Commissioner, General Administration, Government of Bihar
‘Moneylenders as the BCs would be the best choice’
Second panel discussion
FINANCIAL INCLUSION: WILL A GOOD MISSION MEET A GOOD MARKET.
There is need to internalise moneylenders in our financial inclusion model, Amitabh Verma, commissioner, general administration, said. “We should look at the employing this huge workforce of moneylenders as business correspondents,” he said. Elaborating further on it, he said the moneylenders, who are the much demonised people in our country, have the training and knowledge for the purpose. “They are the ones who know the nitty-gritty of the lending and borrowing mechanism,” he said. On the need to look at this alternative, he said, the formal institutionalised banking structure has not been able to deliver to the 65 percent of the population even after 65 years of independence. Hence the need to chart a different course. “Even the 35 percent of those who have been connected to the banking network, all that they can boast of, is having a bank account. So the question arises: are we correct in depending on the same formal structure? There is need, therefore, to look at the alternatives,” he said.
The introduction of the BCs as important component of the financial inclusion model was one of the alternatives; however, it has not worked as efficiently as it should have, he argued.
“It has been hijacked by the section 25 companies that have no understanding of the local needs and demands. To give you an example, suppose SBI advertises for BC positions in Bihar. A section 25 company sitting in Bangalore applies for it and wins the bid. It then selects a state coordinator, district coordinator, and then the BCs at the ground level. The BCs selected are the local guys who take up the job as a stopgap arrangement and move on once they get a better job. Also without any formal training the BCs have no idea who to lend how much to lend. There is no liaison between the local branch manager and the BC,” he said.
Arguing for banks taking control of the appointments of the BCs, he said if he were the branch manager, he would have employed the moneylender in his area as his BCs.
“I would have gone to the village and enquired who the local moneylender was and asked him if he would take up the role of a BC. I would give him a credit of two lakh and ask him to operate with this amount. I would then ask him to bring down the rate of interest from 100 percent to 60 percent. The next year I would increase his credit amount to five lakh and ask him to bring down the rate of interest to 40 or 35 percent. The third year I would again increase his credit limit to ten lakh and ask him further to reduce the rate of interest to 25 percent. And that’s the rate of interest that an MFI can operate with. This is one of the models we could have come up with,” he said.