You’ve heard of micro loans, but how about microsavings?

In a pilot program to start later this year, Des Moines, Iowa-based Social Money is looking to help underserved customers in India save money with the use of its CorePro core banking software.

The effort is funded by a grant from the Gates Foundation, which awarded “seven figures” to Social Money to advance its work in India. Kosta Peric, a founder of Innotribe, heads up the financial services for the underserved division at the Gates Foundation. The Gates Foundation serves in an advisory role on the Social Money project, but is not an active participant.

Social Money had some exposure to India already, working with ICICI Bank in Mumbai to advance Social Money’s flagship Smartypig product, a social, goals-driven savings account.

The problem Social Money has now set out to solve is bringing banking to the financially underserved, according to Social Money President Scott McCormack. “Money moves so fast,” McCormack told Bank Innovation, describing financial services in India. “It’s not a bank, it’s an hourly holding place — it comes in, then it goes.”

McCormack described a transaction he witnessed at a business correspondent, which is a regulated, nonbank agent licensed to perform financial transactions. A migrant worker came in and pulled out a bundle of bills from deep within his robe. McCormack explained: “Where he lives, probably in a room with a dozen other workers, it’s not safe to keep his money anywhere but in a bag tucked way up on his chest.”

The worker then handed the bills to the correspondent, who counted out 1,500 rupees ($24) and entered them on his computer. This money was to be transmitted to the worker’s wife in another state, who would withdraw the cash at another agent and then store the bills at her home, typically in a jar, McCormack said. Fees at business correspondents for both withdrawals and deposits range anywhere from 2% to 5%. The agent then handed 200 rupees ($3.25) back to the worker, who tucked the bills away and departed.

That $3.25, McCormack said, is where the opportunity lies. “These are not large sums of money,” McCormack said. “But savings can be impactful even in a $1-a-day economy. The challenge is making it cost-effective.”

With a more advanced system, in other words, the business correspondent could serve more of the customer’s needs. “What if the correspondent, instead of handing the cash back, could deposit it and hold it safely, earning interest?” To that end, Social Money is working to integrate its CorePro software with business correspondents’ systems, giving customers access to deposit accounts and savings accounts. “CorePro makes this possible at a low cost,” McCormack said, “so that even an account that would be considered ‘inactive’ and unprofitable in the U.S. could be profitable in India.”

McCormack pointed out that this transaction, trusting the agent to count the money, shows there is a great deal of trust in the system, which is promising for the adoption of more advanced banking functions. But there will need to be financial education as well. “When you’re used to putting money in a jar,” he said, “it takes a bit of education to understand that if you put a dollar here [with the agent,] it’s safe here, and you can come get it tomorrow or next week.”

Mobile is also an important part of financial life in India, and Social Money is working on integrating CorePro with existing mobile infrastructure as well, so that feature phone users can perform simple transactions.

“It’s about digitizing currency, inch by inch,” McCormack said. “It’s gratifying to know we can make a difference, and help create a habit and opportunity for savings, without impacting the profitability model of banks and business correspondents.”

ICICI Bank will assist Social Money in its efforts to bring banking services to the underbanked in India. “They are connected to the issue, and have a mission of financial inclusion,” McCormack said.

The experience in India, McCormack said, took him back to his roots as a banker. (He began his financial career at the First National Bank of Omaha.) “It’s not, ‘Take this product and make it work’ in this case,” he said. “It’s, break it down to ashes and build it back up.”

A conversation he had with some Indian bankers after his visit to the business correspondent crystallized the situation. “You’ve always got the end-mile problem with customers. It’s not so much the end mile here, it’s the inches it takes it to get to that end mile.”