Bank on Wheels
For both banks and rural poor people, ‘accessibility’ is a difficult issue. How can banks reach the rural poor who are usually very isolated by the lack of roads and difficult terrain? How can rural people reach banks that are located normally in urban areas? How can banks reach rural people in a sustainable way considering the high transaction costs involved in that process?
The Vietnam Bank for Agriculture and Rural Development (Agribank) with the support of the World Bank have formulated and implemented an innovative and inexpensive alternative to tackle those constraints. In 1998, AgriBank initiated a mobile banking programme modelled on similar programmes in Bangladesh and Malaysia. They started with 159 vehicles equipped to travel on dirt roads and hilly pathways, which enabled loan officers to reach remote areas to process loan applications, disburse money, collect repayments and collect savings. Visits are made following a fixed schedule which is announced in advance. They try to synchronise visits with weekly village markets to save clients travelling time and costs.
After five years in operation, the mobile banking programme proved to be reasonably cost effective and was providing financial services to 315,000 households, about 6% of the bank’s clients. The success required that all normal best practices in microfinance were followed, e.g. appropriate products, group based lending, linking lending and saving. The Bank applies cost covering interest rates but minimises costs by using vehicles for multiple purposes and operating for long hours on each visit to accommodate more clients. Repayment rates are good and each vehicle has recorded a modest profit of about $1000 per month.
The mobile banking experiment in Vietnam has been instrumental in helping the Rural Finance Project achieve its objective of increasing the access to financial services for the rural poor. It has also proven to be beneficial in terms of helping rural people to gain confidence and self-esteem from having the chance to use a bank.