Of all there is said and written about the rural opportunity in India, one thing that continues to plague the rural ecosystem is lack of an efficient financial services model. Despite all the advance, agriculture is and will remain a key component of the rural community but farmers continue to be bogged down by lack of an adequate and efficient financial services system especially when it comes to loans.
The impact that lack of capital and the inability for farmers to pay that in time is not new and even after decades, there is a nexus of the in-house bankers in the form of “jamindars" (landlords) who play on the lack of knowledge of farmers.
Banks have managed to replace the landlords when it comes to lending money but it is out there that they haven’t been really successful given the peculiarities in ability of farmers to pay their loans. For e.g. lack of rains or a natural calamity makes it impossible for farmers to pay the loans in time and their plight becomes worse.
In a bid to revive the credit situation when it comes to farmers, NABARD is piloting a new Mobile based Kisan Credit Card (M-KCC),
NABARD has funded Rs 44.66 lakh to regional rural bank Pallavan Grama Bank, which is conducting a pilot study to launch mobile-enabled Kisan credit cards for farmers in Villupuram district, with a view to reduce transaction costs and improve efficiency
The pilot aims to reinvent the wheel and take a fresh look at Kisan Credit Card which have been launched in the past without much success. Pallavan Grama Bank is the one to start the pilot and as many as 400 cards have been disbursed already. The improved element here which I think the authorities are betting on is the mobile enablement of these credit cards which is not surprising given the improving mobile penetration in rural India
The concept as such has its merits and could prove beneficial if its take off at a larger scale. For one, farmers would be able to conduct all their transactions right from their mobile phone saving them trips to the bank.
Additionally, this could help the banks reduce the physical staff thereby saving some costs and passing that to the farmers in the form of more subsidization (A long strech but feasible).
However, the most important benefit of mobile Kisan Credit Card could be in the form of financial inclusion. If the mobile interfaces are intuitive and user-friendly and farmers can get their way around it, there is a possibility that more and more farmers will adopt the same. This can prove instrumental in well documented records of monetary transactions the farmers make over a period of time.
Not only will this bring more transparency there is a possibility of mining that data to develop a recommendation engine. The recommendation engine could draw from the transactional data and help farmers understand better ways of capital expenditure and utilization.
I personally think that any rural targeted banking product needs to have a educational/ awareness component linked to it to ensure that farmers can be enabled beyond just capital disbursement.
What are your thoughts on Mobile based Kisan Credit Cards? Do you think they can be successful this time around?