LCommerce Observer

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Banking for Local Commerce to Banking on LCommerce

The journey from TMA Pai's Syndicate Bank to Democratizing Digital Economy
PUBLISHED Dec 23, 2020

Tonse Madhav Anant Pai (TMA Pai) would not have started a Bank in the provincial town of Udupi if he followed conventional business wisdom that required existing economic activity to support a Bank. In the days when the visionary Pai started Canara Industrial and Banking Syndicate in Udupi, most Banks were in Bombay, Delhi, or Calcutta. Pai and some of his peers were building something which later became the bedrock of the Indian banking system for several decades, i.e. Financial inclusion and enabling smaller communities in nooks and corners of India.

Pai doubled up as a banker and a doctor. His medical practice gave him a deep understanding of people’s needs. He was empathetic to the long-term well-being of his clients and patients but didn’t think of theBank’s activity as social service. His is a case study in combining a deep understanding of local needs, a powerful vision for the future, and the application of finance to enable inclusive growth and well-being. The impact of the work is visible in the lives of the millions that have been enriched, including mine.

Time has passed since Pai’s pioneering work, and now the world is hyper-connected and financialized. However, one thing that is still true is that sustainable development happens when you combine a deep understanding of local needs, a strong vision of the future, and the application of finance to enable inclusive growth and well-being. The impact that Pai made in decades can now be achieved in years and at scale when we apply good, old-fashioned banking practices of financing productive activity. The big difference between then and now is that there is no need to funnel community deposits into these financing activities since we now have digital finance.

Local commerce (L-commerce) is a system where multiple community leaders and business mentors organize the supply and demand ecosystem of all the production and consumption activity of a community on an ownerless digital platform. This creates the local intelligence network, which is like putting multiplePai’s together.

Since it is digital and therefore transparent, there is an incentive for everyone to behave in the community’s best interest. There are many advantages of L-commerce platforms compared to the e-commerce and hyper-local commerce platforms. Primarily, L-commerce promotes direct producer-consumer, buyer-seller relationships, and doesn’t create a barrier as with the platforms. Secondly, L-commerce is governed and operated locally as against centrally in the case of platforms. Lastly, L-commerce covers all the production and consumption activity in a town as against specific segments or product categories in the case of platforms. L-Commerce enables the circulation of value within a community or locality as against top-downvalue extraction with traditional eCommerce platforms.

Capital to finance product development and productivity improvements is brought in digitally from banks and NBFCs leveraging the Open Credit Enablement Network (OCEN). As L-commerce activities become vibrant within a community, producers and sellers in the community could avail of tailored financial products to meet their working capital and expansion plans.

For example, a home-based pickles producer could apply for a loan to finance the creation of a production and bottling facility, therefore expanding production to meet demand. A merchant could seek working capital limits to finance inventory expansion or to expand product categories and so on. Loans can be applied for directly on their seller Apps, receive approvals and disbursements within minutes, and service the repayments directly from within their Apps.

2020 is a year where we have discovered “the good” in each of us and our innate urge to connect with a place of residence and our fellow residents. Just like the Udupi and Manipal of today emerged from the vision of one man, there are millions of leaders across our nation with a vision for the future of their hometown which they can shape through digital L-commerce platforms. The seeds of which have already been sown.

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