SFBs - Creating Culture Congruence in banking
On the midnight of 15th August 1947 - when India had her tryst with destiny, the economy was in shambles. India was then a predominantly agricultural economy, an infant taking baby steps in a rapidly changing world. Yet there was no shortage of dreams to soar high! 12 Five Year Plans and a few Annual Plans - focused on developing various sectors - have ensured that a once underdeveloped economy is now considered an emerging global economic superpower. While the economy has grown in leaps and bounds, the gap between the urban and rural economy has only widened. India and Bharat have been running as parallel worlds, one the rocket fuel that has propelled rapid growth, while the other is the foundation that is still largely under-served. The 12th Five Year Plan aimed at providing banking access to 90% of households. Subsequently, the NITI Aayog strategy for 2017-24 outlines last mile connectivity and financial inclusion among its primary targets. It was with this aspiration that the Reserve Bank of India granted licenses to start Small Finance Banks in 2015.
Small Finance Banks are treading the path of bringing India and Bharat together on one platform and they need to tread very carefully. The cultural difference is fairly stark out there. The worldview of a Relationship Officer in the Micro Loans team at Hubli is in stark contrast to that of one who is operating from the swanky Basavanagudi branch of the Bank – different in their business model, target customer segment, approach to selling, product & service offerings, look and feel and yet unified in their objective – delivery of superior customer service to their clients thereby creating repeat purchase behaviour. All part of the same jigsaw? Indeed!
A major share of the Indian population is largely under-served due to infrastructural challenges. But one man’s challenge is another’s opportunity. Small Finance Banks are unique institutions, in that the business model enables them to effectively serve the opposite ends of the spectrum. An HNI customer entering the Koramangala branch is as crucial to the bank as a customer the Relationship Officer visits in faraway Khandwa in Madhya Pradesh. Savings Bank, Fixed Deposits, Micro Loans, Loans against Gold / Property, they have it all. Take for example Fincare Small Finance Bank, which offers one of the highest FD interest rates of up to 9.5% per annum. The high interest rate attracts deposits from the urban customers which can be used to fund loans to more remote locations. This is truly a case of India working to bring Bharat at par.
This endeavour isn’t without its share of challenges. While the quintessential urban business thrives on value, the rural business feeds on volume. Every drop counts in this vast ocean! The trick is to effectively reach out to this scattered market, connect with the base of the pyramid as well as with the top of the pyramid, and get the best out of the infrastructure at hand. Today’s technology has made this task infinitely easier thanks to the ability to reach out to the remotest locations digitally as well as physically. Technology is continuously evolving, and so are the people. Yesterday’s MFI employee is today’s banker. The challenge is to seamlessly assimilate the vintage employees into the banking fold, to ensure they feel part of the transformation and are valued along with the newly hired bankers.
A ‘Rurban’ approach is what’s absolutely essential in today’s market. A bank which services both the rural and urban demographics needs to be powered by employees who are both rural and urban. An interesting approach is to ensure an employee knows the opposite ends of the banking spectrum.
Most institutions, especially in financial services space started their journey with an urban business sitting right at the top of the population pyramid and then as the market started to get saturated, they migrated to the next level and then the next and so on. A few businesses which started at the base of the pyramid, have leveraged existing infrastructure, deep distribution capability and new age technology, proving that there is indeed, fortune at the base of the pyramid.