‘In rural financial services one size does not fit all’

Financial inclusion company IFMR Holdings Pvt Ltd uses the urban-centric wealth management approach for rural consumers. It claims to reach out to around 6.5 lakh customers, with an average of 2.5 products per household through 235 Kshetriya Gramin Financial Services (KGFS) branches in three states. Its downstream arm IFMR Rural Channels has provided around ₹550 crore worth of loans to rural customers. These are typically between ₹20,000 and ₹5 lakh.

Less than a month ago the Chennai-based company secured ₹12.5 crore fresh funding from French development financial institution Proparco SA. According to the company, this round of funding will fuel its expansion plans to offer more financial products for people below poverty line.

In an e-mail interview, CEO Sucharita Mukherjee explains how the wealth management approach is used for the village population and how it is different from traditional micro-finance institutions. Excerpts:

How does the wealth management approach work in the rural market and when was it conceived?

The wealth management approach has been a core part of the financial services offering since we started in 2008. It is designed to provide financial services in a comprehensive manner by understanding our customer’s needs and aspirations. The most important part of the approach is the conversation a wealth manager has with the customer about her financial needs, both immediate and long-term. The approach helps in informed decision-making, both for the customer and the institution. This approach also fits well with our objective of offering a suite of financial products including non-credit products like insurance and savings.

What are the parameters that have proved the efficacy of the programme?

The learning along the way has been immense. We measure our success based on our product penetration. We have disbursed around ₹1,800 crore since inception through loan products. The progress we have made in non-asset products has been very encouraging and a proof that rural customers require a full suite of financial services. We have sold more than 14.8 lakh insurance policies, both life and non-life; opened 1.13 lakh NPS (National Pension System) Lite accounts and over 1.932 lakh savings accounts, as of December 2015.

One service that we have particularly provided well as compared to other MFI originators, and which goes a long way in building a relationship with our customers, is timely settlement of claims… our claim rejection rate is close to zero per cent.

Traditionally, rural consumers have used the moneylender. Do you feel you have made an intervention on this score?

Our presence definitely provides a credible option. In an ongoing impact evaluation by Harvard, it was observed that outstanding informal loan amounts (from moneylenders, friends and relatives) were significantly less (about 16 per cent) in areas where KGFS was present than in areas where it was not. This is based on an evaluation done for Pudhuaaru KGFS, one of the six district-level SBUs (strategic business units).

How are you different from both the moneylender and the traditional micro-finance institution that lends to the rural poor?

Our objective is to provide financial services to all segments of the population. The following are our unique offerings through our branches:

a) A full suite of financial services including credit, insurance, savings, recurring deposits, National Pension savings.

b) Local wealth managers who know and engage with the community to know their financial services requirements.

c) The wealth management services we offer is based on an assessment of the household’s income, assets, expenses and liabilities, today and in the future.

d) Ease of access to branches.

As you are working in both the north and south of the country, what are the differences in approach to finances among the rural population in both geographies?

This has been one of our greatest learnings as a pan-India financial services provider — one size doesn’t fit all. Traditionally, there has always been a significantly larger penetration of micro-finance in the south as compared to the north. Our lending model in the south has primarily been the Joint Liability Group lending model whereas in Uttarakhand the focus is more on micro-enterprise and individual loans. Our service area per branch is larger in the north due to lower population density.

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