With a vast majority of the Indian population living in the rural hinterland, its economy and growth are linked to developmental efforts. Crucial to this is in ensuring that the fruits of financial inclusion reaches their doorstep. An article in today’s Economic Times, showcases the work of IFMR Trust and KGFS towards this endeavor.
Click here to read the article.
Last month the Wealth-Management Cross-Functional team had visited 15 households in Thanjavur to pilot the Wealth Management process. A week ago we revisited some of these households with a draft of the Financial Wellbeing Report to see how we could engage in a constructive dialogue with the household on various aspects of their financial lives. One such family was that of Jaya (name changed), a customer enrolled at Andipatti branch of Pudhuaaru KGFS.
The Family – Jaya (40) and her husband Rajan (42) live in a thatched house in Karukkadipatti village. The couple has three children Neetha (16), Vinodini (18) and Pramod (20). While the daughters Neetha (1st Year BSc) and Vinodini (10th Std) are still studying, the eldest son Pramod has just started working in Qatar as a driver. The daughters stay at Jaya’s sister’s house in a nearby village.
Their Activities – Till about 5 years back, Rajan worked in a hotel in Singapore. When he returned, he decided to manage the tea shop business that his father used to run. Rajan manages to make about Rs.1,20,000 a year from the shop. Apart from this the family owns about 1.3 acres of agricultural land and manages a net income of about Rs.35,000 by growing paddy for two seasons and black gram for one. The two cows they have fetch them a net income of Rs.4,000 a year. The family spends about Rs.39,000 a year on routine household expenses. Picture: Rajan (right) interacting with the team.
Goals – Among the list of goals that the household wishes to fulfil, Neetha and Vinodini’s education over the next five years alone will cost the family Rs. 3.6 lakhs (1 lakh = 1,00,000). Other priorities include their marriage (Rs. 5 lakhs each) and expansion of the shop (Rs 20,000).
With this and other information about the household, we set about preparing a Financial Wellbeing Report for them. The report talks about four pathways (Plan-Grow-Protect-Diversify) towards financial wellbeing – all of which try to answer the central question for the customer “How can Wealth Management help improve my financial wellbeing?”
The Advice – The specific advice around protection includes Life Insurance for Jaya (Rs.50,000), Pramod (Rs.5,00,000), Vinodini (Rs.4,20,000) and Neetha (Rs.3,80,000); Accident Insurance for Jaya (Rs.2,00,000), Rajan (Rs.1,75,000), Pramod, Vinodini & Neetha (Rs.5,50,000 each). Insurance for the cow and shop is also suggested upto their current market values. Life Insurance decisions are linked to human capital (Present Value of Lifetime Income net of Own Expenses) of each member.
As regards the surplus generated by the household, the advice was to allocate it in the following proportion: Index Fund – 20%, Gold – 18% and MMMF – 62%. This advice is consistent with the desired features of high returns, diversification from local assets and diversification in assets uncorrelated with human capital. Jaya should also maintain a separate balance of about Rs. 10,000 in the MMMF account to take care of liquidity needs.
The shop being a high TIP (Total Income Potential) asset, the advice is to borrow for its renovation. For all other medium to long-term goals that are 3 to 8 years away, a combination of savings and borrowing is advised.
For a full explanation of Jaya’s Financial wellbeing report please click here.
We would urge all those reading this to share their comments and suggestions on the process and the recommendations in the comments section below. What are we missing?
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Shilpa Sathe of InnerWorlds and Amit Shah of Rural Finance contributed to this post.
As part of its community connect program, Dhanei KGFS had organized a drawing competition for children to let their imagination and creativity loose through colors. It was month of May, peak of summer season where temperature soars, but that was hardly a deterrent to the exuberance of children who braved the heat and reached the venue well before scheduled time. Keeping this in mind Dhanei KGFS conducted the event early morning so that kids can be home before the scorching heat takes over.
Registration process for the competition started at 07:00 AM at the venue of Badakushastali High School with overall 173 children registering for the competition; they were then divided into three categories according to their age and the class in which they were studying.
Student participants
The competition started at 8:00 AM sharp and the theme was “My Village”, allowing students complete liberty to wander through their world of imaginations and draw the best they can. The drawings were collected one hour later and it was a visual treat to look at the panorama of colors on display and the vivid thoughts that children depicted in their drawings.
A drawing master from the school helped to judge the drawings and the results were announced at half past nine. There were three winners from each category and ten consolation prizes were also awarded to children from each category as a token of their participation and their skill. The community connect program was finally concluded at half past ten with the prize distribution ceremony.
Some of the winning entries
Overall it was a heartening experience to engage the community that we are serving through such a program and see the little artists display remarkable creativity.
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Itimayee Pala of Dhanei KGFS contributed to this post.
Livestock rearing is central to the livelihoods and survival of small marginal farmers and landless agricultural laborers across the country. As livestock related activities help to maintain a daily inflow of income for these households, livestock economy is a source of self-insurance for farmers. It provides a diversified source of income and mitigates the uncertainties of seasonal income from their traditional sources like agriculture.
In line with the mission to serve this target group of remote rural customers in Thanjavur district, Pudhuaaru KGFS (PKGFS) launched its ‘Livestock Loan’ product to fund customers who are interested in pursuing dairying activity.
Some of the salient features of this product are:
First Livestock loan disbursement. From left: Rohit Mukkawar (IFMR Rural Finance product and process team), Manikandan (Wealth Manger), Ravi (Asst Regional Manager – PKGFS ) handing over the loan amount to customer Poongothai & her husband Rajenthiran
The first loan was disbursed at Veeramangudi branch on 25th May, 2010, after the mandatory health checkup and valuation by Dr. Gangadharan, DNE’s veterinarian on the field. The second loan was disbursed shortly afterwards to customer Malarkodi after completing the necessary ground procedures.
Rohit Mukkawar says “The product & process were designed after taking inputs from various sources. Interested & eligible customers are being identified by our wealth managers. ARMs along with the veterinarian will conduct the mandatory health check up & valuation process before disbursing the loan. We look forward for a smooth piloting phase and hope to see the product reach the scale-up stage at the earliest”.
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Bharathi Kannamma of IFMR Rural Finance contributed to this post.
The sight of the mighty Himalayas and the scenic surroundings of the hilly terrain can be a source of respite for sore eyes, but when taken in the context of connectivity (both telecommunications and internet) it presents a critical challenge.
Sahastradhara KGFS (SKGFS) located on the foothills of the Himalayas, faced issues of intermittent network connectivity that interfered with its day-to-day operations, resulting in transaction delays and increase in customer wait-time at its branches.
The hilly terrain not only caused instability in continuous network availability at the SKGFS branches, but also the eventual disruption took a lot of time to correct. The options available from the network providers were limited and costly.
Earlier VSATs (Very Small Aperture Terminal) were used to provide Internet connectivity to the SKGFS branches. However VSATs have their own challenges of latency (delay in transmission) and are prone to disruption due to erratic weather. To top it, the running costs of VSATs were high.
To address these issues, IFMR Rural Finance in partnership with AirJaldi – which used the technology that came out of the University of California, Berkeley – created an interconnected network between the SKGFS headquarters in Jolly Grant and its branches, with Internet being supplied through this network. The average distance between branches is 10 kms with the first branch being 75 kms away from the headoffice in Jolly Grant.
Relaying seamless connectivity
The Jolly Grant network uses a combination of wireless WiFi links, utilizing the publicly available and unlicensed 2.4 and 5.8 GHz frequencies and wired LAN cabling. Relays, the antennas used to transmit and receive communication, are all mounted on low masts and are equipped with battery power backup allowing the network to stay up during power cuts – a frequent occurrence. Two of the relays, which are located in areas where power is very erratic or not available at all, are solar powered.
The network is managed and monitored from a central Network Operation Center (NOC), which utilizes a range of Free/Open Source tools configured to suit the network topology. As a result of this solution, now all SKGFS branches have connectivity bandwidth of 256 Kbps and the Head Office is connected at a speed of 512 Kbps through the NOC. The local SKGFS team has also been trained to handle day-to-day issues of basic maintenance.
The Rural Finance technology team is confident of scaling up this technology to other branches of Dhanei KGFS and Pudhuaaru KGFS as and when required.
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Raman Taneja of IFMR Rural Finance Technology team contributed to this post.
The vertical take-off of the mobile services industry in India in the past few years has been aided by an aggressive pricing strategy adopted by both handset manufacturers and mobile service providers alike. Significantly, this growth has also enabled rural India to get on the connectivity bandwagon like never before. Today, in many rural parts of the country mobile phone service is an integral part of daily life and is more accessible than electricity, road networks and clean drinking water.
Despite growth in the rural user base, the majority use of the mobile network in many parts of India has continued to be voice based phone calls with minimal data exchange. Data itself is mainly restricted to urban and semi urban areas with text messages (or Short Messaging Service (SMS)) making up a large part of the communication.
Even so, SMS, despite its simplicity remains an efficient but underutilized tool in information dissemination. With the recent spurt in competitive pricing of mobile services including SMS service, and the continued delays in the rollout of next generation data services (3G) – SMS has once again emerged as an extremely effective channel for the delivery of relevant personalized content. Additionally, an ever decreasing cost per SMS has only further bolstered usage.
In India, the challenge to make use of this powerful medium in an effective way gets amplified when taken in the context of rural India where content and language have to be in sync with the needs of the rural mobile user. To leverage this powerful medium, IFMR Rural Finance has deployed an SMS platform (pictured left) that has localization, interactivity and flexibility intrinsic to its functioning. Built with existing hardware, and open-source technologies, the platform is cost-effective, easy to operate and can be rapidly customized to meet the requirements of the end user.
When Sahastradhara KGFS started exploring ways to enhance service delivery they agreed that well informed field staff were an important part of the solution. Comprehensive class room training was already the norm – additional training (given the difficult terrain and accessibility challenges) involved long travel times and was going to be expensive. What the staff needed was a shorter ‘refresher’ flash-card like format. They realized that the SMS platform was a perfect fit.
Under project “Gyan Vardhan” the platform has been launched as a creative supplemental training tool to meet the need for formal information dissemination in between regular class-room training sessions. Designed like a ‘Quiz’, the system offers a fun way for Wealth Managers (WMs) to learn about the latest in products and processes through an SMS based question and answer format using text messages delivered in Hindi.
The quiz is devised to be interactive, with randomized unique questions sent out to each user. Respondents are updated on their score on a regular basis and also get to track the performance of their peers through periodic ranking reports. This instills both a sense of achievement among the WMs and further affirms a commitment to regular participation.
SKGFS – WM Daily update system
This launch marks an important first step for Sahastradhara in its use of mobile telephony to reach out to and better serve customers in the remote rural areas in which it operates. Project “Gyan Vardhan” would keep WMs in the field abreast of the latest product features and processes in a dynamic way, empowering them to give an informed opinion about services when interacting with customers.
Still in its early days, the platform has the potential to be used in other creative ways and deployed across groups. Please write in with suggestions on how this platform can be further built upon and improved. Please drop a comment below.
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Anupama Joshi and Advait Behara contributed to this post.
The Financial Engineering for Low Income Households (FELIH) course, conducted on the 30th of April and the 1st of May for the newly joined Trusters, was the last task of the 2-week long induction exercise. Intended to familiarize the participants with fundamental concepts and tools of finance, the session began with a brief introduction to the core functions of finance, current approaches to delivery of financial services and the conceptual issues in financial inclusion.
Over the two days Bindu Ananth, Amit Shah and Shilpa Sathe elaborated on these topics with a focus on their applications to low-income households, keeping in mind the varied background of participants and the limited time available.
The fundamentals consisting of preference theory, human capital, probability distributions and game theory were covered on the first day to ensure that all participants were on common ground. On the second day the focus was on learning how these concepts can be applied to real-life issues being faced by financial institutions today. Other topics covered included pricing an insurance contract and understanding how the Joint liability group behaves as an effective collateral substitute. Nachiket Mor led the discussion on asset allocation and portfolio choice and summed up the teachings of the two days.
The last assignment given to the participants was to develop a financial plan for a low-income household based on a real-life case study of one of the KGFS customers, which brought out innovative ideas on how to improve the customer’s financial well being based on the learning from the two days of training.
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Shilpa Sathe of InnerWorlds team contributed to this post.
The Wealth Management Cross-Functional Team (comprising Amit Shah, Deepti George, Shilpa Sathe, Nitin Chaudhary, Suyash Rai, Bhaskar, Chandrachudan, Viji, Anil, Dave and Bindu) have been working on crystallising the principles of wealth management based on finance theory and driving implementation of these, with the support of KGFS teams and Guru.
An important component of the process re-design was regarding the way we collect customer information in the Customer Management System (CMS). The concern has been that this is a fundamental process whose quality determines the quality of financial advice we give the customer. For example, if we are not aware of an elderly member of the household or a non-resident dependent member, we might grossly under-estimate the liquidity and insurance needs of that household.
This week, the team set about piloting a new process designed to ensure higher-quality customer data. In this pilot process, enrolment is split into two phases. Phase 1 entails the customer coming to the branch and providing very basic demographic information and she gets photographed and biometric Ids taken.
At the end of this brief process, we ask the customer when we can come to his/her house for a more confidential and detailed conversation. This is Phase II enrolment. During this phase, the Wealth Manager sits down with the relevant household members and has a detailed conversation that flows asset by asset (children, house, land, livestock, others). Within each asset, we try to understand ownership, income and expense flows associated with each, riskiness, and finally the goals and aspirations with respect to that particular asset (For ex: I want to renovate my house and put a tiled roof in the next two years or I want to admit my daughter who is currently in the Xth to engineering college). Based on this information, we then generate a Household Financial Well-Being Report that is then the basis of all product discussions and sale to the customer.
This week, the team conducted 15 such detailed household interviews and will go back to the same households in the next few weeks with the detailed plan. As always, the resilience and ambition of our customers humbled and inspired us. Watch this space for updates on the wealth management process re-design and talk to anyone in the team for details.
Recently a quiz competition on Wealth Management and general aspects of KGFS was conducted in Dhanei KGFS, Berhampur. Wealth Managers of all the branches participated in the event and were divided as per their respective branch. After initial screening six teams got short-listed from amongst the 15.
The final round involved the following topics:
It was very heartening to see the teams answering the questions very well, especially the photographic round where it appeared as if the WMs knew the customers since long. The GK round (comprising questions on Ganjam District, Odisha etc) was a bit disappointing.
The top three teams were:
Itimayee Pala, Training Manager, organized the quiz competition.
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Ashit Mahapatra, CEO, Dhanei KGFS contributed to this post.
A recent ‘Community Connect’ program at Sahastradhara KGFS saw us trudging through to our branch at Chaka, which overlooks the Koteshwar dam on the river Bhagirathi.
Over 160 children had gathered there on Sunday morning to let loose their imagination through colors in the ‘Chitrkala Pratiyogita’ (painting competition). Their eagerness was evident by the fact that most of them reached the venue at 7 AM, two hrs before time! One child travelled 80 km to take part in the event as this was the first time they were having such an event in the area. Sixteen schools in the vicinity participated and fifteen teachers, including two principals, came to encourage and judge the contest. They were very glad that such an event was being held and did not want to miss being part of it.
Artists in unison
The children were divided into various groups based on their age and the theme varied from ‘My green village’ to ‘Environment as our heritage’. It was a challenge to judge while the children waited with baited breath, watching through the broken windows and doors – clearly eager and excited to know the results. The look of elation on their faces after receiving the medals, made us feel like winners! All the participants received a certificate of participation. It was also covered in the local press.
A brief on what Sahastradhara is was told to them and they all nodded vigorously on the fact that one must save for the future.
One child had drawn Sahastradhara branch as part of an ideal village.
The teachers have pledged that they will keep up the momentum and organize more such events. The feisty children unanimously clamored for a sports competition next time!
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Anupama Joshi, CEO, Sahastradhara KGFS contributed to this post.
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