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Financial Modelling for Business Sustainability: A Study of Business Correspondent Model of Financial Inclusion in India

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  • Shigufta Hena Uzma
  • Suvendu Kr. Pratihari

Abstract

Executive Summary The study highlights the need for measures to accelerate the pace of the business correspondent (BC) model for financial inclusion in India. The financial analysis of the existing BCs with the existing products and services in practice shows a very diffusive break-even (more than 7 years). The occurrence of such a long-term break-even point can be a potential threat to the sustainability of new and struggling entrepreneurs like a Customer Service Point (CSP). A CSP agent runs a kiosk of a certain bank in a rural context, functioning like a BC between the bank and the beneficiaries. The primary investigation found that high cost and low volume of transaction at the CSP points are two major causes of the long break-even. In this context, the study revisited the constructs related to cost structure, market outreach, market potential and commission structure for channellizing respective banking and non-banking products. The major categories of products include (a) banking operation, (b) loan and over-draft, and (c) social security schemes. In search of a solution, the study adopts a non-random stratified sampling technique with a semi-structured interview process to collect the data from different stakeholders in the BC operation. To develop an economically viable BC model, the researchers use a standard financial modelling technique. In contrast to the existing kiosk model of CSP operation, the study found that while applying the new model a CSP agent takes three years to break-even under the same condition as that of the existing model. The study can also be applied in the domain of bottom of the pyramid (BOP) marketing by treating to create value among the low-income customers and business partners like CSPs. This research can further be extended to investigate the viability of the BC model from the banks’ return on investment perspective.

Suggested Citation

  • Shigufta Hena Uzma & Suvendu Kr. Pratihari, 2019. "Financial Modelling for Business Sustainability: A Study of Business Correspondent Model of Financial Inclusion in India," Vikalpa: The Journal for Decision Makers, , vol. 44(4), pages 211-231, December.
    • Handle: RePEc:sae:vikjou:v:44:y:2019:i:4:p:211-231
    DOI: 10.1177/0256090919898909
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    References listed on IDEAS

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    1. Kanika Goel & Wasana Bandara & Guy Gable, 2023. "Banking the Unbanked: Conceptualizing Success of the Business Correspondent Model," Information Systems Frontiers, Springer, vol. 25(5), pages 1953-1984, October.
    2. Pinto, Alreena Renita & Arora, Amit, 2021. "Digital Doorstep Banking: Female Banking Agents Lead Digital Financial Inclusion Through the Pandemic and Beyond," ADBI Working Papers 1285, Asian Development Bank Institute.
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    4. Gupta, Sanal & Singh, Puran, 2023. "What drives activity of banking agents? Evidence from Rural India," World Development Perspectives, Elsevier, vol. 31(C).

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