Less Cash Rural Economy

While working in these villages, we saw the tremendous hardships that were faced by the villagers for withdrawing, depositing and other banking activities. There is just one nationalized bank in Sirsala which is the nearest town to most of our villages. It serves 45 villages and is unable to cope with the pressure with villagers having to wait for hours for a single transaction.

While, we were trying to find a solution, the Government of India took the decision for demonetization. We decided that instead of criticizing and finding faults, we at Global Parli will attempt to make the villages cashless. This would also ensure the financial inclusion of the poor.

The first thing we did just after the demonetization exercise was to visit the villages and understand how it had affected their lives. We were surprised to find out that even though there was so much chaos in the cities, most of the villagers were hardly affected. Kind of strange, isn’t it? This is why. The average household income in the villages that we work in is Rs. 3,500. When we asked them, the villagers said, do you really think we have 1,000 and 500 rupee notes? Next, we asked them about how they withdrew cash. Their answer was that it has been always difficult for us to go to banks and get cash. We learnt that they have to travel far, stand in lines and receive lousy service at the bank. They added that this time they just had to wait a few hours longer. We realised that they were very stoic about the whole thing and were in support of the government’s move because they could clearly see that it was inconveniencing the rich more and they could sense instinctively that it would help them in the long run. Short term pain for long term gain.

With this knowledge, we took our first step to select a village that would be our test case to go cashless. For two months, we visited all the villages under Global Parli, spoke to the people, and analyzed the various elements that were needed to ease this transition. For us, going cashless was not just installing point of sales (PoS) machines, but a combination of all available methods like UPI (BHIM app) and USSD. PoS machines are for people who do not have smart phones or have a problem using smartphones, USSD is for people with feature phones but our most preferred option was UPI (BHIM app) as it does not have transaction charges just like cash transactions do not. Also it works from villager to vendor, vendor to villager and villager to villager, again just like cash transactions. While India’s first digital village Akodara in Gujarat is a closed system made by ICICI Bank exclusively for the village, we wanted to established an open system in Aurangpur which allows the villagers to freely transact with outsiders. Also since we were using UPI, a platform used by all banks, this system is independent of any bank.

When we started, we thought it would just entail training people to use the technology, which we succeeded in doing for a few people and get them to use their phones to make transactions. However, the problem was multifold, sometimes they didn’t have balance and their phones to send an SMS which was essential for the app to work, and sometimes internet connection were patchy. The main problem though was the bank accounts. Most villages are ‘adopted’ by a particular bank. This means that most of their loans and government subsidies come through that bank. Unfortunately for us, most of the villages that we work with were served by Maharashtra Gramin bank which is not one of the 31 banks that offer UPI and is also technologically backward. This means that this bank is not equipped to handle UPI which almost brought our effort of going ‘real cashless’ to a complete halt. Some of the villagers did have accounts with State Bank of India, which is UPI compliant, but most of these accounts were either defunct because of no activity or did not have ATM cards, which is again essential for UPI. We connected with SBI, which being a government monolith is slow to move but did help us to get some accounts activated.

 

While we were struggling with this, the zonal head of HDFC bank contacted Mayank and showed interest in working with us. He actually made the effort to visit the villages which happened to coincide with the District Collector’s visit. The collector of Beed district, Mr. Naval Kishore Ram is a young, dynamic officer who understand the needs of the villagers intrinsically and has gone out of his way to help us in this project. Some of the things that Global Parli does would either be far too difficult or impossible to do without his help. HDFC Bank’s zonal head was thoroughly impressed by the work we were doing and the support that we were getting from the Collector. Immediately after his trip, HDFC came on board to help us create a cashless village.

Our two month long research helped us narrow down the criteria for selecting the first village that we would start working in. We selected Aurangpur based on good internet connectivity, enthusiastic villagers, cooperative Sarpanch and active bank usage. With the help of HDFC Bank, we conducted a banking literacy camp and also showed them videos about the importance of banking. HDFC Bank started opening new accounts and we decided to first start with the women since they always had issues getting bank accounts. Once the accounts were ready, we helped the villagers install the HDFC Bank mobile banking app and also the BHIM app and get them both activated. The effort required long days of work starting from 8 am to 11.30 pm some days to get the ball rolling. We were surprised though to see that some of the young boys in the villages learned to transact with each other using UPI on the first day itself with about an hour’s training.

So far so good. We transferred ten rupees to some people and then told them to start passing it around, giving a rupee each to their friends. Ten youngsters had started using UPI, on a small scale though, but this was a very fruitful and rewarding experience to actually experience how cashless could work in our villages.

The next issue was how to incentivize people to put money in their accounts. Though some people immediately understood the utility and deposited money, others would have to be pushed to use this system. This meant that we needed to target a regular transaction that if made cashless, would ease their routine life. Once they had that one transaction that they did using their mobile, they would get hooked and then the transition would be easier.

Guess what this turned out to be. The ubiquitous ‘phone recharge’! Something that everybody does, all the time. For a recharge, the villagers had to go to the nearest town which was at least 3 km away or sometimes even 10 km or more. Plus most people tend to do small recharges, which meant that they would have to do this every few days. With the app and the bank account, they could now do it instantly without any travel or effort. This struck a chord with the villagers. Post that, they learnt other facilities on the mobile app like NEFT themselves and were thrilled with the effortlessness with which they could transfer money to anyone, sitting in their village. Now the people who did not have Android phones were giving money to the young kids to do recharges for them.

What our experience taught us is that what started as a purely technical problem of using apps for cashless transactions, turned out to be a bigger problem of financial inclusion. We realized that we could use the demonetization fear to get people to use the banking system. Once the villagers started using banks, they could get out of the clutches of the high interest money lenders who at times charge more than 100% interest per annum.

To get the village vendors and the nearby towns into the cashless system, we plan to get them discounted PoS machines from HDFC Bank and UPI. In the future, we will set up Aadhar based thumbprint devices. We have already started this in a small town near Aurangpur called Shirsala where at least 20 vendors will be given PoS machines and UPI. Given that all the villagers have Rupay cards or Android phones, we should be able to cover most cases to reduce the use of cash.

 

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A/C Name: Global Vikas Trust 
Bank: ICICI Bank Ltd
Branch: Vile Parle East, Mumbai
A/C No.: 0211 0500 5514
IFSC Code: ICIC0000211

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