Following from the previous blog, the third part explores the avenues available for banks and MFIs to operate as agent network managers in a way that is mutually beneficial.
In the blog “NBFC-MFIs As Business Correspondents – Who Benefits? Part-I” we highlighted the range of benefits for both NBFC-MFIs and banks in arrangements under which NBFC-MFIs operate as BCs for banks. In“NBFC-MFIs As Business Correspondents – Who Benefits? Part-II” we discussed the advantages and disadvantages of the model for NBFC-MFIs.
But of course, the devil is in the details. So what will it take to make this happen in a way that is mutually beneficial for both MFIs and banks?
Built on years of experience of supporting MFIs (including some mass market market-focused banks) to plan for and operate as agent network managers, here is MicroSave’s step-by-step guide:
There are four ways in which MFIs participate in a digital financial ecosystem. These include:
MicroSave will soon run its “Digital Financial Services for MFIs” workshop in India to assist interested institutions to set up DFS initiatives for NBFC-MFIs (if you are interested to pre-register please send a mail to Garimasingh@MicroSave.net). The workshop provides insights into the costs and benefits of digital financial service adoption in the context of microfinance and assesses the capability of individual MFIs to successfully rollout digital financial services. It will also provide useful information with regard to the opportunities and challenges of digital financial services for MFIs. |
Conduct analysis to assess demand and supply-side readiness
Conduct a baseline qualitative assessment to gauge the initial capabilities and ground situation of your MFI on key aspects that will have a direct bearing on the success of your efforts to effect the significant changes that participating in a digital financial ecosystem will entail:
Supply-side assessment of the local DFS market: to gain a quick understanding of the various DFS solutions available in the states where your MFI operates and which of the available ones can be the best fit; also assess the capacity of the existing available DFS agent networks in terms of liquidity management, spread and density of agents to serve your client base.
Conduct detailed strategic planning and financial modeling
Using the findings of the baseline assessment, the MFI should organize a workshop involving key personnel from each department and associated consultants. Representatives from potential DFS providers should also be invited to discuss possible terms of engagement – see MicroSave India Focus Note 80 Driving Viability for Banks and BCs. This workshop will aim to draw a detailed strategy for the pilot project and also to use the platform to communicate the idea to all the departments. The deliverables at the end of the workshop would be, but not limited to:
4. Operationalize agent network management
The cost and complexity of building and managing a sustainable cash-in/cash-out (CICO) agent network across a broad geography is consistently under-estimated by providers across the globe. MFIs will experience additional challenges not least of all because their processes are credit-focused and banks are likely to outline (but not detail) a series of process that their risk management/statutory compliance departments will require. In addition, MFIs may struggle to assess the risks involved in both the delivery of a wider range of products and in the use of digital channels to do so.
MicroSave’s Agent Network Accelerator project works with agent network managers in eight leading markets across the world to understand address many of these challenges.
Key decisions required from MFIs acting as BCs will include:
To get a really good handle on this, ideally MFIs should send participants to attend The Helix Institute of Digital Finance’s Core Agent Network Accelerator training workshop. This course is invariably hugely over-subscribed so if you want to pre-register, please contact Annabel@MicroSave.net. |
How you will manage customer service and satisfaction – MicroSave Briefing Notes #129 & 130 Customer Support for E/M-Banking Users and Customer Service Through Call Centres .
Plan, implement, monitor and evaluate a pilot-test
This phase will be focussed on establishing all the back-end systems and HR resources necessary for the rollout of the pilot phase. The key tasks during this phase will be the following:
Method and payment mode of commission/ revenue,
Service quality of software/ hardware platforms (service level agreement), and back-end support structure.
A detailed project implementation plan describing timelines and corresponding deliverables, etc. will be drafted jointly with the selected DFS/bank entity to ensure timely execution of the project activities. In addition, unless it is able to piggy-back on existing “pay bill” functions of providers, the MFI may need a separate USSD code. This will require careful negotiation with the MNOs.
If all this looks complex, it is. Moving to a digitally enable system will require detailed planning and painstakingly detailed execution, including a significant change management process.
But help is at hand, MicroSave has years of experience of work on exactly these issues with banks and MFIs across Asia, Africa, and Latin America – including in India itself where we have worked with or are working with the four largest mobile network operators; banks including HDFC, Axis ICICI, State Bank of India, Punjab National Bank and Bank of India; agent network managers including Eko, FINO, SAVE, Oxigen and many others; and MFIs including KGFS, Cashpor, Grameen Koota and Arohan.
Click here for more information on our DFS Capability Statement and Agent Network Management for MFIsbrochure or contact us on info@MicroSave.net.
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