Whose “bottom” line is it anyway?

This post is written by Vijesh Nair, SBI Associate Consultant.

Photo credit: Inkart, Michael Halbert

Earlier this week, some of us in the Alternative Delivery Channels (ADC) team at SBI were engaged in a discussion with an investor who was contemplating investing in a branchless banking venture in South East Asia. The topic of the discussion was not so much about whether the venture will succeed or not but more so about how to tell success from failure when it does present itself. Success or failure, as one would imagine, is very subjective. The challenge lies in marrying the varying (and at times) even conflicting objectives of people at the bottom-of-the pyramid, who see branchless banking as their first shot to gain access to mainstream finance, to that of the profit-seeking financial institution/telecom operator/agent/investor who see this as a lucrative business opportunity.

Additionally, identifying a comprehensive list of measurable indicators which will suggest whether the objectives of each of the stakeholders involved in a branchless banking venture are being accomplished makes the challenge even more unique. It is imperative that we narrow in on a standard set of “Key Success Indicators” for such branchless banking projects and we do so while our memories of the Andhra Pradesh microfinance crisis are still fresh. Some of the Key “Success” Indicators in the pre-Andhra Pradesh microfinance crisis era were gross loan portfolio and the number of customers acquired, and clearly, it was these indicators that set MFIs on the course for failure (quite contrary to its name!). I don’t dismiss the importance of these numbers in measuring the (operational/financial) performance of the venture, but assuming that performing well on these indicators denotes success is being narrow-minded. The MFIs in question did just that; in their blind efforts to increase their market share and their bottom line in the process, they lost sight of the fact that success of their ventures was contingent on all their stakeholders achieving their objectives.

It is critical that we do not repeat those very mistakes as we usher in this new generation of banking. It is also critical that our Key Success Indicators are not focused just on the bottom line because, frankly, whose bottom line do we want to measure?

Please follow this space for more articles on this topic. Meanwhile, I would love to hear your thoughts or comments on this.


One thought on “Whose “bottom” line is it anyway?

  1. Vijesh, consciencious financial institutions utilizing ADC’s to achieve triple bottom line goals may need to be more focussed upon, to meet the innovation challenge.

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