It is not the best of times to own and run a business in India. The business news pages will tell you that investment sentiments have never been more discouraging. That corporate honchos are steering clear of risks, or significant expansion of operations, due to the “turbulent economic times”.

What the business news pages might not tell you, and the national news pages might not have the space for in the run-up to the elections, is the disregard for such ‘turbulence alert’ in parts of rural India. Take the villages of Madhya Pradesh’s Sagar district, for instance. The business prospect, a section of entrepreneurs would report, never seemed so good.

Why? Because they are all on an expansion spree. And why’s that so? Let’s open the whole nine yards, then.

On a balmy February afternoon, Lakshminarayan Gurjar, 27, is busy chalking out his business expansion plans in Baheria Gadgad village of Sagar district. He runs a common services centre (CSC) to deliver banking services to fellow villagers, among other things. Besides refurbishing his 10x30 office and setting up more counters, Gurjar is also looking to employ two people due to the “growing demand” in the market.

Patna Buzurg lies close to Gurjar’s village in the same district. The story here is no different – it is rosier, in fact. Santosh Prajapati is now a pro in the same business. At 31, Prajapati, who quit his job in the regional transport office (RTO) a few years ago, has monthly earnings which have gone as high as Rs 80,000. He employs three others and has presented his business model to corporate affairs minister Sachin Pilot at an event, as testified by a framed photograph in his office. He is now on the lookout for leapfrogging to the next level.

The common thread that stitches the narratives of Gurjar, Prajapati and a thousand others like them is the idea that the poor are indeed bankable, and all that these individuals did was to keep the faith and work towards it.

Either receiving rejections from various avenues or rejecting the comfort of fixed shift jobs – both government and private – these individuals chose to become village-level entrepreneurs (VLEs) and began operating CSCs run by AISECT, a private firm engaged in education and IT training, in 2008 as part of the government’s e-governance plan.

A spark of entrepreneurship

With an initial capital of Rs1 lakh, Lakshminarayan Gurjar began operating the CSC in 2008, offering services ranging from printing, photocopying and photo studio, to giving people the opportunity to fill up forms online and check examination results for a set fee. “I have studied up to class XII and subsequently applied for various government jobs, including in the police. But none of them worked out, so I decided to become a businessman. There was an unaddressed demand for these services and it was enough to get me started,” Gurjar explains to the accompaniment of the rhythm of nails being hammered into woods planks by a carpenter in his office.

A rapidly expanding business and the comfort of operating from an office behind his home all fit perfectly in Gurjar’s scheme of things. In less than six years since he set up shop, Gurjar’s customer base now includes nine villages within a radius of 5 km –  Rusalla, Mugli, Sidhguan, Kerwana and Nayakheda, among others.

The footfall throughout the week and monthly earnings of at least Rs 5,000 were extremely encouraging but Gurjar did not want to get too comfortable too soon. “It was easier to just focus on the existing set of services I was providing and still earn enough to look after my family of seven but there was a scope for significant growth if I kept evolving. So in 2011, I decided to take another leap of faith and got into banking,” he recalls.

With financial inclusion becoming a hot topic for banks and authorities, several experiments were under way to reach out to under-banked and unbanked areas. In 2009 AISECT partnered with the State Bank of India (SBI) to become the country’s largest lender’s business correspondent in Madhya Pradesh, Chhattisgarh and Punjab; it initiated kiosk banking.

Under this model, CSCs became the bank’s customer service points (CSPs), where customers could avail of banking services such as opening of accounts, making deposits, withdrawals and remittances (with a maximum daily cap of Rs 10,000).

Though slow to take off, the idea has now become a cash cow for CSC operators; for banks, it is a more reliable delivery model compared to individual business correspondents (BCs).  

“Having operated in rural areas, we discovered that convenience and access to banking is a service which people here require, and sooner or later there would be a huge demand. Banking ties everybody’s requirements and is a win-win for all. So, sensing a great business opportunity here, we decided to go ahead,” says Abhishek Pandit, director (business services), AISECT.

Asked about the potential risks of catering to such a huge market characterised by low levels of literacy, Pandit says, “There were two choices – either to seize the opportunity in the early stages when people are not fully aware and build the business from there, or wait for somebody else to capture that advantage. We chose the former.

“We have opened over 23 lakh accounts (since 2009) through our 1,400 CSCs across several states, with average daily transactions of Rs 2 crore.”

Everybody's a winner

Besides being viable for CSC operators and a money-spinning, reliable model for banks, it also means convenience for customers.

Take 43-year-old Gajraj of Rusalla village of Sagar district, for instance. A daily wage labourer earning Rs 180 per day, he has been banking at the CSC since 2011, which means he does not have to skip a day’s work. “It’s not that I did not want a bank account before 2011, but I wasn’t able to reach the counter even after making two or three rounds of the SBI branch at Makronia (about 5 km from his village) on different days at different times. I waited in the queue for hours on each occasion, which meant missing an entire day’s work – and the pay.

“So I gave up the idea after a couple of failed attempts.”

In July 2011, Gajraj got a zero-balance account opened after a teacher at the local school where his children study told him about Gurjar’s CSC. “She explained that I could get cheques for uniforms and scholarship of the children under the state government’s scheme only if I had an account. She said opening an account at the CSC was very simple – I tried, and it worked,” he exclaims.

The result: from depositing cheques of his MNREGA payments and uniform and education scholarships of his children to withdrawing money, it all happens “ekdum fatafat” (very quickly). “Having to take care of five children, it was also important for me to begin saving formally,” he says.

Asked if he would take a bank loan, and Gajraj gives out a Bollywoodesque line: “Kal kisne dekha hai? Zaroorat toh kabhi bhi pad sakti hai aur ab khaata hai toh udhaar bank se mil hi jaayega (Who knows what will happen tomorrow? There can be an emergency any time, but now that I have an account I can avail a loan whenever there is a need).”

But does he trust Gurjar with his money? After a hurried “yes”, he says Gurjar is the “bank-waala bhai” for the villagers, and that he explains every little detail with great patience – a fact Gurjar is more than happy to acknowledge. In addition, with the CSC operating from 8 am to 8 pm every weekday and for a few hours on Sundays, Gajraj says he has not missed a day’s work for banking.

A tale of two entrepreneurs

Gurjar has to visit the SBI branch in Makronia village at least five days every week to deposit cheques and withdraw money. On any given day, he keeps around Rs 50,000 cash at his CSC for withdrawals. Tell him about the risk, and with a serious businessman-like flair he replies, “Every business involves some risk.”

Through the CSC, Gurjar’s monthly earning is now anywhere between Rs 15,000 and Rs 20,000, of which at least Rs 8,000 comes from his business correspondent operations. “On certain days, there are so many customers that the work is too much to handle,” he says, “so I have now decided to hire two others to help me run the centre.”

So is he changing his role from a BC to that of a business facilitator (BF)? Grinning, Gurjar says: “Definitely, but nearly 90 percent of the people here are illiterate. Explaining even basic banking services to them wears you down. Credit is a more complex service and it will take some more time.”

Somewhat similar is the story of Patna Buzurg resident Santosh Prajapati, the star performer for AISECT. After working in the department of licences of the RTO for about five years and taking home a monthly salary of Rs 4,000, he quit his job in early 2008. “It was not about money,” Prajapati explains, “I just wanted to get rid of this ‘agent’ tag associated with me since I worked in the department. People thought I was available for all their menial tasks, which made me look out for other options.”

Catering to 15-odd villages within a range of 5-6 km from Patna Buzurg, about 70 percent of Prajapati’s monthly take-home – it once touched Rs 80,000 – from the CSC comes from his BC function. Going a step ahead of deposits, withdrawals and remittances, Prajapati has opened over 1,500 recurring deposit accounts with deposit amounts between Rs 50 and Rs 1,000.

Banks: how to go forward?

Looking at the success of SBI?s kiosk banking model, in December 2012 the government facilitated the signing of a memorandum of understanding (MoU) between all 26 public sector banks and CSC SPV.

Dr Dinesh Kumar Tyagi, CEO at e-Governance Services, says, “Banks have so far approved 20,000 CSCs to work as their BCs across the country, of which 10,000 have been allotted a code (which is the first step, following which a VLE is identified, then a settlement account of the VLE is opened, then the banking application is loaded on his/her computer and finally the operations begin). At present 6,200 of them are already functional as BCs.”

Tyagi points out that only a few banks besides SBI – Dena Bank, Bank of India, PNB, Bank of Baroda, among others – have got the kiosk technology in place. Several banks have still been left out because they have not been able to build the technology, and this migration to kiosk technology is taking longer than expected, he says.

“Migration to a new technology takes time because banks are dependent on technology providers for this; they cannot do much on their own. It also takes time for bank employees to understand the new system and use it with ease,” Tyagi says. “But I am sure things will catch up soon once banks start seeing the benefits.”

But more than the technology aspect, Tyagi is worried about the service-area approach of banks, as mandated by the Reserve Bank of India (RBI). “RBI’s guideline to first cover the uncovered areas is a limitation because we may not necessarily have CSCs in those areas,” he says. “Banks started with catering to villages with a population below 5,000, then moved on to villages with fewer than 2,000 people, and so on. But we did not set up the CSC network in that format. So there is always a mismatch in some locations where banks want a CSC and we cannot provide one, so things get delayed further.”

While everything else seems to be going smooth, one hurdle in their expansion plan is the internal guideline of banks to keep a cap of '10,000 on daily transactions per account, which is in accordance with deposits a BC keeps with the bank. “There are days when customers have to deposit or withdraw big sums and return disappointed. This kills our business,” Gurjar says.

But bankers justify the cap as a security measure. There is not only the possibility of cash being stolen but also of the VLE being harmed, and AISECT’s Abhishek Pandit agrees with the bankers on this. “I don’t think it is necessary to remove the cap of Rs 10,000 because this is an important measure to curb money laundering. It is a prudent decision and is necessary,” he says.

RBI deputy governor Dr K C Chakrabarty, however, says banks’ scepticism will hurt their own business growth. “They (bankers) will not be able to scale up their business if they continue with this model. They obviously don’t tell their cashiers to maintain an account of Rs 5 lakh with the bank so as to make a turnover of Rs 5 lakh for the bank. Then why such restrictions for BCs? Banks are in the business of taking risk and cannot be completely risk-averse,” he told Governance Now.

But amid all the policy hurdles and economic downturn, people like Lakshminarayan Gurjar and Santosh Prajapati have dared to take the risk to show that if you are enterprising enough, even external factors like difficult terrain, poor economic conditions and a largely uneducated customer base can be a heady cocktail.