New money centres to bridge banking divide

March 2008 will see a unique remittance infrastructure rolling out in about 1,000 villages in Tamil Nadu and in fewer numbers in Andhra Pradesh, Orissa and Nagaland. The move promises to unzip the barrier between the rural and urban, the banked and the unbanked.

These would be green, carbon neutral money centres lighted by solar power, equipped with a biometric ATM, manned by two trained officials and powered with network connectivity through VSAT. The plan is to include one billion people with no bank accounts in the banking network.

These are the Zipp money centres which are being introduced for the first time in the country by the Commonwealth Business Council (CBC), a forum formed in 1997 and which has inclusive banking interventions as one of its key projects.

The money centres have already brought banking to the doorstep in many villages and far-flung areas in one district in Uganda where CBC started the project.

Opening at the rate of 15 new centres a month, Zipp runs the centres too. But in India, Zipp is looking at a franchise model considering the breadth of terrain.

The CBC projects head, Vijay Kumar, who was here to attend a seminar organised by London School of Economics on the rural-urban divide, said that the money centres would provide the last-mile infrastructure which has so far eluded Indian banks strapped of funds and manpower.

The low-cost money centres, which will cut international remittance costs by 75 per cent, plan to make remittance within India free of cost.

These centres are packaged in such a fashion that a franchisee will be able to make a decent earning from multiple activities like payment of bills, loan instalments and other payment mechanism.

It comes dovetailed with customer services to many existing Zipp clients, including various banks, phone companies, and to which a franchise can add on more customers.

The centres can be run by either an individual or a company. Vijay Kumar said, "We would prefer public-spirited individuals but since the territory is yet untested in India we are giving out our first centres to some big companies."

Three top companies have already lapped up contracts for setting up and running the centres in three states, Kumar added.

State Bank of India and ICICI Bank have agreed to buy the services of these centres. Vodafone is a partner in the CBC and so is a natural customer. Foreign banks and any other bank that want account holders to access accounts sitting in some remote village in Kalahandi and withdraw money sent by some migrant relative can buy their services. All that the villager will need is a Zipp card and, of course, a bank account.

Zipp is already talking to the Reserve Bank of India on simplifying the 'Know Your Customer' norms for people earning less than Rs 100 a day. Banks are working on it. And once that hurdle goes, Zipp would provide the missing remittance infrastructure.

The cost of setting up a money centre or acquiring one from Zipp is Rs 25 lakh and will earn for the franchisee Rs 80,000 a month.

Of the capital investment, the franchisee has to put in 25 per cent. If the franchisee is unemployed and has no way to raise that money, ZIPP provides a loan which can be returned in instalments. ZIPP also gives training to run the centre. It also provides him two trained workers who are paid by Zipp.

Next on the priority list of Zipp is Kerala where most of its earnings come from migrant payments. It works like the VISA or Master card interchange facilities.

"We are the low-cost VISA for the working class, filling the gap left by traditional banking," says Vijay Kumar. And the main objective is inclusive banking. It is talking to the Government of India to make banks accessible to the masses.

Should a person earning Rs 40 a day be considered a terrorist threat? Asks Vijay Kumar. The poor are confronted with barriers like proof of residence and birth certificates which Zipp feels should be overlooked for people earning so little.

The 'Know Your Customer' norm should not end up in keeping the poor out. He says the banks in India agree to this and soon a solution would be found. And then Zipp would actually become the last-mile infrastructure for every bank in the country.

Zipp is also looking at another country Nepal where money centres would soon coming up in the remote mountain hamlets where migrant earnings keep hearths burning.