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Kirana store owners may emerge as new bankers for rural india

Finance Professional November 30, 2021

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The unforgiving COVID-19 pandemic has forced many Kirana store owners to adopt technologies to better serve their customers. According to a report by EY titled Sentiments of India – Pulse of the country, Kiranas, 20% of Kirana owners had started using online platforms to better manage their supply chain needs and delivery during the lockdown. These stores started using technology to take orders, offer contactless deliveries, and accept contactless payments, enabling easy monetary transactions and eliminating cash exchange. The surge in orders from customers during the lockdown only proved the renewed trust in these stores over any other supermarkets, hypermarkets, or online e-commerce company. The resilience shown by these small retail businesses has also made them hot favorites to serve the financially underserved population of rural India.

Empowering Small Businesses

India has over 12 million independent kiranas, which support the country's vast retail network. These shops are spread evenly across rural and urban areas and cater to the remotest parts of the country. With the Indian government's unrelenting efforts to achieve greater financial inclusion, Kirana store owners are likely to become the new bankers for rural India. The Reserve Bank of India has drawn a regulatory framework of how these small shop owners can act as business facilitators for commercial banks, which traditionally target urban, salaried customers. Commercial banks are now looking for new ways to expand their reach in rural and remote parts of the country by proposing to list Kirana store owners with substantial financial transactions as business facilitators. The reason: a simpler operating model, better understanding of their target audience, and greater reach.

Why Kirana Stores Are a Good Investment

Kirana stores run on customer trust and loyalty. Unlike hypermarkets or supermarkets, they have limited inventory and purchase products on-demand based on their customers' needs. Store owners also know the financial well-being of their customers and their purchasing power. All these factors make them one of the most preferred options to increase financial inclusion in a country. Whether setting up ATMs in small retail stores or allowing store owners to facilitate financial transactions and provide small domestic loans, banks are looking at ways to formalize these services to help businesses attract more footfalls and increase profitability.

Creating Opportunities for Shopkeepers

Various government and private banks are finding new ways to have a Kirana store model, which offers several benefits, including pan-India opportunity and scalability. Banks plan to use this model to complete the required KYC norms and formalize several financial services such as offering micro-insurance, mutual funds, and pension schemes to serve those at the bottom of the pyramid. For instance, the bank can allow Kirana store owners to disburse a maximum of INR 25,000 per borrower on a commission basis. However, the only way the Kirana store model will be successful is if the shop owners adopt new technologies. Industry experts such as EY claim a positive movement towards the adoption of technology, with 40% of respondents stating they want to partner with online delivery and supply platforms.

Final Take

Now that livelihoods are coming back on track, kiranas are likely to technologically upgrade themselves to compete with the big players and become the face of Indian banks in rural India. It is now up to the owners to understand how they want the technology to work and start their digital transformation journey accordingly. Kiranas are the lifeline of Indian localities. It is now time they embrace digital technologies to become the lifeline of the banking sector and help achieve the dream of complete financial inclusion. For more insightful content on the future of banking in India, follow OnTheWayMoney!

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