Are Banks and Microfinance Institutions Natural Partners in Financial Inclusion?

In India, the business case of the BC model is yet unclear. The main limiting factor is very low customer activity rates. Low usage is compounded by the prevalence of unduly low pricing models on the basic savings proposition, which is based on a perception that customers have low willingness to pay for savings services. These two factors are of course linked: usage and willingness to pay are both a function of the strength of the value proposition that customers perceive. Ventures that have incorporated a remittance service have found both higher usage and the ability to charge higher transaction prices. However, the limited geographic coverage of these services limits the value of the remittance service. Where the value proposition is based on remittances, scale and network effects are all-important. This paper by Ignacio Mas and others explores this further.