The Government of Andhra Pradesh in India has proposed to roll out Smartcard technology to a further 3 million rural people in 8 districts in the state, giving them access to a bank account for the first time. The Smartcard technology provides access to banking facilities for low-income groups in areas without existing financial services infrastructure.

The proposal comes after the technology was used successfully in a pilot scheme to organise the payments of the Andhra Pradesh Rural Employment Guarantee Scheme (APREGS) (which provides at least 100 days of guaranteed wage employment per year to every household whose adult members volunteer to do unskilled manual work) and the state’s Social Security Pension Scheme.

The Department of Rural Development has entered into a partnership agreement with the State Bank of India, State Bank of Hyderabad, Andhra Bank, Canara Bank, Union Bank of India and Axis Bank to implement the Smartcard technology. The banks will appoint a business correspondent in each village to provide alternative branch based banking services to beneficiaries, who will be issued with a zero balance savings banks account in the first instance. The business correspondent will be provided point of sale equipment, which may be a palm top, hand held recorder, or mobile phone based device. This instrument would also work as a printer and a biometric identification tool.

Smartcards can be used for various forms of financial services such as small deposit taking, credit disbursements and microinsurance. During enrolment, basic client information is loaded onto the card as well as some biometric data, such as the client’s fingerprint, which is stored for security and identification. The card then functions as an electronic passbook on which transactions can be recorded at once, speeding up the process and improving accuracy.

Smartcards are considered to be essential in India’s drive to improve financial inclusion in rural areas and there are a number of entrants in the market. Last month MicroCapital reported that A.Little.World, a financial inclusion company in India, is piloting a Smartcard project in partnership with seven different public and private banks in seven Indian states.

Amy Rennison, MicroCapital writer

Additional Sources:

The Microfinance Gateway:
http://www.microfinancegateway.org/content/article/detail/44785

The Hindu:
http://www.hindu.com/2007/11/10/stories/2007111054820600.htm

The Microfinance Gateway: Card Technologies
http://www.microfinancegateway.org/resource_centers/technology/iss_software/list_technologies/6

National Rural Employment Scheme – AP
http://nrega.ap.gov.in/Nregs/Home_eng.jsp