Banking Beyond Brick & Mortar Branches: How BLB is Helping MBL Expand its ServicesNovember 26, 2019
“One of the major impacts of the inclusion of Branchless Banking (BLB) in Machhapuchchhre Bank (MBL) is that our presence has been extended to even hard-to-reach areas of the country. People in remote areas with no bank branches are getting banking services through BLB touchpoints,” said Mukunda Bhattarai, the BLB in-charge at MBL. In the last two years, BLB has added more than 16,000 new customers to the bank’s customer base.
Sakchyam’s BLB Intervention
The bank’s foray into BLB began in December 2016 through its partnership with UKaid Sakchyam Access to Finance Programme. The partnership titled ‘Simplified Microcredit Service’ was launched to establish 20 BLB touchpoints across 7 different districts – Banke, Dang, Kailali, Kanchanpur, Rupandehi and Surkhet.
Banks are often reluctant to establish brick and mortar branches in far-flung areas of the country. They consider these high-risk markets and argue that branches at such locations would not be feasible or self-sustainable due to minimum population density and minimum economic activities that are needed for a bank branch to sustain on its own. Thus, people in such areas usually travel long distances to avail even basic financial services from the branches established in nearby towns/cities.
Sakchyam has been helping banks and financial institutions expand the reach of their services to un/underserved population in the programme’s priority districts through alternative delivery channels such as BLB touchpoints. The presence of BLB touchpoints in shops and other establishments within their locality means people have better access to financial services. In some areas, these BLBs are the only places that provide formal financial services to the local population.
Sakchyam’s BLB Partnership with MBL
Sakchyam has partnered with 14 commercial banks to establish 302 BLB points which are currently providing services in the several remote areas of the programme’s priority districts. The partnership with MBL, which was one of the later ones, had the advantage of Sakchyam’s experience and learning gained during the implementation of previous partnerships.
The initial BLB touchpoints launched with other banks were equipped with Point of Service (POS) devices for their operation and these touchpoints faced certain limitations. The touchpoints created with MBL used tablets as the operating device; tablets have more functions and are easier to operate.
Along with financial support, Sakchyam also provided technical support to the bank in the entire process of incorporating the BLB system. Sakchyam assisted MBL in developing a comprehensive manual with guidelines on various aspects of BLB operations including agent management and liquidity management.
Financial Literacy is another major component of Sakchyam’s support in the project. The bank has been using financial literacy initiatives to strengthen and expand its BLB network’s reach. Bhattarai elaborated, “We choose areas near our BLB touchpoints, often recommended by the agents, to conduct Financial Literacy activities. Such events help agents to build a relationship with our clients in the area and the agents also feel like a part of the bank.”
What sets this project apart from other BLB projects is the way MBL understood the importance and usefulness of this banking modality, especially in a country like Nepal with challenging geographic conditions and worked towards strengthening it. “BLB helped us reach people in remote areas who had never opened a bank account. It supported in developing a banking culture among such unserved population,” said Bhattarai. Not only have many people been able to open their first-ever bank account, but business/financial transactions are also being carried out through formal financial channels thanks to BLBs touchpoints. “We are getting business from new places, they might not be substantial but are gradually adding to our loan portfolio and increasing the number of account holders,” Bhattarai added.
The bank has expanded its BLB network to Eastern Nepal as well and even in the Sakchyam priority districts, the number of MBL BLBs is growing. In total, there are more than 130 BLB touchpoints of MBL.
From the initial days, the bank has been focusing on making the BLB process efficient and convenient for the customers. At a BLB point, the transactions are enabled through a dual verification process involving fingerprint and debit card. These facilities make banking convenient for people who are less educated and of old age – the two categories that comprise most of the population in these areas.
The use of tablets at the BLB touchpoints also made the opening of bank accounts efficient and convenient. An agent can use the tablet for the account opening process; scanning the necessary documents and clicking a photo of the client and sharing these instantly with the bank. Delay in the opening of accounts meant the clients had to wait to avail other services such as cash withdrawal. MBL’s BLB touchpoints were the first ones to provide real-time account opening facility and the bank even issued instant debit cards to the clients who opened accounts through BLBs.
The bank looked at BLB as a new revenue-generating opportunity and explored its potential. While most banks looked at BLB points as just deposit centres, MBL went with a plan to make BLB touchpoints profitable service centres by providing a variety of additional services such as loans and remittance. In addition to real-time account opening, MBL has already started providing real-time remittance payout through 72 BLB touchpoints. The remittance service is available in all BLB touchpoints.
The agent model followed in BLB banking has its own set of challenges. “BLB touchpoints are run by a third party agent and not the bank’s employees. This has been and will continue to be a challenge for us. We are dependent on them for the business; while we can teach them the process and banking norms, their proactive behaviour and willingness is not in our hands.” Bhattarai said.
For a BLB point to be sustainable, the agent needs to have a steady source of income. While selecting an agent, the bank makes sure the person has a business that keeps him stationary at a location or at least within a certain proximity. Hence, remittance offices, general stores and hotels are on top of the priority list for the bank’s BLB agents. Other parameters for agent selection are the individual’s financial condition, literacy level and social standing in the area. The selection of the agents was also done more systematically by MBL. Staff from the core BLB team at the head office went to the location to select the agents.
Relationship Building Exercise
The emphasis is equally on maintaining a strong relationship with the agents. This starts at the induction phase and the agents are given training on various stages. The first training is conducted before the launch of the BLB points, the agents go through specific training related to the tablet use and different banking processes about the services available through the touchpoints. In addition, the bank regularly organizes refresher training sessions at the regional level.
The bank offers the agents a remuneration package consisting of elements of both fixed monthly salaries and variable performance-based incentives. The bank organizes regional level meetings where the top-performing BLB agents are awarded. “Just like the way a bank’s service quality is a major determining factor for a client, the same applies to a BLB agent. An individual will look at the incentives and other facilities we are providing to them as our BLB agent,” said Bhattarai adding, “It matters when you are looking for long-term partnerships”.
Technical Support to the Agents
MBL had established a dedicated BLB Unit in the bank right at the start of the project. This helped greatly in focusing on BLB related development and deployment activities. The bank also has a dedicated BLB support team at the head office in Kathmandu. The team is regularly in touch with the BLB agents to troubleshoot problems and monitor their activities.
Successful BLB Agent Indicator
From the business perspective, an agent’s performance is evaluated through the number of new client s/he brings in, deposit amounts, loan referrals and remittance payouts from the touchpoint. Every branch of the bank is responsible for the touchpoints located nearby, the branch takes stock of the quality of the BLB points’ service to the clients.
“We usually have 5-6 touchpoints around a branch and all the accounts opened through those points are referred to the branch. The task of monitoring the touchpoints and loan solicitation is also done by the branch. If there is less burden for the branch and if the BLB points can take care of the customers the branch can’t reach to/cater to then such BLB points are successful agents for us. They are ensuring our reach goes beyond the branch.” expressed Amod Shrestha, Head, Deprived Sector Lending (DSL) Department.
In the first project with MBL, Sakchyam conceptualized a model of lending involving the bank, cooperatives and Heifer International. Under the model, Heifer International identifies ‘viable cooperatives’, which in turn screen out and recommend suitable and interested farmers to MBL. The bank provides loans to the recommended farmers without any additional collateral requirement.
In 2017, the model was pilot-tested in Dang district with four cooperatives and their member farmers. After enthusiastic uptake of the service with 100% repayment record, Sakchyam, MBL and Heifer International commenced the second project to replicate and scale up the model across the country to benefit thousands of farmers.
This project has incorporated BLB to facilitate the loan process of the farmers. The bank provides BLB agency to the member cooperatives to enable them to provide the disbursement and repayment of loan services to their members, besides other banking services. Having BLB points in the nearby cooperatives has also saved the borrowers the time and cost involved in travelling long distances to the bank’s branches in town areas.
Under the project, MBL plans to launch a total of 50 such BLB points at various member cooperatives, out of which 16 have already been launched. This is a good example of how the bank has managed to not only rapidly expand its BLB network but also expand its use-cases in innovative ways.
In the last year, the bank had expanded its BLB points. While the bank’s target is to open a total of 170 BLB touchpoints, from this year on their focus is more on strengthening the operation of the existing touchpoints.
Bhattarai further explained, “In the last two years we have acquired a good understanding of this banking model. We know what kind of issues arise and we want to work towards addressing those so that establishing and operating a BLB touchpoint becomes easier for the bank. We will make the process more systematic.”
Text by Krita Raut (with inputs from Samin Singh and Priya Tamang)