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Silver linings Passbook

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Despite naysayers, experts say the finance minister's women's bank proposal is a good one. But only if it's commercially run.

Finance minister P Chidambaram's budget announcement of an exclusive bank for women has elicited both sexist jokes and angry comments from anti-reservationists and women alike. While the anti-reservationists want to know where this will end, indignant women feel that the money could be better utilised in setting up, say, women's toilets. Even prominent female bankers do not see this as something that will make a huge difference to women. Naina Lal Kidwai, country head of HSBC in India feels that the announcement is playing to the gallery.

The move may have been conceived of as a populist measure but given Indian demographics, consultants say that there is a business opportunity for such a women's bank, which will be set up in the pubic sector. "In the Indian context women have shown themselves to be very resourceful. They can make small amounts go a long way for their families. Resourcefulness and thrift have always been a part of a women's life. If you add credit to it, it significantly empowers women to improve the wellbeing of their families, " says Shinjini Kumar, director, PWC India, while pointing to several reasons why such a bank would work.

BANKABLE WOMEN:

A women's bank is not a new idea. Ela Bhatt of SEWA had floated one 40 years ago in the cooperative sector and the bank has managed to do business entirely with its own funds. "Women are bankable. In fact, poor women too are bankable. We have been telling the union government this for a long time and have also successfully proved it through SEWA Bank which has three lakh women depositors. This will lead to women's empowerment as it will lead to asset creation in the name of women, access to financial services and give women more economic security, " says Reema Nanavaty, director, economic and rural development, SEWA. Besides SEWA, Mann Deshi Women's Cooperative Bank in Satara, Maharashtra, has similar objectives and was even lauded by the US government. Lael Brainard, under secretary at the US treasury, described the bank as a role model some time ago.

JOBS FOR WOMEN:

The State Bank of India's chairman recently said that when you set up a million tonne steel plant you are creating a demand for half a million tonnes of steel in construction. Similarly, a women's bank which seeks to improve income generation for women ends up employing thousands of women in turn. According to PWC's Kumar there is great merit in employing locals for these banks as they have the advantage of understanding the local community and ecology. "In fact, the public sector bank strategy of achieving national integration by posting people from Kashmir to Kanyakumari just does not work, " says Kumar.

INNOVATION:

A new bank has the advantage of adopting innovative strategies. For example, success in lending against gold has prompted all mainstream lenders to get into the same business. "Ideally, such a bank should also have a gold deposit account integrated and therefore attract safety and security of such physical savings to convert them to financial savings which will augur well for the banking industry and at the same time, be a good social security net for Indian women, " says Rana Kapoor, MD & CEO, Yes Bank.

FUNDING ASPIRATIONS:

Traditionally, many social scientists have frowned upon putting cash in the hands of the poor. "With microfinance, a lot of people had problems that women were taking the loans and buying mixers and grinders instead of using it for business reasons. If you ask me this is a good thing for two reasons - it fuels demand and also frees up time. For a woman who is a mother and a wife, time is a very precious resource, " says Kumar. According to her, a woman is involved in the task of "human capital creation" and by funding her aspirations for better education of her children such a bank could work very well indeed.

TALENT POOL:

Although a large number of women in India are 'unbanked' - those who don't have a bank account - there is no dearth of talent when it comes to women bankers. The percentage of women forming part of the Indian bank workforce is over 20 per cent and among the highest globally. Besides Kidwai, prominent women CEOs of banks include Chanda Kochhar of ICICI Bank, Meera Sanyal of RBS, Shikha Sharma of Axis Bank, V Iyer of Bank of India and SA Panse at Allahabad Bank.

While there are strong business prospects for a woman's bank, there are also pitfalls that loom, say experts. The biggest risk is that the bank's business orientation might get overwhelmed by politics if it is directed to give subsidised loans. If this happens, bankers warn that the system would be overwhelmed by touts and those seeking to take undue advantage. "Of course, the bank has to be profit oriented. I don't want to be let down by having an institution, which is for women but run shabbily and makes losses. What impression are you then trying to create - that women cannot run a bank?" says Kumar.

HOW TO GET IT RIGHT
Dos
Focus on the unbanked
Hire locals who understand language and culture
Reach out to lower middle-class women
Adopt a mix of employees and business correspondents for distributions
Lend against cash flow (earnings) rather than collateral
Lend for consumption, education and asset creation
Focus on lending as a business proposition

Don'ts
Get into the welfare mode
Hire through national competitive exams like PSU banks
Charge high rates like in microfinance
Let wage costs get out of hand
Insist on collateral like jewellery
Do more of the same in loans
Look for government subsidies

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