Rural India remains largely a cash economy but that will change in the future and finance brands have to be alert to where they can intervene digitally, according to the managing director of Mahindra Finance.

Ramesh Iyer told a recent Mumbai conference, that while “around 75% [of the rural economy] is still in cash” there are “huge opportunities” for credit providers who can offer a digital solution that both meets rural needs and instils confidence.

He argued that rural consumers have largely been left out of the changes that the country has witnessed.

“Most of these people have always been denied what they ask for, whether it’s credit or the level or kind of service they seek, and so how will they ever become mainstream?” he asked.

“We keep hearing about financial inclusion but we have been unable to include every consumer segment,” he added. (For more details, read WARC’s report: Mahindra Finance: Battling the rural India challenge.)

Digital solutions are attractive for several reasons, not least the cost of collection involved in a cash economy, but that requires a major step into a new world by the credit provider as well as the borrower.

Iyer reasoned that if you don’t give the rural consumer the loan digitally, he will not have the confidence to know his money is coming to you when he digitally transfers it.

“So you need to have the guts to first transfer the money to him digitally,” he asserted. “If you are going to ask him to visit your branch office, sign various documents, bring along a guarantor, then how can you expect him to repay from miles away?”

But if a brand can convince a borrower to do that, then it avoids the sort of situation where collectors may have to call repeatedly on a customer or where the customers come into a branch to make their monthly payment of maybe Rs 500 in a pile of coins.

“If you can handle these issues then there is a huge opportunity for business there and I believe all this can be digitally addressed,” Iyer maintained. 

Sourced from WARC