The integration of ONDC with Kirana stores, coupled with the transformative power of AA and DPI, is set to redefine the financial landscape of rural India
“India’s techade is here. With 5G, semiconductor manufacturing, and optical fibres in villages, we are bringing a revolution through Digital India to the grassroots level.” These words from Prime Minister Narendra Modi encapsulate the vision for a digitally empowered India, where the benefits of technology reach every corner, especially the rural heartlands that constitute over 65% of the population.
In this digital renaissance, a critical facet emerges – the democratisation of credit, an essential catalyst for the financial empowerment of India’s unbanked and underbanked citizens. As behavioural patterns shift rapidly in this increasingly digital age, with online shopping and banking becoming the norm, the need to ensure easy credit accessibility becomes paramount.
Barriers to Rural Outreach: A Challenge for Formal Institutions
The statistics paint a poignant picture. Rural households, a significant proportion of the country’s populace, still remain underserved and underbanked. This glaring gap persists due to entrenched barriers that formal financial institutions encounter. Geographical remoteness coupled with the unavailability of comprehensive customer data obstructs traditional institutions from effectively reaching these populations, leaving them financially excluded. The cost of acquiring and servicing these large, distributed geographies add to the woes.
In this void, money lenders step in, providing immediate credit but often at a steep cost. Their informal transactions, while addressing immediate needs, perpetuate high interest rates, impacting the rural economy’s overall health. The need for a sustainable credit solution becomes evident when analysing these stark figures, highlighting the imperative nature of accessible and fair financial services.
Digital Public Infrastructure (DPI): The Accelerator of Access
The advent of the Open Network for Digital Commerce (ONDC) and Account Aggregator (AA) signifies a turning point in rural credit accessibility. Operating within the Digital Public Infrastructure (DPI), these platforms leverage crucial data and digital footprints to financially empower all at the last mile. DPI acts as the linchpin, granting rural populations a digital identity and access to formal economic avenues.
National initiatives like Jan Dhan, Aadhaar, and UPI have laid the groundwork, boasting over 550 million banking accounts and 1.3 billion Aadhaar enrolments. AA’s introduction transforms the credit landscape by shifting from physical collateral to information collateral, democratising data sharing and enabling access for individuals, especially the new-to-credit (NTC) and thin-file segment, lacking traditional assets.
ONDC-Kirana Synergy: A Beacon of Hope for Last-Mile Customers
The ONDC-Kirana synergy emerges as a beacon of hope, underlining the pivotal role of trusted local retailers, especially kirana stores. These establishments, deeply embedded in the community, simplify the loan application and disbursement process for tech-shy and documentation-averse last-mile customers. It’s more than mere technological integration; it’s about infusing the digital revolution with a human touch, ensuring accessibility to credit for those who need it most. The envisioned fusion of ONDC with Kirana stores holds the transformative potential to bridge the prevailing credit gap in rural India. This integration stands poised to revolutionise accessibility, leveraging the established trust of local retailers to facilitate credit for the currently underserved. The profound impact of this amalgamation hints at a future where every corner of rural India can effortlessly access and benefit from essential financial services, ushering in an era of widespread financial empowerment.
Future of Rural Credit: Innovation and Collaboration to Pave the Way
In essence, the future of rural credit pivots at the intersection of digital innovation, local trust networks, and accessible data. These converging elements aren’t just surmounting barriers, they’re forging pathways toward comprehensive financial inclusivity and empowerment for every individual within the rural fabric of the nation.
It remains imperative for stakeholders to collaborate, harmonising technology, data transparency, and community networks to cultivate an ecosystem that not only facilitates easy access to credit but also nurtures economic growth and prosperity in the heartlands of India. This unified effort aimed at empowering underserved segments through sachetised digital credit solutions stands poised to elevate communities and propel sustainable economic development across the nation.
The Digital Revolution in rural credit is not just about breaking barriers; it’s about building bridges that connect the unbanked and underbanked to the formal financial system. The integration of ONDC with Kirana stores, coupled with the transformative power of AA and DPI, is set to redefine the financial landscape of rural India. This is not merely a technological evolution; it’s a socio-economic revolution that empowers individuals, fosters entrepreneurship, and drives inclusive growth.
(This article is authored by Saif Khan, Chief Growth Officer, PayNearby )
