23 October 2014

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Tumbling Tins Focus on the Foundation to Win

13 January 2014  |  1470 views  |  0

Disclaimer: These opinions are purely mine and do not endorse my firms views or that of any individual of my firm. 


Tumbling Tins: Focus on the Foundation to Win - the title revolves around a topic related the game of Tumbling tins. Remember arranging stacks of tins in a pyramid form. If you were to win the game you would have to hit the bottom. Likewise, the banking game can be won by focusing on the base of the pyramid NOT to DISRUPT but to ERUPT a revolution, please note the use of the phrase "base of the pyramid" and not bottom of the pyramid as recommended by Jerry Rao during one of the conferences on Microfinance about 6 years ago. Truly wealth and prosperity revolves around tapping the enormous base of the pyramid and accelerating the growth of numerous unfunded and untapped areas of development. It is those little drops that will make a mighty ocean. 
This is therefore an appeal to Bring "Microfinance" Mainstream. The word microfinance has received some bad press of late hence the focus here is the concept not really a specific type of banking. 


Further to my recent article about banking licenses and the need for setting up new banks in the country, would humbly request banks to consider making Microfinance lending mainstream. 


Many banks have Private Wealth Management departments to cater to the uber rich clients. Why dont banks think of setting up a department called Private Micro bank. There are numerous banks who outsource this to other organizations and set aside some funds but am really referring to the banks bringing this mainstream. 


So what would be the function of the Private Micro Bank? 


1.) Business Consulting - to support and help businesses strategically with the necessary monitory and business support. Many banks lose some of their good talent to MBA aspirants to become CEO's or to become entrepreneurs or to become philanthropists. The bank has the opportunity to satisfy all the above for the bright young minds. 

2.) Education - provide education in order to be really effective. There may be the tribals who could hunt down fanstastic honey products which is purely organic. The banks could show them how to package, market and distribute these products 

3.) Software Decisions and ERP - the bank could recommend some open source softwares for the benefit of the underprivileged businesses, rather than the businesses making heavy payments 

4.) Setup products focused on the Microbanking customers such as 

a.) Microloans - small loans with a group collateral system where the lien is the guarantee of like minded neighbours who are accountable to each other and to the cause they are borrowing for 

b.) Micro credit cards/Microcredit - credit amongst like minded companies especially the raw material suppliers for micro businesses 

c.) Microinsurance - the biggest reason for poverty is some diseases that could threaten the savings of the entire livelihood 

d.) Micro education loans - many people discontinue their studies due to lack of funds and this increases crime rates and lack of a decent education for a decent livelihood. So loans for microeducation would go a long way to grooming the society. 

5.) MicroKYC - the banks will need to be innovative and have a big role to play to ensure that every person is uniquely identified around the world

6.) Microsavings - Although the idea of loans itself is for saving down, i.e. borrowing first and then returning the funds, which effectively guarantees and safeguards the money from any alcoholic relative. 

7.) MegaSavings for the Micro bank - This is how the Uber rich contribute to this. Well they could become huge contributors or indirect counterparties to the funds required above. Imagine, if they are able to invest a small sum of their savings towards a microfinance business through, they would go a long way in ensuring the market for the Private Micro bank described above is catered to. Many rich people really want to know where their funds go to and how their funds can be "revolved" for a great cause. Here is a classic example as described above. The bank ends up attracting a lot of great philanthopic minded clients if they have a creative strategy around the lines of the above. 
If these products are already available in mainstream banks and banks are already striving to bring these mainstream, then great, may your tribe increase. 


Truly, the above thoughts mark a paradigm shift in the way we may think about an institution and profit making with low volume and high revenue vs high volume and low revenue, but it is the drops of water that make a mighty ocean, we could liken the above to eating small meals to help proper digestion and utilization and distribution of funds. 


Fr Edmund Carasco of Holy Family High School (Bombay) - my alma mater once announced a scholarship for those children who tried very hard and failed. Here is an opportunity to really do something similar, by giving a scholarship to the underprivileged in the society and help see a change in the usage of natural resources and indirectly improving the economy, reducing crime and bringing world peace. We could also think of this as an athletics competition for the age groups - Under 14, Under 16. Once they do well in a certain age group, we are able to catch them young and train them into representing the country for a mega cause. Therefore the Private Micro bank client can one day also become a Private Wealth Client. 
A long shot, but the revival can start with a spark if we have more mavens who believe in the above - remember Tipping Point by Malcolm Gladwell? 

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