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Building integrated wealth and risk management solutions

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Dvara KGFS came into existence as a financial institution with a goal to cater to all the basic financial needs of rural customers of India. Dvara KGFS aspired to be a one-stop solution for customers' wealth creation and risk management requirements by providing a combination of credit, savings, investments or insurance solutions. After setting up a line of credit products--group, individual and mortgaged-backed loans, Dvara KGFS planned to add savings and investment products to its portfolio. It aimed to bring about a fundamental change in the mindset of its customers; which was to move from relying on credit to fulfill their financial goal to relying on savings and creating a financial plan to achieve those goals.

Dvara KGFS developed a data-driven algorithm that would recommend customized product packages to each customer based on their specific financial goal. Dvara KGFS also added investment and insurance products to their portfolio and piloted them through an integrated investment offering named Dvara Sampoorna Sampath Plan. The new product package was piloted in October 2019 and later rolled out in a phased manner across most of its branches reaching more than 5,000 customers to date.

Presenters: Nikhil AC, Head of Liability Products at Dvara KGFS, and Sandeep Kumar, ILO Social Finance Fellow at Dvara KGFS. Moderator: Aparna Dalal (Senior Technical Officer, Impact Insurance Facility).

Published in: Government & Nonprofit
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Building integrated wealth and risk management solutions

  1. 1. Building integrated wealth and risk management solutions: Experience of Dvara KGFS Date: Tuesday / 12 / May / 2020
  2. 2. Interfacing with the webinar system Advancing social justice, promoting decent work 2 Tell us what you think. Type your questions, even while the presentation is going on. These will only be visible to the presenters.
  3. 3. Introduction to webinar and speakers Advancing social justice, promoting decent work 3 Panelist: Nikhil AC Head of Liability Products Dvara KGFS Moderator: Aparna Dalal Senior Research Officer The ILO’s Social Finance Programme Panelist: Sandeep Kumar Impact Insurance Fellow The ILO’s Social Finance Programme
  4. 4. DVARA KGFS (KSHETRIYA GRAMIN FINANCIAL SERVICES) Advancing social justice, promoting decent work 4 KSHETRIYA -> REGIONAL GRAMIN -> RURAL REGIONAL RURAL FINANCIAL SERVICES -> ONE STOP SOLUTIONS FOR FINANCIAL SERVICES IN RURAL INDIA Personal Loan JLG Loan Micro-enterprise loan Term Life Insurance Accident Insurance Medical Insurance Gold SIP Investments Protection Banking Savings Account Transfers Deposits and withdrawals Remittances Financial Services CreditMutual Funds
  5. 5. DVARA KGFS’ INTEGRATED RISK AND WEALTH MANAGEMENT - PROJECT OVERVIEW Advancing social justice, promoting decent work 5 OBJECTIVE • To arm Dvara KGFS customers with an integrated financial management plan (a suite of credit, savings, insurance, and investment products) tailored to support and protect their needs and aspirations • To change the customers outlook from always credit oriented to savings oriented • To retain customers by providing solutions for all the financial needs of the customer APPROACH • Design a machine learning algorithm which can analyze customer information pertaining to their: • Personal and Household Information • Monthly Income & Expenditures • Credit Bureau History • Financial Goals in life and make recommendations on financial products that should be offered to them
  6. 6. Advancing social justice, promoting decent work 6 PGPD FRAMEWORK DVARA KGFS approach to wealth management in rural India comprises of four building blocks, namely, Plan, Grow, Protect, and Diversify (PGPD) • PLAN: The first step towards managing wealth is creating a plan for the same. This is enabled by performing a gap analysis to know the current financial status of the family. • GROW: The next step is to work on how the customer can grow their money. They must devise ways to grow their money in order to achieve their goals at the desired time. • PROTECT: The family must PROTECT its money i.e. insure it from unforeseen debacles. Shock events such as death, disease, or disability, which can be disastrous to their goals. • DIVERSIFY: As different kinds of investments behave differently over a period, it is better to diversify one’s investments, instead of just investing in one option. DVARA KGFS’ INTEGRATED RISK AND WEALTH MANAGEMENT - PROJECT OVERVIEW
  7. 7. ALGORITHM FRAMEWORK OVERVIEW Advancing social justice, promoting decent work 7 INPUT DATA CAPTURE MEASURE JUSTIFICATION Income concentration - # of earning members - Income levels Classified as concentrated/diversified income sources, depending on the share of income earned by the primary wage earner Higher concentration would necessitate greater protection for the primary wage earner Income volatility - Occupation type - Income seasonality Related to occupation. Seasonal/weather dependent activities such as agriculture would be highly volatile, while salaried classes would be low volatile Higher volatility households would need help in managing cash flows during lean times Household surplus levels - Expense information Measure of ability of household to save, relative to their expenses Higher surplus would improve the ability for households to plan beyond their day-to-day requirements Liquid asset holding - Jewel holding Measure of household's ability to manage cashflow requirements by liquidating assets such as jewels High holding of monetizable assets would imply that households can easily manage short-term liquidity constraints Credit history - Credit bureau data Credit behavior of the household Good credit behavior can enable households to take additional credit as required
  8. 8. ALGORITHM FRAMEWORK OVERVIEW Advancing social justice, promoting decent work 8 HOUSEHOLD GOAL LAYER • Map Household surplus levels, cash outflow for goals at various periods to identify required return on surplus to achieve goals (NPV >= 0) and compute achievability of their goals • Identify maximum possible return from KGFS product portfolio for the customer given constraints around: • Risk appetite of customer • Liquidity • Product features • Protection (insurance) requirement • Define efficient product portfolio for customer based on the above SOLUTION DESIGN • Customer discussion to agree on level of surplus customer is willing to allocate for the achievement of their goals Goal achievability Low surplus allocation Medium surplus allocation High surplus allocation Goal 1    Goal 2    Goal 3    • Based on consistency of customer behavior toward saving for their goals, a credit boost could be offered if customer is falling short of achieving 1 or more of their goals • If customer’s surplus is too low, hold discussion with them to agree on level of surplus they are willing to allocate for wealth creation through investment in mutual funds and Gold SIP
  9. 9. MARKET RESEARCH AND INSIGHTS Advancing social justice, promoting decent work 9
  10. 10. MARKET RESEARCH AND INSIGHTS Advancing social justice, promoting decent work 10 Financial goals of the customers are more closely related with their income level than their surplus Accumulation of wealth is more important than returns earned Majority of the customers are willing to save USD 7 to USD 14 (₹500 - ₹1000) per month for 2 years and more Gold is the most favoured tool of investment for majority of the customers Chit funds are a known phenomenon, but participation is relatively low (15%) Investment in mutual funds is almost unheard of for our customer base
  11. 11. CUSTOMER CLASSIFICATION BASED ON MARKET RESEARCH Advancing social justice, promoting decent work 11
  12. 12. FINANCIAL PRODUCTS OFFERED Advancing social justice, promoting decent work 12
  13. 13. FINANCIAL PRODUCTS OFFERED Advancing social justice, promoting decent work 13
  14. 14. FINANCIAL PRODUCTS OFFERED Advancing social justice, promoting decent work 14
  15. 15. FINANCIAL PRODUCTS OFFERED Advancing social justice, promoting decent work 15
  16. 16. DVARA KGFS’ INTEGRATED RISK AND WEALTH MANAGEMENT OFFERING Advancing social justice, promoting decent work 16
  17. 17. DVARA SAMPOORNA SHAKTI PLAN – PILOT Advancing social justice, promoting decent work 17 • KGFS commenced the pilot of the project in October 2019. • Launch events were done at multiple locations to create buzz about DSSP and make them customers aware of the service • The pilot was operated in 10 branches across 2 districts—Thanjavur (6) and Krishnagiri (4)— of TamilNadu • 3 more branches were later added to the pilot • 1000+ households enrolled got enrolled KGFS staff explaining product packages to the customers
  18. 18. DVARA SAMPOORNA SHAKTI PLAN – PILOT REVIEW Advancing social justice, promoting decent work 18 CUSTOMER VOICES • Customers wanted to have more flexibility in their monthly contributions (“since our income fluctuates so should our monthly contribution”) – additional top up option was added. It can be availed up to 4 times in a year • The minimum investment term has been reduced to 12 months from 24 months • Customer can choose to pay advance EMI for one month, if desired All in all – a success. Based on the feedback received few changes were made in the final offering
  19. 19. DVARA SAMPOORNA SHAKTI PLAN – ROLL OUT Advancing social justice, promoting decent work 19 Customer Enrolled Net Investment 6000+ USD 50,000+ Where we stand today: As of March 2020, DSSP has been rolled out in more than 80 per cent branches of DSSP. NEXT STEPS • Roll out of Liquid funds as the next investment product • Review of the algorithm parameters based on the customer behaviour over past 6 months and make necessary changes
  20. 20. Questions and Answers Advancing social justice, promoting decent work 20 Panelist: Nikhil AC Head of Liability Products Dvara KGFS Moderator: Aparna Dalal Senior Research Officer The ILO’s Social Finance Programme Panelist: Sandeep Kumar Impact Insurance Fellow The ILO’s Social Finance Programme
  21. 21. Thank you! www.ilo.org/socialfinance

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