The assumption that a big-name bank with a set of smaller local partners, yoked together by technology, will automatically win over the local money lenders or the informal financial sector needs to be challenged. “Biometrics” and ATMs are not consumer value propositions, they are the supply side story.

The local pawn broker who is usurious is also culturally sensitive. He knows that the mangalsutra mortgaged to him needs to appear on the bride’s neck at the time of a wedding and that is part of his idea of customer service. He will wait behind the venue, both to hand it over and take it back. A friend whose family is in the business tells the story of how it offered the service of making artificial jewellery in exactly the same pattern as the items mortgaged by customers – a winning proposition for both sides.

Similarly, in urban slums people talk of the money lender whose daily collection agent knows when not to enter your house (when there are visitors, for instance) and when to come in order to not run into family members who should not know.

Research by Centre of Gravity, a Bangalore-based consumer research organisation, shows that anything that requires taking time out of work, travel or filing papers results in procrastination and subtle resistance because of the opportunity cost or time and the current level of doorstep service by the informal sector. Flexibility on all fronts is a key requirement for the target consumer for financial inclusion and is more valued than even returns. Yet forced savings devices that help you work towards a goal like a wedding, social ceremony or buying a house or vehicle are enormously valued. That’s why chit funds are so popular. They are viewed as an expenditure. “Working capital” loans are also very important and these are for the day-to-day business of living. Just as micro- and small enterprises have short-term and bridge working capital loans, so too do people; and banking products need to be configured to deal with this.

As Centre of Gravity puts it, life for this segment of people is like the snakes and ladders game. The goal is an upward movement; but although the ladders to move up exist there are potentially double the number of snakes to pull a family down. The snakes are “must do” social expenses – birth and marriage rituals, gold ornaments for a close relative, financial losses from being cheated by a friend or losing a job or being swindled by the chit fund man or emergencies like medical, travel, death and so on. The ladders are education, having money to send your son to a job in a city but cushioning him till he settles down and learns the ropes and so on. The objective of financial inclusion is to help de-risk customers in their lives. If there is dengue in the air or food prices go up, can repayment rates be adjusted? If everything is going well, can there be a “save for gold” scheme in the form of a chit-fund type product?

There is a huge market for education and home improvement loans. The census data shows how many houses have pucca walls but kuchcha floors, or houses but no toilets or toilets but no water storage facility. It is clear that new products have to be designed for these new customers, their needs and behavioural cultural nuances.

And then comes the question of how to make the ecosystem that serves this segment profitable. That’s the time to talk of technology and hand-held devices and to study how the local money lender does things and understand whether a special set of banks needs to be created because the big guys just don’t get it.

The magic ingredient is caring about customers. One doesn’t have to be a bleeding heart liberal and think about financial inclusion as CSR. One has to, to use a Prahalad prescription, empathise with human needs and co-create with customers who are already being served by the informal sector. Regulators must also see the light. The fatwa method of financial inclusion won’t really work.