Indian Institute of Management Bangalore

Elective Course for PGP

Term 4 of PGP
Rural Banking and Financial Inclusion
Instructor: Professor M S Sriram
Credits: 3.0

Objectives

We live in a VCUAI (Volatile, Complex, Uncertain, Ambiguous and Interconnected)

world. The element of interconnection is more applicable to the financial world due to the
seamlessness of borders.
The course on Rural Banking and Financial Inclusion locates the agenda of inclusion in
this complex world of banking and looks at how the poor and vulnerable could
potentially get integrated into this world, while we build insular systems to protect them
from the downside shocks.
The course is intended to give an exposure to the participants on the theoretical
underpinnings how rural financial markets operate; the role of institutions; the policy
framework and how these markets have evolved in the Indian context. There has been
much action on new institutional forms in the past year, which we critically review. We
also look at this market from the now famous sub-prime lens to look at how risky they are
for the system and how the system could deal with these customers.
The course, in the process, will also examine different institutional forms – commercial
banks, regional rural banks, local area banks; co-operatives and non-bank finance
institutions in Rural Banking.

Learning Objectives
To develop a better understanding of banking with the last mile customer by
understanding
a. the economic, regulatory and market ecosystems
b. the vulnerabilities of the customer ecosystem
c. the linkages with the systemic risks
d. the consumer protection architecture needed

Pedagogy
The course would be based on lectures readings and cases that highlight practice. Cases
are highlighted in red. Preparation for the case on those days is absolutely essential. Case
material will be distributed in hard copy. For the rest of the reading, the appropriate links
are provided (highlighted in blue) or copies are uploaded on moodle (highlighted in
green)

Evaluation
Reflection Memos (750 words, 3 in number): 30%
Term Paper (live case study, theme paper): 30%
End Term Open Book Exam 30%
Class Participation 10%

Attendance: Not Compulsory, but absence may affect ability to submit Reflection
Memos.

Session Plan

Module I: Customers

Session 1 Introduction: Landscape of the complex world – the role

and justification for inclusion
Reading: Too Big to Fail versus Too Small to be Counted
Case: Case: David Moss and Cole Bolton: Fighting a
Dangerous Financial Fire: The Federal Response to the
Crisis of 2007-09 HBS Case No.9-711-104
Session 2 Introduction to the customers:
Readings: 1. The Chettiars in Burma Sean Turnell
2. Finance for Livelihoods at the Margins: Moneylender
Credit in a Rajasthan Village – J Howard M Jones
Case (Continued): David Moss and Cole Bolton: Fighting
a Dangerous Financial Fire: The Federal Response to the
Crisis of 2007-09 HBS Case No.9-711-104
Session 3 What is microfinance: The concept of Trust, Social
Collateral, and transaction costs
Reading: Information Asymmetry and Trust: A
framework for studying microFinance in India
Session 4 Models of microFinance: The Grameen Model, its
replicators in India and its view of the customers
Reading: From Credit to Finance: The Maturing of
Grameen Bank
Case: Geetika Shah and Charles Dhanraj: Bandhan (A)
Advancing Financial Inclusion in India. IMD 805
Session 5 Models of microFinance: The Self-Help Groups, its
linkage with the customers and banks: Lecture
Session 6 Models of microFinance: Individual banking and Joint
Liability groups: Lecture
Session 7 Mainstream Banking and inclusive Finance – Where do
they meet? Examining the design and roll out of PM Jan
Dhan Yojana
Readings 1.Future of Rural Banking: YV Reddy
2. Review of PMJDY – M S Sriram
3. Act in Haste, Repent at Leisure: Review of PMJDY –
M S Sriram
Session 8 The demand side for rural financial services
Readings: 1. Financial Flows of the Rural Poor: A Study
in Dungarpur District
 2.Prospects and Assessment of Rural Credit: Deodhar and
Sriram
Session 9 Understanding other financial services: savings
Reading: The poor and their money [Book] – Stuart
Rutherford
Case: Nava Ashraf, Dean Karlan, Wesley Yin, Marc
Shotland (2014) Evaluation Microsavings Programmes:
Green Bank of Philippines (A) HBS Case No. 9-909-062
Session 10 Other financial services: insurance, social security and
pensions: Lecture
Reading: Annapurna, Review of Microinsurance
Module II: Institutions
Session 11 Institutional Architecture of for-profit models
Reading: CGAP Reflections on the Compartamos Initial
Public Offering: A Case Study on Microfinance Interest
Rates and Profits
Case: Shainesh G and Menaka Rao (2018) Grameen
Koota: The Turnaround for Financial Inclusion [IIMB
Case No. IMB 691]
Session 12 Financial Inclusion: The SME Sector and the MUDRA
Bank
Case: Sriram MS et al., Vistaar Finance India IIMB Case
Session 13 Placeholder for Guest
Session 14 Embracing the for-profit model: Managing image,
mission and integrity.
Reading: Commercialisation of Microfinance in India: A
Discussion of the Emperor’s Apparel
Microfinance: A Fairytale turns into a Nightmare
Case: Sriram MS, AP Microfinance Crisis: Discipline or
Death?
Session 15 Institutional Architecture for scaling Self Help Groups
Case: Sriram MS, Belstar India Finance IMB 661
Session 16 Financial Inclusion: The role of State as a provider
Readings: 1. Report of the Internal Working Group on
Priority Sector
Session 17 Understanding Co-operatives: A review of legal
architecture, and reform processes
Reading: 1. Member Funds and Co-operative
Performance
2. Kerala Cooperative Bank New Institutions: The
journey from microfinance to banking
Session 18 Do commercial banks fit into the niche inclusive finance?
Case(s): Geetika Shah and Charles Dhanraj: Bandhan (A)
Advancing Financial Inclusion in India. IMD 805 and
Bandhan (B) Sustainable Banking in India IMD 823
Session 19 Regional Rural Banks, Local Area Banks and Small
Finance Banks – Evolution of policy and performance
 Case: Puran Singh, Nupur Pavan Bang, Kaushik
Bhattacharjee and Rajesh Chakrabarti: Krishna Bhima
Samruddhi Local Area Bank (KBSLAB) A Decade
Review. ISB018
Reading: Review of Local Area Banks and Policy
Implications for Narrow Banks in India
Session 20 Commercial Banks in rural areas: Examining the
evolution of policy and performance
Reading: 1. Sriram MS, State of financial inclusion in
India: In search of focus. See, page 43-45

Deadlines:
1. Confirmation of the name of group members and name of organization/topic: Sunday
XXth June 2019 23:59:59
2. Proposal on what will be done in the project Saturday XXth June 2019 23:59:59
3. First reflection memo due on Saturday XXth June 2019 23:59:59
4. In-principle approval from the host organisation (in case the assignment is a case
study) by Monday XXth June 2019 23:59:59. You just need to confirm to me that the
organisation has agreed. I am not looking for any documentary evidence. Just an
assurance.
5. Second reflection memo due on Saturday XXth June 2019 23:59:59
6. Interim progress report Saturday XXth July 2019 23:59:59
7. Third reflection memo due on Saturday XXst July 2019 23:59:59
8. Final term paper report due on Thursday XXth August 2019 23:59:59

End Term Exam XXnd August 2019 XXXX Hrs to XXXX Hrs.