Chennai, Jan 2

Financial Information Network and Operations (FINO), a two-year technology-backed company, enables financial institutions to reach out to the un-banked customers. FINO’s biometric smart card will help underprivileged customers save as small an amount as Rs 50 in their bank account, without having to visit a bank branch.

FINO is promoted by international investors such as IFC-Washington, Intel Capital, Legatum Ventures, public sector bank and private entities. Mr Manish Khera, CEO, FINO, spoke to Business Line on efforts towards financial inclusion.

How did FINO get into the financial inclusion space?

I can say it was largely accidental and designed. Initially, FINO started out as a technology partner.

The marriage between banks and micro financial institutions did not happen the way it was envisaged.

The cost of delivery of funds is very high at about 25 per cent for MFIs and they do not have the mindset to use technology to reduce cost.

From the perspective of banks, they do not want to take on the job of handling a huge number — 5,000 or more — of agents directly but would prefer to deal with a single intermediate agency.

Therefore, we felt we had to step in as an interface between banks and customers.

The business correspondent model is where agents reach the underprivileged people at their doorsteps for banking services.

In two years’ time, the business correspondent rolehas ramped up at a rapid pace.

When do you expect to break even? How do you see FINO’s business portfolio in two years’ time?

Our target was to break even this year. Inspite of high volumes, pricing (commission) is lower than we expected.

For every customer enrolled and transaction made, FINO earns a commission of two per cent. We expect to end the current financial year with Rs 50 crore and hope to break even next year.

Currently, savings form about 80 per cent of the business portfolio, insurance and lending the rest. Savings would still form a significant portion of about 60 – 70 per cent.

Insurance will be the second largest portfolio. It is a better and easier way to acquire savings customers and lend to them — we know their cash flows – than asset profile customers for lending.

As a business model are you a competition to MFIs?

I would say we complement MFIs; there is a huge market. Our business model is largely based on savings and insurance while lending is a very small part. The business correspondent model has garnered about 5 million customers. On the contrary, MFIs only focus on lending.

The cost of delivery is 15 per cent in the business correspondent model and therefore pressure on MFIs will increase from banks to reduce the cost of delivery. MFIs cater to about 14 million customers (concentrated in south India) and banks cannot wish them away.

What is the default rate you see?

It is too soon to say; we are yet to see bad loans. We started giving loans from September 2008. Only after a year or two we can say the defaults rate.

We are also looking at the option of providing loans to groups of people. The default rates are low for MFIs as they lend to groups. First, we have to train our business agents to handle groups.

Will you share customer data information with any other sector than banking?

We cannot as the data belongs to banks. Banks find it difficult to share data about their customers among themselves due to competition. Even Credit Information Bureau India Ltd as an entity only shares defaulters list and never good creditworthy clients.

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