A card that means credit for the poorest of the poor

In Medak, one of the poorest districts of Andhra Pradesh, people will soon get a New Year gift, something they could not even dream of: a bank account.

In Medak, one of the poorest districts of Andhra Pradesh, people will soon get a New Year gift, something they could not even dream of: a bank account.

The State Bank of India accounts will come courtesy a small card with a radio frequency ID chip embedded in it, and a cell phone. The district administration is planning to distribute over a lakh ‘SBI-Tiny’ cards in the district. “The idea behind this project is financial inclusion. These families that we are targeting do not have even the basic access to credit and savings,” says B Venkatesham, Medak district collector, and the man behind the scheme. Many of the recipients will be daily-wage labourers. “On a good day, they have excess money and spend it all. On bad days, they have no money and have to go hungry. We are hoping that these bank accounts will change that.”

The technology used for these accounts makes it easy, and cheap, to operate these accounts. The special phone, when the card is swiped, shows the account details on a screen. For verification, there is a fingerprint reader and a printer to print out the information. The whole set-up costs about Rs 20,000. In the beginning, a cluster of villages will be given one phone, but the administration eventually aims to give every village one. The cost of the infrastructure will be borne by the district.

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Instead of stationing bank officials at the village, district officials have decided to use the strong network of village organizations and women’s self-help groups.They will keep the phone, accept deposits and give out money. When a loan needs to be given to a customer, the SHGs will evaluate the person’s need for a loan, as well as his ability to repay the loan but there will be no collateral on the loans.

The project was officially launched last month. A pilot program is being tried out in three villages, along with NGO Zero-Mass. Mumbai-based firm, A Little World, has developed the technology for SBI.

R Ashok, SBI Regional Manager, says that Medak is the first district in the country to launch the project, while a pilot project was testing Arunachal Pradesh as well. “We are currently in the process of validating the process. We are seeing how the transfer of money (through the SHGs) is working. The project should take off completely by early February,’’ he says.

The Tiny accounts are also tailor-made for their target audience. According to Venkatesham, what makes these accounts special is that they do away with basic requirements that most bank accounts need. “There is no need for any introduction. The accounts can be started with even five rupees, there is no need to keep a minimum balance,” says Venkatesham. Other than making daily deposits, account-holders can even borrow small amounts of money for their daily needs, as less as Rs 5.