Paper

Business Correspondent Model: A Preliminary Exploration

Improving financial inclusion through the business correspondent model
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This paper analyzes the effectiveness of the Business Correspondent (BC) model in India in promoting financial inclusion.

Banks can partner with third party agents to provide financial services on their behalf under the BC model. Various banks have promoted it, but only a few of them have scaled up beyond the pilot stage. The research team conducted field visits to four BC pilot sites and met with practitioners, bankers, clients and other stakehold¬ers to examine how these pilots work in the field and assess if they contribute to the BC model's financial inclusion objectives. Findings indicate that:

  • Current regulatory regime does not allow the BC model to become financially viable;
  • For business correspondents, the commission structure is not adequate to cover costs;
  • Clients of the BC model include the financially included, such as shopkeepers, as well as previously excluded individuals.

The study recommends that for-profit organizations be allowed to provide the BC model in order to make the model viable and popular. Finally, regulators also need to assess whether they have created an enabling or disabling environment for the BC model.

About this Publication

By Rath, B., Ramji, M. & Kobishyn, A.
Published