Posted on April 22, 2014

Posted by: Meenu Mynam, Analyst, Channels & Linkages

sub-k photo 2The Sub-K Branchless Banking Network project was launched in India in 2012 to demonstrate a successful business case for the business correspondent model of financial inclusion in India. Sub-K is an agent network company with a mobile banking platform designed to provide financial services to India’s low-income rural households.  The project, funded by the Bill and Melinda Gates Foundation, has strengthened and expanded Sub-K’s agent network and created a highly scalable and secure transaction platform.  Sub-K is now poised to become one of the primary providers of digital payments in rural areas.  As of today, Sub-K has around 350,000 customers with close to 2,100 agents in 24 states.

Sub-K’s performance contrasts with that of most other business correspondent companies in India. In the business correspondent model, banks use the services of nonbank organisations (microfinance institutions, NGOs, civil society organisations, and for profit entities) as intermediaries that provide financial services in underserved areas, especially rural areas or urban slums, in exchange for a fee.  The model was created to address the lack of formal financial services for India’s rural and urban low income households, since only 35% of the adult population in India has been mainstreamed into the financial ecosystem, according to the World Bank’s Global Findex survey.

The business correspondent model has not reached its full potential due to problems ranging from regulatory hurdles to lack of customer awareness. Dormancy of accounts is a major challenge faced by all business correspondent companies – accounts are opened but rarely if ever used, primarily due to low customer awareness of the available services. Marketing is needed to reduce this problem, but the banks, to which the customers belong, are not willing to pay their share of the marketing costs.

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Enclude is helping Sub-K improve customer awareness by developing customised marketing programmes that are rolled out as soon as an agent is appointed in a village and on a continuing basis for several months thereafter.  A series of training modules ensures that agents are able to source customers in the village, instruct them on how to use the banking platform, and cross-sell other banking and non- banking products they offer. An earlier marketing campaign supported by Enclude involved town criers, customer incentive activities and role playing to educate customers about the advantages of using the Sub-K platform for their day-to-day financial transactions. These agent engagement and customer awareness-raising efforts helped Sub-K achieve an account activity rate close to 50%, far higher than the industry average.

Over the course of this engagement, Enclude’s technical assistance has helped to generate the following results for Sub-K:

  • Strengthened and expanded its agent network, more than doubling the number of agents
  • Improved service quality and efficiency
  • Added bank partners
  • Contributed to launching a new remittance service in response to customer demand

While sustainability remains a challenge for business correspondent companies in India, Sub-K is charting one potential path to success through operational excellence, quality service delivery and proactive engagement with customers and agents.

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