirations and the Need for inclusive growth. On one hand India is a developing country still grappling with poverty alleviation while on the other hand it is also one of the world’s fastest growing economies increasingly attracting global investments. Wealth creation in the economy has led to rising aspirations among the people. Simultaneously the call for making this growth and wealth creation, a more inclusive process is gaining ground. India being a democracy and free market economy, neither the aspirations nor the agenda of growth in India is determined by the state regulations. Therefore what shape this growth shall take is largely determined by market. Whether social inclusion will be a natural outcome of this growth process in India is not a question I would address here. However in order to sustain the growth, create more markets, social inclusion would be required. A fact that is not lost upon the entrepreneurs in India.

‘Financial inclusion’ has been on the agenda of the Indian state for a long time now, yet this has not translated into significant ground action. Financial inclusion refers to providing banking services to the people not covered by banks either due to geographical or economic barriers. Against such a backdrop the innovative microfinance models like those of the Nobel laureate Yunus Khan stand out in their ability to bring banking services to the unbanked.

The challenges of addressing financial inclusion continue to fire up the entrepreneurs in India. One such innovative model aiming at financial inclusion is being run byEko Financial Services India. I had first met its founder, Abhishek Sinha during the course of a lecture series from entrepreneurs we had organized at our university. Way back then the most pertinent challenges being faced by the firm, as described by Mr. Sinha, was to sustain the liquidity in the company. While the long term value that this business model might create was important, the ability to remain liquid in the short term was also necessary to keep the startup alive. In context of the difficult business environment for startups in India, the focus of the company was to build a business model that conserves maximum possible cash. In order to conserve cash, a firm must build an operating structure at as low cost as possible. Over time it is easy to see how this has led the firm to have an incessant focus on low cost practices being built within its business model. Since then the firm has moved ahead in implementing the business model in collaboration with two leading banks of India, State Bank and ICICI.

The basic challenges of ‘financial inclusion’ or ‘providing banking services to the poor’ are that the amounts and transactions involved in the segment are very small in value. The operational structure prevalent in major banks is not designed to cater to these segments at such low costs. Often migrant labor face problem of lack of access to banking services. E.g. laborers working in one state might want to send back money to their home in another state. First the sum involved is small, so normal banks cant process it. Secondly these people do not have the official records as required by the banks in order to open a bank account. Eko’s business model is addressing such gaps.


The whole business model allows the banking service from major banks being administered to common people through business correspondents (BC) using the platform developed by Eko at low cost. Using low cost BCs banks avoid using their higher paid, costlier staff to deal with users on Eko’s platform. The Eko’s platform feeds all transaction directly into the computerized banking platform of major banks, where the automated system can process all transactions at negligible costs. Therefore Eko’s platform in essence replaces the bank’s high cost manual processes with its low cost processes.

In order to keep its cost low, Eko has tapped the neighborhood retailers, more widely known as ‘Kirana Stores’ in India as the business correspondents. These retailers are conveniently located in the communities where they sell a myriad of services/products to local people- from general groceries to cellphone recharges. These retailers also have information about the various residents of the communities to whom these people sell goods. Many of these retailers also sell goods at credit to the residents and therefore have quite an understanding of the ‘credit’ history of the residents. The lack of official records pertaining to the customer is often replaced by the insights that this retailer has about the customer. Therefore these retailers are ideal for doing the due diligence of the customer at a very low cost. These BCs collect the information of the customers and receive deposits and disburse money.

Eko has provided these retailers and customers a mobile based platform. Again the mobile based platform allows a low cost system to serve as the communication/interaction device between various players in the business model. Customers can transfer money across the accounts using their mobiles only. The retailers can receive deposits and acknowledge the payments through mobile also.

Together it is interesting to see how a business model built around the available infrastructure in the society to achieve goals of financial inclusion and entrepreneurship. Increasing aspirations of the Indians to avail financial services and the need for inclusive growth are two forces that are shaping many enterprises. TheReserve Bank of India is increasingly focusing on financial inclusion of the unbanked segment and it has passed several directives/recommendations to major banks in India to increase financial inclusion. The Eko model is also in part made viable due to such facilitations though more is required to be done.


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