Banking Beyond Exceptions at Kamal Bazaar

Can a full-fledged commercial bank branch get the critical mass of business in an extremely remote and difficult geographic location? Is there any scope for banks to expand their outreach in remote locations where settlements are dispersed? Can a bank attract sufficient customers from the communities that have less or no awareness about banking services?These are questions generally asked by commercial banks who are thinking of opening their services to a financially unserved locality; where sometimes it takes locals more than a day to reach the nearest banking service. Taking into account the success of UKaid Sakchyam supported commercial bank branches established in most remote locations of the country, the answer is yes.

One such example is the Prabhu Bank Branch in Kamal Bazar, Achham, which was established with Sakchyam’s support a little more than six months ago. This branch shows how a commercial bank can operate successfully even in a rural setting where access to even the basic necessities is scarce.

The Location

Achham is one of the outmost hilly districts of Nepal. Mangalsen, the district headquarter, is connected with Dipayal, Doti and other key market locations of far west of Nepal, but only by a single lane, black topped road.  Many other municipalities and rural municipalities in the district are accessed only through fair weather roads and the mid-hill highway, still under construction, passes through various remote villages in the district. While, Kamal Bazar is only around 35 km from Mangalsen, it takes around 3 hours to reach by 4-wheel drive vehicles. Though this place is remote and far from major market locations in the region, it serves as the market place for over 4 municipalities/rural municipalities of Achham.

Taking into account all of these factors, Prabhu Bank knew that opening a branch in Kamal Bazar would mean high operational cost, long gestation period and other associated risks. But, after the Agriculture Development Bank branch was closed due to insurgency more than a decade ago, people of Kamal Bazar were deprived of any type of financial service. Thankfully, Prabhu Bank saw the opportunity in introducing an innovative hub and spoke strategy to the location. And after realizing their potential and determination to serve the unserved population, Sakchyam Challenge Fund supported the Bank to establish a branch in this location and 5 Branchless Banking Touchpoints (BLBs) in the market places that are connected with Kamal Bazar. Six months since its opening, the branch has clearly shown that it can bridge the gap created due to the absence of financial services around the locality. Now, the Bank is working towards making the Kamal Bazar branch commercially sustainable within 3 years, after Sakchyam funding has stopped, and demonstrate that it can continue to serve the beneficiaries in a sustainable way.

Most of the Prabhu Bank branch staff of Kamal Bazar were previously working in big cities. But now they are helping the unserved population with financial services and are making a difference to the lives of remote, rural communities every day. They visit remote villages to create awareness and to provide financial literacy as part and parcel of their regular job. The branch team is dedicated in their work and is committed to making the branch a success.

For the People

Shyam Lal Deuba, a local trader, needs to frequently pay his suppliers in Dhangadhi, Surkhet and Nepalgunj. Travelling to Dhangadhi from Kamal Bazar takes over 24 hours by using public transportation. Previously, he used to physically carry cash with him or used to risk sending bags full of cash with locals travelling to those locations. It always used to be a hassle and risk for Mr. Deuba to pay the suppliers. But now, he simply visits the Prabhu Bank branch in Kamal Bazar and deposits money into the supplier’s account. Many residents of the locality where Prabhu has now established its operation, used to walk more than six hours to go to Mangalsen to collect their remittances sent by their family members working abroad. Now, they are not only able to collect the remittance at their door steps, but are also able to deposit the funds in their recently opened bank account, giving them the opportunity to make more productive use of their remittance. The bank branch has a target to provide services to over 5,000 individuals and MSMEs in a year and has approached municipalities to route Government to People (G2P) payments of over 1,000 beneficiaries and banking services to over 40 schools, including payment of teacher salaries.

Introducing innovative approaches

During the insurgency, all the government records related to land ownership were destroyed. Even today those records have not been reinstated. Because of non-availability of records with government agencies, the banks are reluctant to accept land and buildings located in the district as collateral. That is why many MSMEs are not able to approach banks for credit facilities. But now Prabhu Bank, under another project with Sakchyam, is introducing the innovative Psychometric Testing based lending programme. With this project, the bank can assess the customer’s character and predicts customer’s credit score – based on the score the bank may relax the collateral requirement. Many MSMEs operating out of Kamal Bazar will also benefit from this new lending programme.

Reaching the Unreached

Like this Kamal Bazar branch, under the Sakchyam inspired approach, more than —- physical branches of commercial banks have been set up in rural locations, further deepening the use of technological advancements in nearby villages/towns. The customers from remote villages are connected to the main branch using technology based services such as BLBs, for their day to day operations with more major services such as credit facilities being referred to the branch, making financial services more a reality than a distant dream.

Text & Photos by Shasi Wagle, Sakchyam-Access to Finance Programme