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From Prodem to Pragati - ATMs for the Poor
Robert Katz, 4 Dec 06
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Poor people don’t need ATMs, right? Wrong. On Friday, the Financial Times reported on Citigroup’s plan to roll out biometric ATMs to serve Indian slum communities over the next couple of months. The machines use biometric identification (thumbprints) instead of personal identification numbers, and interact with customers using voiceover technology instead of written instructions – enabling illiterate customers to access their bank accounts. The program, dubbed Citibank Pragati, is not microfinance; these are savings accounts, not loans. According to Citibank, Pragati accounts will have no minimum balance requirements and no charges. It’s not clear from the articles what kind of identification requirements customers must meet to open an account, but as a product targeting low-income customers, I assume they will be relatively straightforward.

This is not the first time a financial services company has reached out to low-income customers with special ATMs. Citibank follows in the footsteps of PRODEM, a Bolivian microfinance NGO turned bank, who first introduced similar machines back in 1999. PRODEM’s machines also use biometric technology. When they were first designed, PRODEM executives worried that thieves could cut off customers’ thumbs in order to access accounts; in response, company engineers designed the biometrics to recognize whether blood was flowing through the hand, thereby making a cut-off thumb worthless. Like the Pragati machines, PRODEM’s ATMs use color-coded screens and voiceover technology to interact with a largely illiterate customer base. (“Touch the blue button for withdrawals? takes the place of a button next to the word “Withdrawal?). Bolivian clients can choose from between Spanish, Quechua, and Aymara (the latter two are indigenous languages) when accessing their accounts.

So – do poor people want and need ATMs? PRODEM was able to transition from a non-profit microfinance institution to a for-profit bank in part due to the success of the ATMs; they expanded operations into new markets quickly and easily using new technology. But do low-income customers want and use the machines?

This question was put to the test in 2000 and again in 2005 during large-scale riots in Bolivia (the first over water privatization; the second over natural gas contracts). While storefronts and cars burned in the streets of La Paz and throughout the Bolivian countryside, not one PRODEM ATM was damaged or looted. Why? I’d suggest that some of the rioters – largely poor, often from indigenous tribes – were also PRODEM customers, and they valued the ATMs. Looting them would not be an act of rebellion against the government or entrenched business interests; they would only be hurting themselves.

Citibank’s Pragati initiative sounds like PRODEM, but for India. I’m not sure, but I’m willing to bet that Citi did their homework before embarking on this venture, and that they’re consciously integrating the success story of a small Bolivian bank into their strategy. (Full disclosure: World Resources Institute, my employer, published a great business case study (PDF) of the PRODEM model back in 2003). What sets this apart from PRODEM, however, is the sheer size and reach of Citibank. They are the world’s largest financial services company. They’re taking a proven model and testing it in a new market; if it works, they could roll out similar machines – configured for local languages – in hundreds of other emerging markets relatively quickly.

People often tell me that they like and support the base of the pyramid theory, which says that companies should view low-income communities as customers and suppliers, not as aid recipients. Then they tell me that it’s just a great idea, and that it only works in certain cases. If Pragati takes hold in India – effectively copying the Bolivian PRODEM’s model in a completely new market – then that will prove some doubters wrong. And there will be customers to prove it.

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Thanks for this post. I find it particularly relevant to my native environment in Nigeria. WANGONeT, the NGO I run, has just successfully designed and deployed touchscreen information kiosks with important HIV/AIDS public service information in five Nigerian languages. The initial response and public reception has been great, we are now exploring ways in which we harness the clear potentials of this offering to other underserved communities. We are presently working on non-text based GUIs, using culturally relevant symbols as a new platform for providing financial and other services to poor and informal sectors of our economy. I welcome more information, contacts and ideas on topic. Thanks for the post

Posted by: Tunji Lardner on 5 Dec 06

As an Indian, I am very curious about how the ATMs will be implemented. One thing I am rather afraid of is that local strongmen might end up bullying some people into what would be the equivalent of money laundering. Hopefully Citi has thought through some of these issues, because the idea is great.

Posted by: Deepak on 7 Dec 06

I would really appreciate such move from citibank. I am sure such moves make banking services accessible to the otherwise inaccessible section of the society. It is a wonderful concept and only the world class bank like citibank India can think of such moves.

Posted by: Sameer on 18 Dec 06



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