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Yes bank - say to inclusive and social banking and inclusive business model
CSR / CSR Asia
Despite of the efforts made by banks in India to reach out to rural areas in recent years, India remains a highly unbanked country, with more than half of the population financially excluded. In 2004, Mr. Rana Kapoor left his job at a multinational bank and started YES BANK with a vision of driving inclusiveness and sustainability across India, and to serve the 600 million unbanked people.
YES BANK has an Inclusion and Social Banking (ISB) division that specialises in engaging the unbanked and under-banked populations in India. It uses sophisticated financial tools and adopts advanced technologies that are traditionally available only to big businesses, to develop offerings for the marginalised poor.
Launched in September 2011, YES Livelihood Enhancement Action Programme (YES LEAP) was one of the pioneer programmes that paved the way for many of the other financial inclusion products and services developed by the ISB division. YES LEAP provides comprehensive financial services, including credit, savings and micro-insurance, to women Self Help Groups (SHG). These groups are typically comprised of 10-20 women from local villages that make small regular contributions to a common fund. As the fund grows, money can be lent back to group members to meet their needs.
As indicated in the diagram, YES LEAP adopted a pioneer Business Correspondents (BCs) model. The BCs, which include NGOs, Self Help Promoting Institutions (SHPI) and SMEs that had already established long-term and credible connections with the SHGs, serve as an important nodal point for the facilitation of YES BANK’s financial inclusion services. The BCs typically provide financial inclusion education to the SHGs and help to introduce YES BANK’s products and services to the SHGs. After getting SHGs on board with the YES LEAP programme, the BCs are also involved in providing training to the SHGs and facilitate document collection and distribution. As a return for the BCs’ facilitation, YES BANK pays a commission fee, which is around 40-50% of the interest rate that the bank receives from the SHGs.
What also differentiates YES BANK from other existing lending channels is how it designs its products to adapt to the capability and demand of the women SHGs. Usually the most convenient way to borrow money for people in remote rural villages is from informal lenders in the villages that extend loans at an interest rate as high as 100%. While micro-finance institutions which are becoming more prevalent in recent years offer a lower interest rate than usuries, it is still difficult for women in rural villages to access credit as individuals because collateral is often needed. YES LEAP closes this gap through providing an unsecured group loan to women SHGs, offering an interest rate comparable to or even lower than micro-finance institutions. The nature of SHGs also ensures that each woman involved in these groups can have access to the fund when in need.
After four years of development, the YES LEAP programme has reached over 1.3 million women customers across 5,000 villages and disbursed a total of US$ 500 million in loans. The loan repayment rate is close to 100%. As mentioned by Mr. Sushanta Tripathy, vice president of the ISB division at YES BANK, considering the multiplier effect, YES LEAP’s cumulative disbursement has influenced almost US$1.5 billion in the Indian economy. Moreover, YES LEAP has made immeasurable impact on the women involved, contributing to the social empowerment and financial security of women, as well as enabling women entrepreneurs to develop their own businesses.
YES BANK has 42 partner BCs, with over 700 branches across 19 states in the country. The partnership and connection with SHGs has also enhanced YES BANK’s regional expansion, enabling other financial inclusion products to reach the rural villages. For example, YES BANK developed YES Kisan Dairy Plus, which provides an instant, secure and traceable payment solution specifically for farmers in rural areas. The access to women SHGs was of great value in introducing the YES Kisan Dairy Plus solution to the farmers that are either part of the SHGs or the relatives of SHG members.
Key Success Factors
• Business Correspondent model It has always been a challenge for banks to get access to remote rural villages due to physical barriers. It is essential that YES BANK managed to find the right grassroots partners that understand the financial inclusion needs and can also effectively facilitate with distribution and training activities. The effective feedback loop at the grassroots level also helps YES BANK improve the affordability and accessibility of the products and services.
• Real-time monitoring technology Very few banks in India have pushed the technology agenda like YES BANK. As the network of BCs and customers expanded, YES BANK was faced with the challenge of monitoring and tracking the programme in a timely manner. To tackle this challenge, YES BANK tapped into a vast network of service providers and invested in a real-time internet based communication system. This enables effective communication between YES BANK and the BCs across the country and also enhances the bank’s risk control mechanism.
Lessons Learned and Future Plans
In four years, YES BANK has grown into the leading social and inclusive banking service provider in India with an extensive network of low-income customers. However, YES BANK continues its innovation efforts – not only in relation to technology, but also in understanding the ever changing demands of customers. According to Mr. Tripathy, YES BANK has set a target to double the amount of loan disbursement under YES LEAP every year over the next 3-5 years. “The more customers we have, the higher expectations we receive. As customers have more access to credit, their needs will also evolve. We cannot afford stopping where we are - we need more innovation to adapt to our customers’ demand.”
In December 2014, YES BANK announced that it raised a loan of US$200 million from the Asian Development Bank (ADB) to take forward its objective of financial inclusion in India. The bank also received US$1 million in aid to improve its real-time monitoring platform. This is expected to strengthen YES BANK’s position in expanding its financial inclusion services across India.
The India Responsible Business Forum (IRBF) Index 2015 is an initiative by Oxfam India in partnership with Corporate Responsibility Watch, Praxis and Partners in Change, non-profits which look at corporate accountability and business responsibility.
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4.Interview with Mr. Sushanta Tripathy, vice executive president of ISB Division at YES BANK on October 15, 2015.
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