the reason why you think that the business can be categorized as the

second/third form of BoP engagement.

Model: Public sector bank ties up with Sec25 Company and technology provider who
partners with to provide financial services
Location: Tangi village, Cuttack district, Orissa
A Little World - A Little World (ALW) is a for-profit
FI Products
technology company that has partnered with dozens of
banks in India on financial access and inclusion
initiatives. The technology it provides is an
expensive, but convenient method for the remote
Savings
delivery of banking services. Most well- known is
a mobile phone device that can record and store
bank customer bio-metric information as well as
remotely send transaction activity to a central
server
Insurance
Credit
A Little World was paid by the promoting bank for
providing the technology.
These activities include the enrollment of clients
into no frills accounts, door-stop service for
Remittanc
account deposits and withdrawals as well as
recruitment and training of customer service
es
providers. Zero Mass Foundation is paid a
commission by the public sector bank for each customer enrolment as well as for
each transaction.
the business model of such a firm (i.e. the revenue and cost heads, viability
as a for-profit business, the novelty of such a business).

BC Operations

Zero Mass Foundation (ZMF) employs one supervising field officer who operates out
of a Bhubaneshwar office and two mobile, Customer Service Providers (CSP) who
interface with clients in Tangi and report to the field officer. While CSPs report to their
Bhubaneshwar-based supervisor, they are enabled by A Little Worlds technology to
work and communicate remotely (more on the technology later). While ZMF hoped
that one day the CSPs could settle into a fixed location, given the low number of
customers they are currently roving. ALW dispatched a single staffer to manage the
BC transaction database who works with the ZMF officer in Bhubaneswar
In the five months since the BC pilots launch in Tangi, ZMF has enrolled approximately 1,050 clients into no frills savings accounts, the only product currently
offered. The enrollment procedure is swift and showcases the models reliance on
technology. Once a CSP receives affirmation from a potential client, he snaps a photo
with a high-resolution camera and imprints the clients bio-metric information using
ALWs mobile phone device. Upon registration, the customer is given a bio-metric ID
card with their photograph and ZSN number. By combining a new generation Near Field
Communications (NFC27) technology enabled
mobile phones, contact-less Radio-Frequency Identification (RFID) Smart Cards, integrated
biometrics authentication system and a transaction server, to enable cost effective and
convenient mobile transaction solutions for branchless banking and financial transactions

how the business is creating

value for itself as well as
creating value for the poor.
ALW
began a pilot project for the State Bank of India (SBI) to
provide banking transactions in the
rural villages of Aizwal (Mizoram), Madek (Andhra Pradesh) and Pithoragarh (Uttarakhand).
ALWs role was to provide the technology platform ZERO, and the ZMF developed and
The project was to enrol about 5,000 villagers in
no-frills bank accounts for Electronic Benefit Transfer (EBT) - the disbursement of
government funds using biometric Smart Cards. However, it soon became apparent that the
costs to SBI for delivering the service were too high to make it viable as it lacked a
distribution network to reach rural India effectively. The distribution burden to the villages
was too high for most financial institutions to shoulder alone.

ALW/ZMFs
Model

Participant

Source of revenue

BANK

Account opening

the ZMF had a

Transaction fee
mandate from
different state
Interest on credit
governments
for disbursement of
BUSINESS
Bank/MNO commissions:
NREGS funds by
CORRESPOND
enrollments, maintenance of
the end of 2009, in
ENT
active accounts, marketing and
Andhra Pradesh Rs.
promotion
1,500 Crores
(approx. US$321.54
million); in Orissa
TECHNOLOGY
Recurring technology licensing
Rs. 2,000 Crores
SERVICE
fee
(approx. US$428.72
PROVIDER
million); and
Enrollments
in Chattisgarh Rs.
Transaction fees
200 Crores in two
districts (approx.
Device/equipment
US$42.87 million).
Additionally, ZMF
was commissioned to
MOBILE
Transaction fee/revenue sharing
disburse Rs. 600
NETWORK
with Bank
Crores (approx.
OPERATOR
US$128.62 million)
in Andhra
Pradesh and a small amount of Rs. 2 Crores (approx.
US$0.43 million) for pension funds in
Andhra Pradesh and Himachal Pradesh respectively. On an average, over 25,000 new
accounts are opened every day through 8,314 points of presence (as on December 2009)
across 22 states for SBI and other PSU banks
For NREGS funds disbursement,
the commission varies between states and ranges from 1.75%
to 2%. Commissions are also
earned by BCs for disbursements of other government welfare
scheme such as old age
pensions and scholarships as well as on selling of the core
banking services such as deposits,
loans, mortgages etc. For savings and deposits, BCs earn 0.5%
of the amount and for loans,
0.5 to 1.0% of the loan amount from banks.

ALW/ZMF Stakeholders and Value Creation

Here we aim to broadly map the stakeholders and the
respective value creation for them through the ALW/ZMF venture, however, this mapping is
not exhaustive. The primary stakeholders in the ALW/ZMF venture are: the financial
institutions, government of India, state (provincial) governments39 and financial services
regulators, the rural India and its inhabitants, investors of ALW/ZMF, companies with interest
in rural markets and NGOs, MFIs and SHGs

With ALWs ZERO technology platform and ZMF extension service infrastructure in rural
India, the disbursal of governments social security pensions, NREGS wages and other
government schemes come to the village safely and directly. Each ZMF customer is
biometrically identified and linked to a unique bank account through which the money is

Financial

electronically transmitted and documented, ensuring financial inclusion of rural India. This service tends to the
villagers
needs by ensuring that the money goes directly to them and is not diminished while changing
hands.40The ALW/ZMF services also helped to shift power dynamics within villages. With politically
neutral, trustworthy women as CSPs controlling the disbursement of money, power has
shifted away from the village headmen. Where there once was one person with power to deal
with government funds in the village, now there are three, and two are guaranteed to be
women (the two CSPs are trained to help one another) ZMF hires extensively in local areas for its field operations.
ZMF has
provided job opportunities to people with moderate levels of educational attainment (the
minimum requirement is ten years of formal education), which in turn discourages migration
by benefiting local youth, and in turn, the local
economy. The ALW team has 125 people, and
the total number of direct employees on payroll of
ZMF is approximately 400 and temporary
field staff numbers around 350.

the challenges the business is facing and your suggestions to overcome the
challenges (with valid reasons)

As a BC in Tangi, Zero
Mass Foundation is
empowered by the
promoting public
sector bank to offer
only basic no frills
savings accounts and
as of May 2009, had
opened
approximately 1,050
accounts via their
operations. Both the
promoting bank and
ZMF expressed
hesitation at the
prospect of extending
credit via BC; namely
the promoting bank
balked at outsourcing
credit evaluation to
an inexperienced
third party while ZMF felt uncomfortable taking on banking activities. Therefore,
credit was not explored as an option. The research team discovered that Zero Mass
Foundation and A Little World had received a mandate to distribute National Rural
Employment Guarantee Act (NREGA) wages through its BC though this channel was
not operational at the time of writing. Thus, basic savings accounts were the sole
product offered in Tangi for business correspondent clients.
accounts, most frequent among them was their view of the scheme as a convenient
risk-mitigation and consumption-smoothing tool. Additionally, several of the families
used the accounts to deposit portions of remittances they had received from migrated relatives. BC clients conveyed their satisfaction with the door-stop service
especially in the absence of local ATMs or bank branches
Another reason behind low usage was high participation in self help groups (SHG).
They claimed to use the SHG as a source of short term credit and savings for
consumption; they perhaps differentiated between the function of the SHG savings
and their BC account savings, preferring the former for short-term needs and the
latter for emergencies.

Operational
Issues
Cash Handling
- Allowing BCs to handle cash is the
biggest challenge. 99% of the financial transactions
are in cash, warranting high-cost cash-handling
operations and added operational risks
Irregular Accounting - Irregularities have been
observed in accounting of clients withdrawals and

Viability Issues
Inactive No Frills Accounts The majority of No Frill Accounts
opened by BCs are not operational. In some locations that have achieved
100% financial inclusion, the accounts in use have been less than 25%.
Model Viability -Theres a shortage of funding to BCs for meeting the
group promotion costs in the case of SHG- Bank linkage models.
BCs Losing Money - Initial losses are forcing many BCs to shut their
operations. Business continuity risk in such cases is impacting banks
adversely.

Regulatory Concerns
Interest Capping- Reaching unbanked areas warrants higher delivery costs and
the rate cap doesnt allow much room for banks to recover the costs necessary
to extend credit to hard-to- reach areas and in small amounts.
Distance Criteria Banks do not always find it easy to get service area waivers
from District-level Committees which are necessary to operate in certain areas.
Cash Settlement - Current regulations mandate BCs to complete accounting
and settle cash with bank branches within 24 hours of transaction.