Rural fintechs seek government fund to upgrade last-mile tech infrastructure

Fintech startups and business correspondents operating in the area of financial inclusion have sought support through equity funding from the union government. While an exact amount has not been placed before the government, industry insiders told ET that an outlay of around Rs 500 crore in the budget would be helpful for the industry.

Such a fund could be used for upgrading technology at these firms that offer services like processing domestic remittance, Jan Dhan account opening and selling government-sponsored insurance policies for the rural poor.

“Similar to the IMEF (India Microfinance Equity Fund), an IBCEF (India Business Correspondent Equity Fund) may be created as a consortium between the Indian government and banks and FIs (financial institutions),” Dharanidhar Tripathy, chief executive of the Business Correspondents Resource Council, wrote in a letter addressed to the secretary of the Department of Financial Services (DFS).


Also Read: Tax cuts for ‘Bank Mitras’, hike in kisan card loans limit in rural fintech’s budget wishlist

Tripathy told ET that an estimated Rs 10,000 would be required for basic technology upgrade at a retail outlet that offers these services in rural India. “At around four to five lakh such agents, an outlay of around Rs 500 crore would be required,” he said. “Currently, agents are buying printers, mobile ATMs and such devices with their own funds,” he added.

The request for equity support from the government comes at a time when fintechs are facing a severe funding winter and last-mile service providers are seeing stress on their business margins.

The larger fintech industry, in a January 17 meeting with the DFS secretary, sought a Rs 1,000 crore fund from the government in a bid to ensure better supply of capital to sectors like digital lending.

Industry insiders aware of these conversations said a similar demand for a dedicated fund was placed before the finance ministry even during last year’s union budget. But nothing moved beyond some early conversations, they said.

In this year's budget wish-list, rural fintechs have also sought tax cuts and expansion of the limit on Kisan Credit Cards, citing increase in agricultural product prices.

The industry also wants the government to push banks to increase commissions for physical agents who provide last-mile banking services, popularly referred to as bank mitras.

“The DFS had a meeting on financial inclusion with banks and BCs on January 17. The demand for higher commission pay-outs from banks which have not been revised for years was raised there. The secretary asked banks to look into the demand,” said another industry executive who was present at the meeting.