Sakchyam is an Access to Finance initiative funded by UK Aid and implemented in Nepal by Louis Berger, for DFID Nepal in partnership with local and international organisations. Sakchyam is currently supporting 286 BLB openings in the mid and far-west and in earthquake-affected districts. This BLB strategy includes the use of Point of Sale (POS) machines, mobile phones and tablets through agents, extension counters and physical branches to rollout micro-banking products, G2P payments and value chain financing models. Louis Berger’s Senior Vice-president Baljit Vohra is Sakchyam’s Team Leader. Vohra spoke to New Business Age as Sakchayam completes its first year to discuss the different dimensions of the initiative.

First of all, congratulations on completing a year in Nepal. I would like to begin by asking: How are Sakchyam’s goals congruent with the objectives of Louis Berger?
Before we go to Louis Berger, let’s talk about the broader objectives of the government of Nepal with regard to access to finance. Improving access to finance to deal with inequalities is an overarching goal of the government of Nepal; it is not just the case here in Nepal, it is a global phenomenon. Inequality, as you see, is a big issue and it comes in different forms. The way we deal with inequality in a small way is by improving access to financial services. 

If you go to the remotest parts of the country you don’t get things we are accustomed to in a city like Kathmandu. We have many range of options; we can go to the ATM, go to the bank, we have access to credit and saving instruments and so on. Because our own income and savings may not be enough for us to grow, we can take a loan to buy a car, or send our children to school. And this is what we would like to make sure that every individual on this planet has access to. 

What is the difference between access to finance and access to credit?
Access to finance is a broader term than access to credit. Access to credit just relates to the ability to borrow while access to finance relates also to the ability to save. When you have money and you can invest in any instrument that can give you a great return, then you have access to finance; it is more than just credit. Access to finance helps you get insurance, investment opportunities and saving instruments.

Let’s get back to the broader objectives of the government. What are the government’s objectives related to access to finance? 
The government basically has two-three objectives. So the first objective of the government is to create avenues for the unbanked so that they have the facilities as others in a country. So, financial inclusion—getting more people into the financial system is the first goal. 

The second goal is related to the first goal itself; it is to see to it that these people earn enough by way of livelihood to invest in the future to be able to become productive members of the economy. This leads to the creation of jobs because it is not individuals but the enterprises that we want to see borrow money. So the second goal is to be able to provide access to finance to enterprises so that they are able to develop and grow and generate employment. 

Revolving around all these is the overarching goal of the government to have a type of formal banking institution in every single VDC of the country, and at least one bank branch in every municipality. So within this context, the issue of access to finance is being raised. 

What are the indicators that we can use to check the level of financial inclusion in a country?
There are a number of ways to do that.  The first way is to look at the credit side: what has been the total increment in credit to retail and the wholesale sectors. Second is the number of new micro and small enterprises formed. Third is the employment that they provide. Revolving around all these, the impact on consumer behaviour and saving patterns also need to be considered. And the other thing is innovation- what are the different product and services that have been made available to the people; these are the main important issue that the indicators capture.

We have seen similar government programmes in the past. But they have not involved BFIs. Do you think the involvement of BFIs in this programme is an advantage?
There are differences between government-funded programmes and donor-funded programmes. A programme like ours aims to increase local capacity. The word Sakchyam itself means ‘building capacity’ of the people. When we work with institutions, they are in the position to offer products that are relevant to the people and through creating these linkage mechanisms we can reach out to the local people. And the other thing about working with institutions is at the end of the day, all that is required is a sustainable model. Yes! The government programmes have the right reasons for being what they are, but they tend to be more inclined towards subsidies. But long-term sustainability of a lot of those government programmes can sometimes be questioned because they don’t always look at it from the sustainable point of view. But if at the right time an incentive structure is set up with the financial institutions, and they are monitored, then you can reach similar kinds of objectives that you would otherwise reach with the government because historically, it has been proven around the world that a government should not run any business or organisation; the role of a government is to govern, manage and monitor. 

Yes, in the case of Sakchyam, we are working with farmers; we work with households and enterprises looking for ways to break the constraints. So, what can be done, how are the people making their living, what is the local economy like, what are the key sectors of value chain around which people make a living, how are they financing their day to day needs: these are the things we look at. We also look at what can be done by working with institutions locally or at the national and international level to incentivise them to go those (remote) areas, support them and bring a change in the people’s living standard in a sustainable way. 

We do this by sharing the cost with BFIs to expand to communities and help them create more products and services for which they cannot put in their own resources. We come in and give them technical resources so they can take these new products and services to the communities. This is the business model we bring in by creating avenues for people to be able to sustain themselves and build a livelihood.

Let me just give you one example. We got a situation in the Far-west. When sugarcane farmers sell their produce to sugar mills, they have to wait for 14-16 months for cash, and even if they received cash before that, they would get a price lower than the market price. So what is happening now is that the farmers bring the sugarcane to the mill (the price of sugarcane for the entire year is already negotiated). So the farmers get an invoice which they can take to the bank, and the bank gives them credit of up to 75% (at a low interest rate) of the value of the invoice; the farmers get money instantly. They don’t have to worry about borrowing money. 

Now, we don’t want the farmers to walk 40-45 km every time, so we are trying to open bank branches in every VDC. This is what Sakchyam is trying to do.  This is what value chain financing is all about.

Louis Berger has been involved in big ticket infrastructure projects in different parts of the world. In Nepal also we have been talking about bringing in big infrastructure projects. So why did the company choose a grass-roots programme over a mega infrastructure project?
I think it goes down to Louis Berger who in 1953 formed a company; he came from a farming background. When he was growing up, he wanted to link his community to the market. That is why our tagline is ‘solution for a better world’. The only way he could transform his village was by building roads. So that was how the company was started. But as we started taking on larger projects, we never forgot where we came from. 

Did you come to Nepal to lay the foundation for future investments in infrastructure?
Yes the company has a history here in Nepal where we have built some roads. In fact, the roads were built during the insurgency time with help of US AID; we are not new to Nepal. But you are absolutely right, this is also one of our long-term goals. Right now, we want to position ourselves and build the infrastructure of the country. Yes this could serve as a good entry point because it helps us to understand communities, and to get to see the country.

“At Sakchyam, we want to be a game-changer”
You see, there is an ongoing global discussion on the whole issue of microfinance. You may have heard stories from India where farmers have committed suicide because of their inability to pay high interests. But there are also stories where microfinance has helped and has been proven to be successful. I think the way to discuss this is that we are here to provide technical support, and the lending is done by a registered organisation. But what we do is that we adopt certain measures to offset the cost. We tell the institutions we work with that we would like to see how you’d do your pricing. 

What were your early days in Nepal like? What were the challenges?
The main idea was to work with the mobile banking model. Our plan was to go out there and understand the local requirements. The main challenge was the geography. We could not drive to these places, and we had to walk; there were frequent landslides. 

The region (Far-west) has been ignored for a long time, so the level of financial literacy was another big challenge. Third, the communities are scattered and it was difficult to reach them; there are just two or three houses in a village, and we had to walk for two days to reach them. The other big challenge we faced was in areas like Achham which were hit hard by the Maoist insurgency. The people do not have records of their land; this made it difficult for us to convince banks to invest in communities that do not have physical assets.

Were the solutions from the grassroots level or were they devised by experts?
I think it was a joint effort. We went to these communities, we sat down with LDOs, school principals and members of the communities and discussed these issues. 

Were there any advantages of working in these areas?
One of the good things was that we have a good team. All of the team members are driven by passion and their interest; it’s not just another job for them. Even with difficult geography and bad roads, we were able to adapt to the situation. And we also have good support from the Ministry of Finance, Nepal Rastra Bank, NPC and partner cooperatives.

There were some technological innovations that were implemented in your programme. Could you give some examples?
At Sakchyam, we want to be a game-changer. That is only possible by making people think differently and making them do things differently. Despite the fact that there are many people who understand technology, they have not been able to make technology do things at the level that we would like to see it being done. Using tab banking is a big idea behind Sakchyam. Second is branchless banking through mobile phones, tab and POS devices. Yes you will see a lot more innovation form Sakchyam in the days to come. 

Sakchyam’s tenure is for five years. After five years what are the results you would like to see?
We want to see large numbers of people get access to financial services. We want to see a lot more enterprises being formed- small and medium. We want to change the dynamic in terms of how financial literacy programmes are conducted, and we also want to bring in the different types of approaches for value chain financing which have never been introduced in Nepal.