Microinsurance in India


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Microinsurance in India

  1. 1. A REPORT ON IDENTIFICATION OF RURAL CHANNELS OF DISTRIBUTION FOR THE SALE OF INSURANCE PRODUCTS AND PREPARE BUSINESS PLAN ACCORDINGLY By Anurag Mehra 11BSPHH010989 FINO A report submitted in partial fulfilment of the requirements of MBA Program of IBS HyderabadDate of Submission: 18 April 2012
  2. 2. Table of Contents1. Acknowledgement2. SIP Certificate3. Executive Summary4. Introduction 4.1. Background 4.2. Objective 4.3. Methodology 4.4. Scope & Limitations5. Industry Analysis 5.1. Porter’s Model6. Company Profile 6.1. About 6.2. Vision 6.3. Mission 6.4. Investors 6.5. Management 6.6. Partners 6.7. Lines of Businesses 6.8. Solutions 6.9. Services7. Project Specific Analysis 7.1. Product Profile(Marketing Mix) 7.2. Product Life Cycle 7.3. Competitor’s Analysis 7.4. On site Project Report 7.4.1.Current Strategy 7.4.2.Work Performed 7.4.3.Findings8. Recommendations9. Learning from SIP10. References2|Page
  3. 3. AcknowledgementI hereby take this opportunity to thank FINO for providing me with a fruitful association by wayof Summer Internship. This association, however short lasting, has provided me with acomprehensive insight into the Technical Expertise‘s present in the rural financial inclusionIndustry and pros & cons of the same. I would like to express my deep gratitude to my companyguide Mr. Anand Kumar Tiwari, State Head (Haryana), CDVG department who provided aconstant support, valuable inputs and encouragement in understanding the nuances of theproject.I would like to extend my sincere thanks to my faculty guide Prof. Rajan Mani of IBS Hyderabad,for his constant guidance, immense support; motivation and encouragement which inspired mepursue my project with added interest and enthusiasm.I would also like to thank my short term colleagues Mr. Lokesh Sharma for his co-operation andall my friends, and my family members for their, support and help as and when required as wellas for inspiring me to put in my best efforts for this project.3|Page
  4. 4. Executive SummaryMicro insurance is the provision of insurance services to low-income households, which serves as animportant tool to reduce risks for the already vulnerable population. It is in growth stage in India asrural market is still untapped in India. My project title was to build a business plan for the sale ofinsurance products in rural areas of Sonepat, Haryana. However, my work was to sell insuranceproducts in rural areas and make new customer enrolments for financial inclusion project.My methodology in the project was different in both the project works. While doing the microinsurance, I opted to visit the villages which have customer enrolments i.e. have our bio metriccards, so that we can do their insurance. We visited these villages at the time of pension distribution(for old age), the main reason for holding a camp at that place was that people were alreadycollected over there for a reason and they were our target market at that point of time. Myapproach for financial inclusion project i.e. customer enrolments was to visit those villages where wehad low customer enrolments and those villages where customer enrolments were average buttransactions were low.While doing the project I first tried to understand their current strategy, company did not have anywritten strategy for marketing their product. In every village, we have one employee who isbelonging to that village only; we call our employee as “Bandhu” as this name relates to ourconsumers. This person is our “Point of connection” with our consumers and plays an important rolein the company’s position in the consumer’s mind. This person always belongs to the village he isassigned to so that people can believe him and they can rely on us.After that, I went to sell the micro insurance with the “Bandhu” in villages, as said before we chosevillages with high customer enrolments. While doing the insurance of the people, I talked to severalof them to get the feedback of the company and product. There, I got to know that many of themwere buying our product because of reference i.e. “Word of Mouth” however; they were not awareabout the financial services and knew little less about product and company.While doing the other project, financial inclusion i.e. customer enrolments, we chose villages wherewe had low penetration. In those villages, we adopted “door to door” strategy in some villages andin others we asked the head/sarpanch of the village to make a gathering, wherein we can tell themabout our services. While doing this project, I talked to people of these villages, and here I got mixedpeople i.e. people who are not aware/does not believe in financial services and people who areaware of these services but do not use as banks are very far. Those who were not aware ofservices/who did not believe in these services, we told them about our services and its benefits intheir lives. Those who were not using these services, because of other reasons such as banks farway, we made their biometric cards and enrolled them so that they can operate their account fromtheir village only.My recommendation is to hold “Financial Literacy Program”, wherein we can hold camps to educaterural people about financial services and its benefit in their life. By this medium we will be able tograb higher market which is still untapped and our position will improve in minds of consumers.4|Page
  5. 5. Introduction:BackgroundRisk is pervasive in the lives of poor and low-income groups. Economic, social, natural, and otherfactors distort household‘s risk management capability and their struggle to come out of poverty.Faced with multiplicity of risks, poor and weaker sections are often forced to deplete their financial,physical, social and human assets just to cope with the contingencies. Some common risks theyconfront with are unemployment, illness, and accident, death of main earning members of thefamily, crop loss, loss of livestock, fire, theft, drought, flood, and loss in petty trading activity due tomarket factors. Some groups are more vulnerable to many of these risks than the others and unableto cope with risk events. Hence, uninsured risk leaves many poor households more vulnerable to thelosses from negative shocks. However, impact of such risks lingers for a longer period depending onthe nature and severity of risks and strategy adopted by the household for coping. On the otherhand, household exposure to risks not only results in substantial financial losses but also thesuffering accentuates the fear and uncertainty relating to the risk. Because of this perpetualapprehension, many poor households are less likely to take advantage of income-generatingopportunities which could be a way out of poverty.Risk pooling and informal insurance are not entirely new to many low income households. Informalrisk-sharing practices have been around for generations. Options for protecting against risks includesdiversifying household resources and income, building assets, stocking food, investing in livestock,renewing & strengthening social networks, saving and borrowing from informal sources,participating in public social security programme, enrolling in insurance schemes etc. The riskmanagement approaches differ under socio-economic and agro-climatic conditions and alsodepending upon its exposure to risk. Unfortunately, risk coping mechanisms are limited in assuringbenefits and typically cover only a small portion of the total loss of income and income generatingopportunity. Household‘s informal means to manage risks may not provide adequate and long termprotection, especially to poor and low income groups who are prone to loss of entitlements incurreddue to variety of risks. Households follow variety of coping strategies to manage different kind andnature of risks that affect their income and consumption smoothing. But many informal risk copingstrategies come at a cost, as assets are depleted when trying to cope with risk such as distress saleduring crises, reduction of household expenditure on food, withdrawing children from school,postponing or avoiding expenditure on health, social functions etc. It has both short term and long-term adverse impacts on households. Though household diversification often viewed as positiveresponse against risk events many such coping strategies followed by the poor do compensate theentire loss. If household risks are not carefully designed and strategically handled it may result inbigger welfare losses. The situation would be worse when risks to life and livelihoods recur morefrequently and there is limited risk managing options. So provision of formal insurance cover tothese vulnerable groups could be useful to protect them against risks and supplement their riskmanaging capacity. As formal insurance can directly impact on households‘ex-post risk copingmechanisms, it is believed that household’s participation in insurance would help to maintainincome and consumption soothing and avoid asset loss. But access to and provision of formalinsurance is limited for the poor and low income groups. State-provided social security measures areinadequate to cover all kinds of household risks. Under this condition many poor households maytend to behave as resilient to risk events or their risk coping behaviour may result in huge welfare5|Page
  6. 6. loss due to wrongly managed or unable to manage risks. It may also induce many poor householdsto focus on low risk and low return activities or rely on a range of informal ex-post options, reliefmeasures, public social security measures etc. It provides huge scope for policy interventions as wellas business opportunity.Therefore, it is important from policy point of view to understand different household risks and risk-management strategies in one hand and the need and demand for insurance products, particularlyfor low income groups. On the other hand, interestingly micro insurance has drawn attention of thepolicy makers, insurers, business leaders and others in recent years. Micro insurance has been seenas one of the major risk managing tools for the poor and low income groups and a potential marketfor business. Experiences across countries in the world show that micro insurance has potential toreduce household risk impacts and to provide business opportunity. By offering a payout after theloss, it may avoid more costly ways of risk coping by the poor household and leaves their futureincome earning opportunities intact. The sense of security linked to being insured through microinsurance augment household welfare with positive impacts. Poverty and vulnerability among lowincome groups mainly stems from their poor risk management capacity and exclusion from thefinancial markets. Hence it is important to understand their need as well as demand for financialproducts including insurance. Many poor and low income households may involve in activities orenterprises of smaller scale but higher risk and uncertainty. It makes them disadvantageous becausethey are more prone to economic and financial collapse. Under this situation it is interesting toanalyze how micro insurance can play a meaningful role in household risk managing efforts, in ruralcredit and insurance market and providing business opportunity. In this regard we like to focus oncurrent scenario of outreach and efficacy of micro insurance in India, major factors that encourageand prevent growth of micro insurance and other related issues for achieving broader objectivessuch as financial inclusion and inclusive development.Meaning and Definition of Micro insurance:Micro insurance, commonly called as insurance for the poor, has recently drawn the attention ofpractitioners in developing countries. In common parlance, micro insurance is the provision ofinsurance services to low-income households, which serves as an important tool to reduce risks forthe already vulnerable population. There is no unanimously accepted definition of micro insurancedespite its profound use and understanding across stakeholders and others. A simple definition ofmicro insurance is offered by Churchill (2006) is that it is an insurance that (i) operates by risk-pooling (ii) financed through regular premiums and (iii) Tailored to the poor who would otherwise not be able to take out insurance.Micro insurance is defined as ―...insurance that is accessed by the low-income population, providedby a variety of different entities, but run in accordance with generally accepted insurance practices... Importantly this means that the risk insured under a micro insurance policy is managed based oninsurance principles and funded by premiums‖ (International Association of Insurance Supervisors,2007). Micro insurance is different from usual form of insurance. A macro definition of micro6|Page
  7. 7. insurance states that it is the provision of financial protection contingent on the occurrence ofpredefined risk in exchange for an ex-ante premium payment affordable to the clients. In terms ofmicro definition, micro insurance is more complicated as there are different approaches. ―Micro‖ asreference to low premium and low benefits may be affordable but it may not be effective enough tomanage risks of different types of different categories of clients. Micro insurance is often believed tobe an important component of a broader set of financial services under microfinance – makingavailable financial services for poor households and enterprises to sustain their livelihoods. Basicallythere are two broad categories of micro insurance often commonly understood – one focused onextending social protection to the poor in the absence of appropriate government schemes and theother offering a vital financial service to low-income households by developing an appropriatebusiness model that enables the poor to be a profitable (or sustainable) market segment forcommercial or cooperative insurers. Micro insurance is also taken as group insurance that can coverthousands of customers under one contract. It requires an intermediary between the customer andthe insurance company. This intermediary role has been played mainly by non-governmentalorganization (NGO) and microfinance institutions (MFI).Micro Insurance in IndiaIn India development of micro insurance sector and related policy discussions has started few yearsback. Within very short period, the sector has drawn attention of policy makers due to itsimportance both at household level and the economy as a whole. Two major and recent studies bythe ILO (2004a and 2004b) depict broad picture of micro insurance sector in India. As regard to themicro insurance products the study highlights that out of 80 listed insurance products 45 cover onlya single risk and only two or three products cover multiple risks. Majority of the insurance productscover life (52%) or accident-related risks and addressed to individuals. Out of the 12 currentlyavailable health insurance products seven products have been designed and restricted to groups andfive products have chosen to coverage to some critical illness at individual level but not thereimbursement of hospitalization expenses. Most of the products require a single payment ofpremium (i.e., a one-time payment) upon subscription. Private insurers had three times moreproducts than their public counterparts.Some important observations about the demand for micro insurance in India are made in a recentstudy by ILO (2004b). The study provides details of micro-insurance schemes operational in India.Out of 51 schemes that are operational in India most schemes have started operations during thelast few years. As regards to beneficiaries, about 43 schemes, for which the information is available,cover 5.2 million people. About 66% of the micro insurance schemes are linked with micro financeservices provided by specialized institutions or non-specialized organizations. Twenty two percent ofthe schemes are implemented by community based organizations, and 12% by health care providers.Life and health are the two most popular risks for which insurance is demanded. Twenty-five out of37 schemes received some external funds to initiate their schemes. Twenty out of 32 schemesreceived external technical assistance in the form of advisory services, technical services, training oreven referral services for their schemes. As regard, to the regional distribution of micro insuranceoutreach about 74 % of total schemes operate in 4 southern states constituting Andhra Pradesh(27%), Tamil Nadu (23%), Karnataka (17%) and Kerala (8%). Two western states Maharashtra (12%)and Gujarat (6%) account for 18% of the schemes. About 56% of schemes deal with one single risk.This shows low outreach and unequal distribution of micro insurance in the country. The study alsoreflects the linkage between micro-insurance and micro-finance.7|Page
  8. 8. Development of micro insurance is often related to microcredit, particularly in developing countrieslike India. Though microcredit has dominated in microfinance market the entry of micro insurance isonly in recent past. In India micro insurance is a relatively new financial service and its outreach israther limited and unevenly distributed across states. The overall performance of micro insurance inIndia is not very encouraging. According to a recent study by UNDP (2007), the outreach of microinsurance is around 5 million people covering only 2 percent of the poor in the country. It showsthere is huge potential for micro insurance market in the country. A conservative estimation of sizeof micro insurance market (both life and non life) in India ranges between INR 62,304.70 to84,267.55 million (US$ 1,384.55 to 1,872.61 million). In case of life insurance, the market potential isestimated to be between INR15,393 to 20,141 million (US$ 342.07 to 447.58 million) and in case ofnon-life insurance, it is between INR46,911.70 to 64,126.55 million (US$1,042.48 to 1,425.03million). The non-life insurance estimation is limited to four types of coverage – milch 17 animals,livestock, health and crop insurance. The population used for this estimation is 40-50 percent ofthose earning less than US$1 a day and 50-70 percent of those earning between US$1 – 2 a day. Thisis expected to increase as demand grows and a wider range of risks are recognized as insurable.However, high exclusion of poor and vulnerable groups from formal insurance cover in India is alsoevident as per the UNDP study.8|Page
  9. 9. Objective:Identification of Rural channels of Distribution for the sale of Insurance Products and preparebusiness plan accordingly.9|Page
  10. 10. MethodologyWhile working in the company, I worked on two different projects, which included field work. Theycome under Electronic Benefit Transfer (EBT) scheme of government and company. The two topicsare mentioned below:  Micro Insurance  Customer Enrolments.Micro Insurance: In this, we were supposed to do the insurance of the rural people and achieveour targets. Their normal strategies to do insurance are:  Word of mouth  Door to doorHowever, this time we adopted some new ones.  We chose villages with maximum number of customers enrolled with biometric cards.  We chose the time of the month when pensions are being distributed.  We chose the same place for our camps where pensions are being distributed.Customer Enrolments: In this, we were supposed to get new customers enrolled with ourcompany so that they can get benefit from our bio metric cards.They do not have any specific strategy for the same. “Bandhu”, who is our employee and a personbelonging to village (most of the times) used to do it randomly. “Bandhu” is also responsible for thetransactions from the particular village, he is assigned to.However, this time we adopted a new methodology i.e. to held camps. But while holding camps, wecarefully worked to the data given to analyse, where to hold them.  We chose a village where the number of customer enrolments is less as compared to others.  We chose villages where the numbers of enrolments are average; however the numbers of transactions are less.These are the two different methodologies; we worked on while working on two different projects.10 | P a g e
  11. 11. Scope & LimitationsScope  Word of mouth is very strong.  Money is there.  Investment is there but not with banks.Limitations  Transportation Problem  Language Barrier  Financial Illiteracy11 | P a g e
  12. 12. Industry AnalysisPorter’s ModelA means of providing corporations with an analysis of their competition and determining strategy,Porters five-forces model looks at the strength of five distinct competitive forces, which, whentaken together, determine long-term profitability and competition. Porters work has had a greaterinfluence on business strategy than any other theory in the last half of the twentieth century, and hismore recent work may have a similar impact on global competition.Porter referred to these forces as the micro environment, to contrast it with the more generalterm macro environment. They consist of those forces close to a company that affect its ability toserve its customers and make a profit. A change in any of the forces normally requires a businessunit to re-assess the marketplace given the overall change in industry information. The overallindustry attractiveness does not imply that every firm in the industry will return the sameprofitability.12 | P a g e
  13. 13. Threat of Substitutes(Low) As, rural people are not much aware of financial services, substitue product would not work. Bargaining Intensity of Threat of New Power of Competitive Comp(High)Suppliers(High) Rivalry(High) As, rural sector is being targeted for financial As new firms are services due to high As there are firms offering entering into this potential, new the same service, and many segment, bargaining banks/cpmanies are big firms entering into the power of suppliers entering to tap this sector. segement, this is really high. increases. Bargaining Power of Customers(Low) As, of now this is really low because people in rural sector are not financially literate. 13 | P a g e
  14. 14. Company ProfileAboutFINO founded in year 2006, headquartered in Mumbai, India, has emerged as a leading inventor,innovator and implementer of integrated technology solutions for institutions like Banks,Microfinance Institutions, Government entities, Insurance companies to enable financial inclusionenvironment for the micro customers.FINO caters to the industry needs across market segments by undertaking complete electronicpayment platform projects. FINO solutions are anchored around using biometric smart cart, hand-held devices and Micro Deposit Machines to perform field operations and biometric authentication.Today FINO, with its leading edge solutions plays a key role in Indias quest for developing branchlessbanking infrastructure.Vision"To provide innovative technical & management services for the masses, in both financial and non-financial domains making a positive impact on their living standards and creating wealth for allstakeholders"Mission"To achieve a breakthrough in the scale, relevance and reach of financial services for the un-servedand under-served masses throughout the world"14 | P a g e
  15. 15. InvestorsManagementManish Khera (Chief Executive Officer)Manish Khera is the Chief Executive Officer and Whole Time Director of FINO Limited. Since FINOsinception in 2006, Manish has lead FINOs efforts to connect micro-customers with businesses,banks, government and investors. Under his leadership FINO has dramatically increased itsinstitutional acceptance, market leadership and global repute.Manishs career began with ICICI Bank Ltd. in 1993. During his 13 years at ICICI, Manish has workedin various areas including credit, government & rural banking, technology and alternate channels.His last role in ICICI was of Joint General Manager heading Alternate Channels Group.For his leadership and business vision, Manish was conferred as the Young Global leader by WorldEconomic Forum in March 2011.Manish holds an M.Phil in Environment & Development from the Cambridge University, UK. He alsoholds a MBA from Faculty of Management Studies (FMS, Delhi) and a BE (Electrical) from DelhiCollege of Engineering (DCE, Delhi).15 | P a g e
  16. 16. Rishi Gupta (Chief Financial Officer)Rishi Gupta is the Chief Financial Officer and President - Sales and Marketing of FINO Limited. Hisresponsibilities include Corporate Finance, Fund-raising, Investor relationships and BusinessDevelopment.Rishi has more than 15 years of experience in manufacturing, banking and international institutions.His career has overseen budgeting, accounting, project finance, corporate finance and relationshipmanagement.Rishis illustrious career began with Maruti Udyog Limited where he went on to head Budget andMIS department. Rishi then moved on to join ICICI Bank. Prior to joining FINO, he was working withthe regional office of International Finance Corporation in New Delhi.In 2011 Rishi was awarded "CFO100 Roll of Honor" - an effort to recognize the top 100 senior financeprofessionals in India, who have made a difference with their acumen, attitude and energy.Rishi is a certified chartered accountant and cost & works accountant. He did his article training withPrice Waterhouse Coopers (PwC). Rishi also holds a bachelors degree in commerce from Universityof Delhi.Rajeev Arora (Director - Products & Operations) Rajeev Arora is the Director and President - Products & Operations at FINO Limited. He isresponsible for strategizing and overseeing the field & central operations and product development.Rajeev has over 19 years of experience in operations and banking.Rajeev began his career with National Thermal Power Corporation (NTPC). Prior to joining FINO, hewas associated with ICICI Bank in Corporate Banking where he was managing relationship with largecorporate, specializing in the infrastructure sector. He has also managed relationship with variousstate and central governments extensively to work on various large e-Governance projects focusedon government to citizen interaction and payments.Rajeev has done is post-graduation in business administration (MBA) from Indian Institute ofManagement, Calcutta and holds a bachelors degree in electrical engineering.16 | P a g e
  17. 17. Partners & CustomersBanking PartnersGovernment Partners17 | P a g e
  18. 18. Insurance PartnersLines of BusinessBankingWe make anywhere banking a reality for worlds micro transaction customersFINO has created a robust, safe, and streamlined alternative channel for Banks at lower costs,making Financial Inclusion financially viable for them, and thus opening up a mammoth customerbase. Not only has this helped Banks, but it has also altered the lives of the beneficiaries - the ruralcustomers who were excluded from the formal banking system until now.GovernmentThe Indian government has introduced various schemes for the benefit of the bottom of the pyramidpopulation of the country. However, there are immense challenges and constraints faced in ensuringthat these benefits reach the correct beneficiaries. These hurdles include the huge amount ofpaperwork and human effort involved, a massive information gap, the lack of accessibility andinfrastructure, a largely illiterate populace and above all fool proof identification.FINOs through its Technology solutions has been working with both state and central governmentsfor providing (EBT) Electronic Benefit Transfer for the implementation of various Governmentschemes including  National Rural Employee Guarantee Scheme (NREGS)  Social Security Pensions (SSP)RetailFINO has developed an online micro-payment and delivery platform for a unique bouquet of Value-added e-Services to the micro customers, at their door-step through partnerships/tie-ups withvarious service-providers.18 | P a g e
  19. 19. FINO Third Party Services aims at first-of-its-kind speedy, convenient, accessible and affordablechannel of online micro-payment system for all customers through its network of FINO-Bandhu &retail channel.FINO Third Party Services are available to its customers through secured mobile-transaction systemsas well as Points of Transaction and Backend processing platformFINO Third Party Services includes following kind of services –  Recharge.  DTH Recharge.  Railway Ticket Booking /Bus booking.  Insurance Premium Collection.  Utility Bill Payments (Mobile & electricity bills, municipal taxes).  SIM card connection sellingFINO Third Party Services will allow our clients to offer their products and services in the rural andsemi urban areas exhaustively resulting in immediate up scaling of customer base and businessrevenues for minimal investment with economic payback in short time.InsuranceFINOs technological solution has proved to be the game changer in the health micro-insurancesector in India by enabling Insurance companies to reach out to customers at the bottom of thepyramid and serve their needs, while maintaining financial viability.As a key enabler and facilitator of financial inclusion, FINO has unlocked a INR 45 billion potentialmicro-insurance market for health insurance companies, triggering a sea change in their deliverysystem by providing them with the geographical coverage, scalable technology platform andprocessing capabilities required.FINO facilitated the standardization of the delivery platform, back-end database managementsystem and data maintenance format, effectively solving the issues faced in earlier governmentschemes that were plagued by design and implementation problems and were therefore unable toreach out to the un-served/underserved markets.Leveraging its experience in the micro-finance sector and applying it to the micro-insurance sphere,FINO has created a model that is efficient, scalable, sustainable, low-cost, interoperable andsimultaneously profitable.TechnologyFINO solutions enable distribution of financial services in remote locations with minimumconnectivity and infrastructure.19 | P a g e
  20. 20. The user entities can enrol customers in the field and issue smart cards as well, if required.This customer data collected during the enrolment process needs to be uploaded to the backendsystems for data de- duplication checks, account opening and reporting purposes.Customers can transact in the field through a number of media such as ATM/ Micro DepositMachine, POS and/ or mobile. These transactions can be pushed to the backend Core BankingSystem either in an online mode or offline mode depending on the business requirement andconnectivity available.Supporting these functions are different systems which perform very different supporting butrelevant roles.There is a Terminal Management System that manages issuance/ blocking/ application updating ofPOS devices; a Card Management System to manage issuance, hot- listing and re- issuance of cards.All these systems are a result of the field experience gained over the last 4 years in tough andremote locations. These systems provide services that are very relevant to entities operating in thissector.SolutionsCustomer Enrolment SolutionsFINO has developed applications that can be used to acquire micro customers in the field usingsimple processes and minimalist of the hardware (including mobiles) to address the infrastructurechallenges on the ground. FINO also offers services to Indian entities to rapidly acquire microcustomers using this technology. FINO is currently acquiring customers at the rate of 50,000 per day.Customer Acquisition SystemThe system allows customers to be enrolled/ acquired at their door step unlike a bank model whichforces customers to come to the branch. The process is quicker and simpler both for the customerand the bank, yet maintains the banking rigour.Operations SolutionsThis component manages all logics for data messaging to generate information for day-to-dayplanning and management of operations. The principals may utilize some of the pre-designedreports by FINO or ask for customized reports.20 | P a g e
  21. 21. Hardware SolutionsFINO Financial Inclusion Solution is driven by robust yet affordable technology and products. FINOprovides a full suite of biometric products for enrolment, storage and verification with all back endsystem elements to achieve different financial inclusion applications.This technology will enable our clients to offer a rich spread of simple and accessible solution withour range of products including hand held devices, biometric smart cards, backend switch, MicroDeposit Machine.ServicesBusiness Correspondent ServicesFINO FINTECH FOUNDATIONFINO has formed FINO Fintech Foundation to enable its solutions to reach micro customers. This is aSection 25 company under the Indian Companies Act of 1956 has been incorporated in June 26th2007.FINO FINTECH FOUNDATION has been established to carry on the activity of promoting sustainablelivelihoods for the rural poor and underserved classes by helping them become economically self-reliant, through the provision of Financial and Insurance services and technical assistance in anintegrated and sustainable manner.The activity of this Company is not for profit and is working with FINO’s partners to establish an endto end distribution platform thereby ensuring reach to Banks and other financial institutions in thosegeographies and amongst that section of the population which has been consideredROLE OF FINO FINTECH FOUNDATIONCreation of Bandhu (FINO Agents) network across the country to deliver financial services through acombined technology-and-distribution channel to enable a rapid reach-out to the under-bankedpopulation.Assist banks in designing new products and services for the under-banked populations by workingclosely with them, and acting as the key resource who truly understands end-customer’s financialneeds.Managing a training and audit calendar with the banks to ensure that the entire distribution networkworks in alignment with the overall mandates given by the banks21 | P a g e
  22. 22. Financial Literacy Program We define Financial Literacy as "Knowledge of basic financial concepts and the skills to translate thisknowledge into improved financial behaviours".Hence, as an independent channel we not only provide access to financial products and services butalso focus on making customers aware about them through our various financial literacy initiatives.Our financial literacy programs focuses on teaching the knowledge and skills required to adopt goodmoney management practices for budgeting, spending, and saving. Participants in these programsbecome equipped with the information and tools to make better financial choices, work towardstheir financial goals, and enhance their economic well-being.The FINO program will result in higher financial stability of the customers, reduced financial stress(vulnerability), better saving habits, and higher usage of formal savings accounts (provided by banks)through the FINO card. Changes in budgeting and savings behaviour as well as the ability toeffectively use the FINO technology will result in increase household well-being for customers.Currently FINO is running various financial literacy campaigns with World Bank, International FinanceCorporation (IFC), Microfinance Opportunities, NABARD and UNDP as partners.FINO Consultancy ServicesFINO Consultancy Services (FCS) aims to bridge the divide between formal financial institutions andthe un-banked/under-banked populations across the world by bolstering emerging branchless andmicro-banking channels and entities with technology, public policy, channel managementconsultancy and knowledge sharing.FINO provides its consultancy expertise to National Governments, Central Banks, Commercial andCooperative Banks, Microfinance Institutions, Insurance Companies and Not-for-Profits. FCS bringson board capabilities in the areas of technology architecture, strategy and planning, implementation,product designing, regulation and policy framework, channel management and capacity building.FINO as a Consultant provides customised services, working in tandem with each client to deliversolutions that are best equipped to tackle the challenges present. FCS recognizes the importance ofsustainability for any financial entity, and is actively engaged in developing practical and profitablebusiness cases, keeping in mind the client’s strategy.Furthermore, FINO assists in the implementation of these recommendations wherever required,drawing on its years of practical experience.FINO as a branchless banking consultant facilitated designing of financial products and deliverychannels to bring more people under the ambit of financial inclusion in association with "EnablingFinancial Innovation and Access" in Nigeria, Africa22 | P a g e
  23. 23. Project Specific AnalysisProduct ProfileMicro- InsuranceFINO micro insurance is a service that enables insurance companies to reach out to low-incomecustomers and serve their needs, while maintaining financial viability. The product/service taps intothe existing, proven network of Smart Card holders who can access other financial services from thesame card.FINO micro insurance acts as the middle layer or delivery channel between the insurance companyand end-customer, providing the geographical coverage, scalable technology platform andprocessing capabilities for insurance business. This enables cashless and paperless insuranceprocessing to effectively reach micro transaction customers.FINO micro insurance uses technology to cut costs, maximize efficiency and ensure sustainabledelivery of micro insurance services offered by various insurance companies.This is a product of ICICI Bank which is being offered and sold by FINO. This product has followingfeatures: Product Physical Pricing Evidence Marketing Mix Process Promotion People Place23 | P a g e
  24. 24. Product: The product in service marketing mix is intangible in nature. Like physical products such assoap or a detergent, service products cannot be measured. At the same time service productsare heterogeneous, perishable and cannot be owned. The service product thus has to be designedwith care. Generally service blue printing is done to define the service product. Features:  Duration: 1 year  Claim: `. 1, 00,000/-(In case of death or 100% Disability) and `. 50,000/-(In case of accident or 50% Disability).Pricing: Pricing in case of services is rather more difficult than in case of products. Generally servicepricing involves taking into consideration labour, material cost and overhead costs. By adding aprofit mark up you get your final service pricing. Features:  Premium of `. 100/- for one year.Place: Place in case of services determine where the service product is going to be located.  Sonepat, Haryana.Promotion: Promotions have become a critical factor in the service marketing mix. Services areeasy to be duplicated and hence it is generally the brand which sets a service apart from itscounterpart. Features:  Word of mouth.  Door to door.People: People are one of the elements of service marketing mix. People define a service. In case ofservice marketing, people can make or break an organization.  Bandhus.  Office Staff.Process: Service process is the way in which a service is delivered to the end customer. The processof a service company in delivering its product is of utmost importance. It is also a critical componentin the service blueprint, wherein before establishing the service, the company defines exactly whatshould be the process of the service product reaching the end customer.Physical Evidence: The last element in the service marketing mix is a very important element. Assaid before, services are intangible in nature. However, to create a better customer experiencetangible elements are also delivered with the service. Several times, physical evidence is used as adifferentiator in service marketing.  Company Office.24 | P a g e
  25. 25. Product Life CycleProduct life-cycle management (or PLCM) is the succession of strategies used by businessmanagement as a product goes through its life-cycle. The condition in which a product is sold(advertising, saturation) changes over time and must be managed as it moves through its successionof stages.Introduction Stage: In this stage, company tries to build product awareness and to develop amarket for it. Its impact on marketing mix is as follows:  Product Branding and level of quality is established, as well as intellectual properties e.g. patents & trademarks are obtained.  Pricing strategy can be low penetration so as to build market share, or may be high penetration so as to recover development costs.  Distribution is limited/ selective until consumers show acceptance to the product.  Promotion is to target at innovators and early adopters.Growth Stage: In this stage, company tries to build brand preference and increase market share. Itsimpact on marketing mix is as follows:  Product quality which has already been established is maintained and additional features and services are generally added.  Pricing is maintained as the firm enjoys increasing demand with little competition.  Distribution channels are increased as demand increases as consumers accept the product.  Promotion is targeted at mass audience.25 | P a g e
  26. 26. Maturity Stage: In this stage, sales increases at decreasing stage. Competitors come up with similarproducts. The main objective in this stage is to defend market share while maximizing profits. Itsimpact on marketing mix is as follows:  Product features may increase for differentiating the product from others.  Pricing may decrease due to increasing competition.  Distribution becomes more intensive and intensives may be offered to encourage preference over competing products.  Promotion is targeting on product differentiation.Decline Stage: In this stage, sales of the firm decreases. Now, the firm has several options:  Product is maintained, possibly by rejuvenating it by adding new features and finding new users.  Product is harvested- reducing costs and continuing to offer it, possibly to a niche segment.  Discontinue the product, liquidating remaining inventory or selling it to another firm which is willing to continue the product.Our product micro-insurance is in growth stage as it is started only an year before in FINO.26 | P a g e
  27. 27. Competitors AnalysisHCL BFSI (PSB)There are a variety of financial services which HCL is providing today.HCL’s offering:  Enrolment software.  Single Integrated Handheld smart device with connectivity.  Server Infrastructure.  Provide network connectivity & Interface.  Provide SMS/GPRS Interface.  Bilingual FI Solution.  Smart cards & Card personalization.HCL Info systems bags another prestigious Financial Inclusion project from Punjab and Sind Bankunder its Systems Integration BFSI Practice  HCL Info systems selected as partner of Punjab & Sind Bank’s Financial Inclusion Project  Deal to make banking accessible to unbanked villages through technology  To roll out in more than 1500 villages across the nationHCL Info systems Ltd., India’s premier Hardware, Services and ICT System Integration Company,today announced the awarding of an order from Punjab and Sind Bank (PSB) to provide smart cardbased solutions in over 1500 villages across the country. The partnership aims to facilitate theprovision of smart card-based technology solutions for financial inclusion, besides engaging andmanaging business correspondents deployed in unbanked villages allotted to PSB.HCL Info systems will be providing end-to-end solutions for PSB’s Financial Inclusion project involvingsupply of the Core Banking and enrolment software, DC and DR, customization, installation,operation, maintenance of Servers and Networking; management and maintenance of hardware &software, delivery & support for banking & financial services to the Bank. Apart from technologicalsolution and technical services, it will also involve integration of various technological and functionalcomponents, supporting business correspondents to educate, facilitate and deliver financial servicesto the targeted BPL beneficiaries.The project will enable UID based disbursement for various schemes of the Rural DevelopmentDepartment. PSB aims to cover over 6 Lac customers over a period of three years.27 | P a g e
  28. 28. TCS BaNCS (Indian Bank)TCS bags Financial Inclusion Solution Project from Indian BankIndian Bank has selected TCS for its Financial Inclusion Solution project. The Deal value pegged atINR 850 million for three years. TCS’ cloud computing services will be used to enable bankingservices for rural customers in 5,500 villages.TCS is deploying its TCS BaNCS Financial Inclusion Gateway solution for executing the bank’srequirements for this project. The applications will be hosted on cloud computing technologies tocreate an easy-to-access, highly-secured environment that provides reliable world-classinfrastructure and application services in a cost-effective and efficient manner.Financial inclusion is the delivery of banking services at an affordable cost to low-income groups atplaces where mainstream banking facilities are unavailable. This solution will help the bank deliverbenefits to the general public and provide an end-to-end, cost-effective solution. Currently, 41% ofthe Indian population is unbanked (80 million households). Out of this, 40% is unbanked in the urbanareas and 60% in the rural areas.Indian Bank has been serving customers for more than a century and is seen as a front-runner inspecialized banking as well as rural development. The bank had deployed TCS BaNCS across 1802branches to offer finely-tailored products to its corporate and retail customers.Tata Consultancy Services Ltd has won a project for implementing a smart card-based financialinclusion solution worth Rs 850 million from Indian Bank.COROMANDEL INFOTECH India LtdCoromandel InfoTech bags the World Banks Karnataka Health Systems Development and ReformProject.Coromandel InfoTech India Limited, an IT initiative of THE INDIA CEMENTS LTD, has been selected astechnology solution partner for the World Banks initiative "Karnatakas Health SystemsDevelopment Project" to provide technical solution to strengthen governance & improve themonitoring in the World Bank Operations in India.In this project, the world Bank and the Karnataka government pilots the beneficiary verificationplatform to improve monitoring and evaluation capacity, timeliness and reliability of the field datacollection, electronically verify service delivery and collect the feedback to the services delivered.Conceptualized by the World Bank, the project aims to create information based IT systems in realtime basis. Coromandel InfoTech will deploy the appropriate technologies to collect and submit thedata to the World Bank. This project will also present a citizen interface to provide basic services tothe participants. Information collected will be uploaded and made available to everyone in the realtime or near real time depending upon the local conditions.28 | P a g e
  29. 29. Federal Bank inaugurated Financial Inclusion Project with Coromandel Infotech as TechnologyService Provider - 18th Dec, 2010Ms.Suma Verma, Regional Director (Kerala & Lakshadweep), RBI Inaugurated the ICT based FinancialInclusion Project for Federal Bank with Coromandel InfoTech as Technology Service Provider atAlappuzha on 18 December 2010. Mr.Chalapathy Rao, Head – Microfinance lighted the lamp in thepresence of Mr.Shyam Srinivasan, Managing Director & CEO, Mr.Kalyanaraman, Executive Directorand Mr.Sashi Kumar M, Deputy General Manager of Federal Bank.BASIXFinancial Inclusion Services (FINS) – are provided to fulfil working capital & investment needs of theclients – the poor household. It includes savings, credit – short term and long term, insurance forlives and livelihoods, fund transfers, commodity derivatives, financial orchestration – ranging fromgrants to equity for livelihoods.  Insurance  Savings  Microcredit  RemittancesTAFIOn August 27th, 2007 BASIX launched a project on Technology Assisted Financial Inclusion in a fewlow-income neighbourhoods in Delhi and Muzzafarpur, Bihar. This pilot covers an urban and a rurallocation, and can potentially be scaled across all BASIX locations. This is being done as the BusinessCorrespondent of Axis Bank, on the basis of a tripartite agreement between BASIX, Axis Bank and thetechnology provider, A Little World.By December 2007, BASIX had enrolled over 4000 customers for no-frills saving bank accounts. Theaccount opening of these customers has been done inside slums and villages on the basis of verybasic Know Your Customer (KYC) documents. The customers are being issued biometricauthentication based smart cards. These customers now have access to both savings and withdrawalservices, in addition to other financial services at either a SPOT (Specified Point of Transaction)within 5 Km. of their homes, or at their doorstep.The current services being offered include  savings,  insurance,  remittances,  credit,29 | P a g e
  30. 30. And other financial services such as pensions and systematic investment plans (SIP) of mutual fundswill also be offered soon.The customers include rickshaw pullers, hawkers and vendors, rag pickers, scrap collectors, autodrivers, illiterate and poor women. The customers include both those directly engaged in low-gradeeconomic activities, and those who have a need to save, regardless of any direct income earningactivity.The technology used is Near Field Communications, and transactions are done with a kit comprisinga mobile phone, a fingerprint scanner and a printer. Transactions can be done both online (instantserver updation) or offline, for remote areas where there is no signal. The field operators carryingthe transaction-kit is the human equivalent of an ATM Machine, with mobility added. Thetechnology allows for effective risk-management and fraud control.BASIX plans to maximize the impact of the BC framework by combining a suite of financial and non-financial services, to enable sustainable strides towards greater inclusion and stronger livelihoods.This requires offering multiple services and high operational efficiency, while managing technologywell, which we are working towards.30 | P a g e
  31. 31. On Site Project ReportCurrent StrategyThere is no written strategy as such. However, what I’ve observed is mentioned below:  Promotion - Word of mouth Strategy, Door- to –Door Strategy.  Place – At the time of pension disbursement.Promotion – Word of MouthWord-of-mouth marketing (WOMM), also called word of mouth advertising, is an unpaid form ofpromotion—oral or written —in which satisfied customers tell other people how much they like abusiness, product, service, or event. Word-of-mouth is one of the most credible forms of advertisingbecause people who dont stand to gain personally by promoting something put their reputations onthe line every time they make a recommendation.As, target consumers are not financially literate and do not understand the benefits of the productby advertisement or any other means. This is the best method of promotion. They basically apply itat the time of pension disbursement. While the pension is being distributed among the people, wego there with our “Bandhu” who is a resident of the village, so that people can rely on him and wecan connect better with our target consumer.“Bandhu” asks the consumers to do insurance and tells him the benefits, as soon as one consumerbuys our product, we ask him to tell the benefit to others as well. Now, other people come and askfor the product from “Bandhu” who is the person of their village and they already know. This makesthe promotion of our product and the sale increases.Promotion- Door to DoorDoor-to-door is a sales technique in which a salesperson walks from the door of one house to thedoor of another trying to sell a product or service to the general public. A variant of this involves coldcalling first, when another sales representative attempts to gain agreement that a salespersonshould visit. Door-to-door selling is usually conducted in the afternoon hours, when the majority ofpeople are at home.As, all people are not covered while pension is distributed, so they go for door to door sellingtechnique. The person who goes door to door is our “Bandhu” who is a person from village andpeople already know him. He explains the benefits to the person and hence sells our product.However, here also he carries the references of people who already brought our product so thatpeople can rely on it.31 | P a g e
  32. 32. Work PerformedDuring SIP period, I’ve visited following villages along with “Bandhu” and their “BusinessCoordinators”. The villages visited are mentioned below:  Bhawad  3Puthi  Ashraf Matindu  Kundal  Rampur  Teha  SanperaThese were the villages with high customer enrolments and transactions i.e. people already knewabout our services. So, we need to sell our product to them.  Gopalpur  Asadpur  Baroli  Makinpur  Bajna Khurd  Pugthala  KailanaThese were the villages with low customer enrolments so, we added new people in our network ascustomers by consulting them and telling them about financial services offered by us. Here, wemade their bio-metric cards and asked them to do transactions regularly.While visiting to villages we did insurance of people using the strategies mentioned above. Here, Ipersonally talked to several people in every village to understand them better. While talking tovillagers, we figured out various facts which are mentioned below:Findings  “Bandhu” is an important person for the sale of insurance product as he should be reliable and known to the target consumers.  “Bandhu” is an important person while doing financial inclusion i.e. customer enrolments and transactions of customers.  Rural people are not financially literate; they are purchasing the product only on the basis of reference and relations.  Rural people do not believe on outsiders easily, though there are certain barriers e.g. area difference, language difference and they can believe on a person from their village instantly.32 | P a g e
  33. 33. RecommendationsFinancial Literacy Program  As, we have figured out that rural people are not financially literate.  We should held camps wherein we can teach them about financial products. This will help them in becoming financially independent.  During these camps we should promote our firm in form of print media e.g. “Flex”, “Pamphlets (In Hindi, people depicting rural people)”.  During these camps we should teach them about how to manage their finance and benefits of using banks and other services for investing their money.  We can make them not only financially aware however; we can also tell them the benefits of micro-insurance which can benefit them and their family.  We can promote and do insurance at the time of crop harvesting. This is a time when people have money and are ready to spend it.  “Bandhus” should have proper uniform with company logo which will help in branding for the firm in minds of consumers.  “Bandhus” should get an ID card which they should wear all the time, this will create an impact on consumer’s mind and they’ll rely on company.  There should be one office (a room) in every region for every “Bandhu”. By this, people will be having one stop/place for getting in touch with company. These factors position company as reliable in minds of consumers.33 | P a g e
  34. 34. Learning from SIPFollowings are the learning from SIP:  Product should match the consumer’s need.  Promotion is not only about sales. As we are achieving sales, however, consumers are not aware about product’s benefits and services.  Promotion not only means advertisements and all. It can be done from various other methods e.g. print media (flex, pamphlets).  It’s important that consumers should be aware of the product details and its benefits. If consumers are educated then, sales can automatically increase.  It’s important to have a position in consumer’s mind so that they can relate to us in a better way and can refer others about our product.  Promotion for a company may get product specific, but it is only which helps in building brand.34 | P a g e
  35. 35. References  http://birdindia.org.in/doc/Reoprt%20on%20Microinsurance%20in%20India%20_Final.pdf  http://www.icrier.org/pdf/wp162.pdf  http://www.microfinanceindia.org/roundtable-report/Client-Education-and-Microinsurance- Roundtable-Report-revised.pdf  http://www.marketing91.com/service-marketing-mix/  http://en.wikipedia.org/wiki/Marketing_mix35 | P a g e