Enhancing Outreach of Microfinance by Use of ICT in BC Model - Field Level Problems and Their Probable Solutions

Microfinance is about providing financial services to poor people. The extent of financial exclusion in India has been a matter of concern since long. RBI has allowed BC model for increasing outreach since 2006. The cost effectiveness of BC model largely depends on the use of Information and Communication Technology (ICT) in Banking. However, there are practical difficulties in accessing financial services through BC model. Some of these problems at customer, BC and Branch level and their remedial measures are discussed in this paper. The problems and probable solutions stated in the paper have largely emerged out of the field based experiences of the authors through their involvement in the training of rural Bankers engaged in delivery of financial services to the rural people.

The paper highlights the need for increasing the outreach of microfinance. Further, the relevance of BC model is highlighted for increasing the outreach. BC model uses ICT extensively for its operations. The paper presents the field level problems involved in financial intermediation faced by villagers and FBCs who are field level functionaries of BCs and Bank staff at the Branch level. The main problems relate to mistrust, inadequate technology support, financial non-viability and technology obsolescence of ICT. Some probable workable solutions to overcome these problems are given in the paper. Banks and BCs have to work more closely in terms of sharing MIS, databases, trust building, capacity building and updating of technology on regular interval to make BC model successful in enhancing outreach of microfinance services.