NextBillion.net - Development Through Enterprise - Financial Access for the BoP: Expanding Inclusion in India - Comments

re: India

Manuel Bueno — Wed, 28 May 2008 11:05:57 -0400

Yes, I remember double-checking that number a couple of times in the publication, because it surprised me too.

At any rate, I tend to take BCG numbers as an estimation. If each household has 5 members (India has an average household of 4,9 members, but we can assume that in poorer households the average household size is bigger, say 5), that makes 675 million people out of a total population of 1.1 billion, so more than 60% of the Indian population is financially excluded. I think this is plausible - I tend to prefer putting things in percentages to see if they make sense or not (a number is just a number).

What other countries did you think were ahead of India?

India

structured settlements — Tue, 27 May 2008 17:07:21 -0400

"India has the second highest number of financially excluded households in the world with 135 million" Wow, this number really amazes me. There are several other countries I would have put ahead of India in a heartbeat.

India BoP Rationale

Jalal Alamgir — Tue, 26 Feb 2008 16:10:44 -0500

It's encouraging to see businesses, from BCG to Khanna's new book, thinking about the next billion customers. The current risk/reward models that feed into most business decisions have been overlooking not just the financial significance of this market, but also the political significance of it in countries like India. As I note in Globalization and Local Risk, this market's real power has been in making/breaking governments, and their preferences have frequently featured when governments think about going slow on liberalization or even turning toward protectionism, a big risk cited by many global businesses. With the right type of product, whether financial or otherwise, and the right culturally and locally sensitive approach, investment in the next billion in India can make immediate financial as well as longer term political sense for foreign investors. The keyword, however, is 'locally sensitive', and you very rightly point out that "BoP customers ... will not settle for cheap, stripped-down versions of mainstreams products. New products have to be designed for them." Thanks for a good post on this topic.

Financial Access for the BoP: Expanding Inclusion in India

Manuel Bueno — Fri, 22 Feb 2008 11:44:45 -0500

Which banking models could be used to enable access to the BoP? A recent BCG publication, entitled "A Roadmap for Expanding Financial Inclusion in India," tries to answer just that question for the Indian market.

India has the second highest number of financially excluded households in the world with 135 million (China is first with a whooping 263 million). Rural households represent a big share of those financially excluded. BCG estimates that between 2007 and 2010, 17 million households will enter the financial markets thanks to income growth and 30 million more thanks to innovative banking business models. BCG further estimates that these 30 million people will represent Rs 10,000 crore (about $2.5 billion) for banks and Rs 20,000 crore ($5 billion) for insurance companies, or $83 and $166 per household.

They argue that the value chain should be deconstructed into six fundamental pieces that can highlight ways to serve this market: product development, customer acquisition, risk management, funding, administration and collection (although they just elaborate on the first two): In terms of product development, household needs can be divided into transactions, borrowing, saving and insurance. Although BoP demand is not homogeneous, there are several common characteristics for the products they are looking for, such as:

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