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2013 India: National Survey of Branchless Banking Agents

Authors: Gregory Chen, N. Srinivasan & Aimthy Thoumoung

16 December 2013

2Photo credit: Sudipto Das

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0%

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45%Daily Transaction Frequency

3Transactions Per Day

2012

2013

Main Findings: leading indicators show stagnation

% Of Customer Service Points

(Agents)

Agents in other countries are more active with higher median transactions per day:

Kenya: 62 *Tanzania: 35 *Uganda: 34 *India:

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* MicroSave

No increase 2012 to 2013

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Main Findings: few signs of progress by 2013

Customer service points are more experienced: after 8 years of Business Correspondent guidelines, most CSPs active for >24 months

Some positive outliers, but in aggregate signs point to stagnation from 2012 to 2013

• Low level of client use• Low level of CSP compensation

Strong evidence of viability problems in bank-led BC deployments: • Push into rural areas• Geographical targets met, but banking activity low

Little evidence that the present trajectory will contribute much to financial inclusion or financial sector development, despite increasing years of experience

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2013 Survey BackgroundPhoto credit: IMRB

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2013 Survey: Background

In 2006 India’s central bank (Reserve Bank of India) permitted banks to use Business Correspondents (BCs) to organize networks of customer service points (CSPs) – also commonly known as banking agents.

National surveys of CSPs have been undertaken jointly by CGAP and the College of Agricultural Banking (an affiliate of the Reserve Bank of India) in March/April of 2012 and again in September/October 2013. MicroSave provided critical input as a partner.

This powerpoint provides highlights of the survey results from 2013. The earlier results from 2012 can be viewed at:http://www.slideshare.net/CGAP/a-survey-on-bc-csps-in-india-2012

The College of Agricultural Banking expects to complete a comprehensive report on the 2013 survey data in the coming months.

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2006 2007 2008 2009 2010 2011 2012 2013 -

50,000

100,000

150,000

200,000

250,000

2013 Survey: BackgroundBC guidelines in place for 8 years, 2 national surveys 15 months apart

BC* Guidelines in Place

Number of RBI reported BC* Customer Service Points is increasing

*Business Correspondent (BC): regulatory category created by Reserve Bank of India which allows organizations to partner with banks to set up one or more customer services points (bank agents)

2012Survey

2013Survey

15 month interval

Number Of

CSPs

2013 Survey: Sample Selection

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All 5 regions: North, South, East, West & Northeast of India

Prioritized 15 states for nationally representative coverage

Drawn from bank lists of CSPs reported as active as of 31 December 2012

Survey Details13 September - 6 November 2013Business hours, weekdays & weekendsLocal languagesIMRB http://www.imrbint.com/ survey firm

Tried to contact 2,358 CSPs 1,104 unable to survey:

983 not reachable: wrong phone #, no response

87 unwilling: stopped CSP work or unhappy with CSP work

1,254 surveyed are the sample

NotAvailable

Available

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2013 Survey: Sample Selection

CSP Sample

Reached & surveyed 1,254

That work for: 7 Public Sector Banks 5 Regional Rural Banks 3 Private Banks 12 BC Companies*

Note: added 219 customer interviews to double check CSP responses

220 158

30

15

117

108

64

117

68

75

75

* 592 of the CSPs surveyed were individuals contracted directly by banks and not through BC companies.

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67

2

95

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Agent CharacteristicsPhoto credit: IMRB

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Technology used and CSP demographics held steady

Demographic Profile

2012 2013

Male 85% 87%

25-35 47% 46%

12th Pass or Graduate 66% 76%

POS+Card Personal Computer Mobile Phone None0%

10%

20%

30%

40%

50%

60%53%

26%

18%

3%

57%

22%18%

3%

CSP Technology

2012

2013% CSPs

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Rising proportion of corporate and individually contracted CSPs; offset by a decrease in specialized BC CSPs

Specialized BCs Large Corporate BCs Individual BCs0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

78%

5%

17%

38%

20%

42%

CSP Categories2012

2013

% CSPs

Specialized = BC companies whose primary business is managing CSPsLarge Corporates = BC companies who have other business, but who also manage CSPsIndividual = individual CSPs that are contracted directly by banks

2012 Survey 2013 Survey0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

70%

53%

30%

47%

Larger proportion of moving point

2012 Survey 2013 Survey0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

69%60%

18%

16%

13%24%

Still predominantly rural

Fixed Point

Moving Point

FI Village*

Non FI Village*

Urban

Location of CSPs

% CSPs

* An FI (financial inclusion) village is location identified with less than 2,000 inhabitants targeted under a national financial inclusion plan established in 2010. Banks set geographic coverage targets against this plan.

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<3 4-6 6-12 12-24 24-36 36-48 48-60 >600%

5%

10%

15%

20%

25%

30%

35%

40%

6%

20%

36%

31%

5%

1% 1% 1%2%

6%

13%

26%

33%

17%

3%1%

The typical CSP has many more months of experience today

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2012

2013

CSPs gaining more experience, even as some drop out

% CSPs

Between surveys 25-34% formally ceased their CSP operations

(dropped out)

Months as CSP

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Value to CustomersPhoto credit: Quicksand

Reliability problematic in 2012, worse by 2013

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CSP readiness to transact

16% (198/1254) never transacted, increased from 5% in 2012.

48% (602/1254) technical capability that allows clients to transact at other CSPs, down from 65% in 2012

11% (134/1254) unprepared to transact at moment of survey, improved from 25% in 2012

Tried to contact 2,358

1,104 not possible

to survey

1,254 surveyed

CSP availability

198 no transactions yet

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Accounts open quickly; but speed of account activation slower than in 2012

% of CSPs

1 2 4 7 15 30 45 60 >600%

5%

10%

15%

20%

25%

30%

35%

40% DAYS: Account activation time

% of CSPs

1-5 5-10 10-15 15-20 20-25 25-30 30-60 60-90 >900%

5%

10%

15%

20%

25%

30%

35%

40% MINUTES: Account opening time

Median remained at 10 minutes

Median increased from 4 to 9 days

2012

2013

Note: often in other countries account activation can be a few minutes or within 24 hours

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CSPs continue to provide primarily savings and payments

G2P P2P Savings Insurance Credit0%

20%

40%

60%

80%

100%

120%

31%

50%

97%

23%

12%

30%

52%

88%

11%

17%

Product Offering

% of

CSPs

2012

2013

Insurance offerings decreased while credit

offering rose

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CSP MotivationPhoto credit: IMRB

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CSP earnings remain low – near minimum wage; No change from 2012 to 2013

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0%

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14% No increase in CSP income from 2012 to 2013

% CSPs

2012

2013

Median stayed the same in 2012 and 2013 at 2,700₹

180 CSPs surveyed in 2012 show little change in income in 2013

Urban CSPs median 5,441 three times rural 1,968₹ ₹

Income per month from CSP work ( 000s)₹

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30%

23%

7%5%

3%7%

Sole Income (53%)

Other Income (47%)

3%

16%

5%

AgricultureKiranaShop

SalariedSelf

EmployedOther

Fixed Point(52%)

Moving Point(48%)

1% 0%

0%

+12%

-10%

+1%

+4%

+3%

-5% -2%

+4%

-8%

-2%+4%0%

Majority continue to rely on CSP work as sole income; Increase in Kirana Shop CSPs

Denotes change from 2012 survey

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Monitoring of CSPs by BC/Banks improves, but other measures of support worsen

2012 2013

Visited by Bank/BC in prior month

82% Improved 89%

Visited by BC/Bank in prior week 60% Improved 72%

Those paid on time 50% About the same 48%

Received training 90% Worsened 85%

Positively viewed Bank’s/BC Support

64% Worsened 58%

Attrition rate 25-34% annually

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860 Surveyed in 2012

267 no longer agents

Tried to contact again in 2013 (15 months later)

500 remain agents 93 unreachable

Attrition rate (minimum): 267/860 = 31% (annualized to 25%)Attrition rate (maximum): (267+93)/860 = 42% (annualized to 34%)

Note: the rate used measures formal cessation of service by CSPs, but does not include dormancy of CSPs in either 2012 or for 2013.

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CSPs are motivated by qualitative aspects of CSP work, but low pay will continue to push CSPs out

Reason for continuing CSP work:

53% "Enhanced reputation / goodwill in the community“ OR "Personal choice” (decreased from 59% in 2012)

47% “Revenue / income generated” (increased from 41% in 2012)

Satisfaction from CSP work:

82% Satisfied or Very Satisfied with "Enhanced reputation / goodwill in the community“ (same as 2012)

Only 24% stated they were Satisfied or Very Satisfied with respect to “Revenue / income generated” (decreased from 32% in 2012)

Attrition likely to continue as income expectations are not being met, despite positive perception of enhanced reputation and goodwill. High number of rural CSPs testing CSP work as a long term livelihood opportunity and the willingness to remain may dwindle, especially since CSP compensation is close to minimum wage levels.

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Learning from CSP variations

Photo credit: IMRB

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CSPs delivering G2P perform better on a number of indicators

Only 23% of CSPs offer G2P services:

Most CSPs established to meet financial inclusion geographical targets and majority are still not linked to G2P delivery

G2P CSPs Non-G2P CSPs

Median Transactions per Day 15 8

Monthly Earnings – Rural ( )₹ 2,497 1,865

Readiness to transact 95% 88%

Local Language Forms 50% 38%

92% of G2P CSPs work in rural areas; despite greater challenges in rural areas G2P delivery has a number of positive correlations:

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CSPs at fixed locations who earn other income, are substantially different than other CSPs

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Daily transactions (8) are lower than other CSPs (10)

However, • Earn more than double the monthly income• Hold 2-4 times the amount of cash/float liquidity

Variation by income from CSP activities

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Variable

2013 Survey Data

ObservationCSPs Above

Median Income

CSPs Below Median Income

Rural vs. Urban 37% vs. 57% 63% vs. 43% Lower income for rural

Median Cash In Hand ₹ 19,122 5,972

CSPs who make more money also hold more floatMedian Settlement

Account Balance ₹ 23,889 9,827

Proportion offering Credit services 20% 14% CSPs who earn more are more likely

to offer credit

Variation by income from CSP activities

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Variable

2013 Survey Data

ObservationCSPs Above Median Income

CSPs Below Median Income

Type of CSPFixed Point 57% 43% Fixed Point CSPs correlated with

higher incomeMoving Point 25% 75%

Technology Category

POS + Cards 33% 67%Mobile Phones associated with higher income

Mobile Phones 60% 40%

PC 47% 53%

Top 3 States for Rural CSPs

Karnataka 89% 11%

Significant variation in earnings by state

Tripura from North East in the Top 3; remote region not necessarily a barrier to higher income

Orissa 79% 21%

Tripura 73% 27%

Bottom 2 States for Rural CSPs

Uttar Pradesh 12% 78%

Tamil Nadu 20% 80%

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