Samridhi has partnered with IDBI Fortis Life Insurance to provide affordable life insurance to Samridhi's clients. IDBI Fortis will offer a new "Microsurance" product at competitive rates, providing benefits to customers and the companies. Samridhi has also been selected for a technical assistance program with the RBS Foundation and MicroSave involving training, workshops, and exposure visits over the next year and a half to help professionalize their operations. The document then discusses challenges to innovation in the Indian microfinance sector including a lack of incentives, competition levels in the market, and barriers faced by smaller organizations.

1. VOLUME 1, ISSUE 1II 2 MARCH , 2009
Samridhi ties up with IDBI Fortis for its
Insurance needs
Samridhi has entered into an agreement with IDBI
Fortis Life Insurance Co Ltd. Amongst the fastest
growing private life insurance companies, IDBI For-
tis, will provide affordable life insurance coverage to
Samridhi‟s entire clientele. The product is titled
„Microsurance‟. Samridhi Financial Services (SFS) will be amongst the first few to benefit from
the new product. The rates being charged are amongst the most competitive in the industry
and a win- win deal for all the stakeholders involved.
Samridhi selected for RBS Foundation/
MicroSave Technical Assistance Programme
Samridhi has been selected as one of the partner in the Royal
Bank of Scotland (RBS) Foundation/MicroSave Technical Assis-
tance Programme based on the Rapid Institutional Assessment
(RIA) conducted by the MicroSave in January. This is going to be
an intensive partnership for one year starting from April and a 'slowed down' partnership for
next six months subsequently.
To start with an exposure visit has been planned in March to see a reputed mid sized MFI.
The idea of the exposure is to see how commercial microfinance operations are run profes-
sionally and in the process take back any learning gleaned through the exposure. For the
month of April, the event is Mini AMI. Mini-Applied Microfinance Institute is specially tailored
for the smaller MFIs and will have components on Process Mapping, HR, Finance and Ac-
counts.

2. Indian Microfinance: what holds back the
PAGE 2
“Game Changers”?
Till the start of the 18th century, India constituted over 35% of the world trade. Today with
over 400 million people coming under the BPL, India alone constitutes over 35% of the
world‟s poverty. Thanks to our colonial past which rendered the otherwise working
classes useless and in most of the cases wage labourers.
The objective of the entire British education system propagated by Macaulay was to pro-
duce clerks for British Administration which they successfully achieved. Scientific tempera-
ment which was Indian psyche‟s mainstay was pushed back. The new system discouraged
the very notion of thinking which resulted in no major scientific breakthrough from India
during that period. There have been aberrations but those had been far and between.
Proof of that is so little number of patents issued to Indian compared to tiny countries like
Taiwan and Japan. We are yet to come out that phase as have not thought it worth while
to change your education system and bring back the glorious past. The so called temples of
Modern India, (IIT‟s and the IIMs) are some of the efforts in the right direction but it‟s too
little too late. The entire system needs to be restructured to bring the innovative minds at
work.
quot;Perfection is achieved, Putting aside the entire blame on theory, any classical economist would tell that rational
human being or entity performs according to the incentive system. So we need to go into
not when there is nothing
the rationale behind low level of innovations.
left to add, but when
Indian Microfinance
there is nothing left to
remove.quot; – Antoine de
Though the SHG Model of Microfinance was started in India, the various constraints in-
Saint-Exupery volved with it have limited its growth or replication in other parts of world. This left the
case open for Indian Entrepreneurs to replicating others models of microfinance which
had two prevalent models in world
Latin American Model – branch based banking/individual lending
Grameen Bank Model – JLG based lending
It comes as no surprise that India chose the second model because it suited the cultural
environment and sensibilities. But what comes as a surprise that it took almost 14 years
before any Indian entrepreneur thought of replicating the model. entrepreneur thought of
replicating the model.
Though there have been innovations on the delivery side like working only with women
and working strictly with the groups but very few innovations on the products and cus-
tomer service.
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3. VOLUME 1, ISSUE 1II PAGE 3
So as is clear at any given point of time there is decision to be such entry barrier for other smaller play-
made that what are costs involved vis-a-vis what are the rewards ers.
that can be achieved through the innovation. As is clear from the graph that it makes
This can be understood with the help of the graph which draws a most sense to the organizations to involve in
relationship between the lifecycle of the organization and costs innovations when they are in midsize cate-
involved in innovations. gory (5,000 – 50,000 Clients)
Few points which emerge quite clearly from this discussion is are
as following
 Cost of innovations will be quite high for the organizations
which are bigger and it keeps increasing with the size of the
organisation.
 Being large does not give enough flexibility for such large or-
ganisations to make swift movements. This leaves the net ex-
pected reward net off from the cost lower comparing with
smaller players.
 Also there is nothing which stops the other smaller players in
market from copying the innovation. So as to say there is no
Intuitively it is clear that if some organisation is starting then it makes no sense in innovating as there is no scale
and fruits will be visible only once the organisation reaches number of clients where it is profitable to implement
the change. But there is need to provide support to the organisations in this stage to promote them to innovate.
The task is cut-out for different stakeholders to provide support in this stage. This is where technical service pro-
viders and PE funds can collaborate to give a long rope to players who are innovative when it comes to providing
maximum value to the customers. For large organisations though the unit cost can be very low but overall cost is
huge.
Lack of innovations can also be understood from prism of level of competition in the market. As any economist
would tell that it does not make sense to innovate in a seller‟s market as with economies of scale the organisa-
tion can enjoy periods of abnormal profits. This essentially discourages the organisations from engaging in innova-
tion.
There can be four different stages in the competitive scenarios.
In state of monopoly/oligopoly which is com-
parable to no competition/low level of com-
petition there are abnormal profits to be
booked which does not lead to innovations
and the strategy of the organisations is to en-
ter new areas and create monopoly for what-
ever period of time.
This state would continue for some time till
there are some other players to take their
share in this pie leading to mid level competi-
tion. Prevalent strategy in this stage is to im-
prove upon customer service.
When the competition intensifies further then the organisations try becoming more accommodative of the client
requirements hence leading to greater emphasis on product development.
The most conducive environment for innovation is when there is fierce competition in the market which is other-
wise known as perfect competition. That is when there are no abnormal profits to be made and the margin is very
little. At this time the larger players will try to find their own segments and they would defend their territories
fiercely. This time is most apt for “Game Changers” as most of the bigger players would be too busy in defending
their turfs.

4. If any player wants to enter such markets then the
best way to enter the market is with the existing
products and after reaching a sizeable size, the or-
ganisation should start innovating to create a niche
for itself. There are still large territories in India
which incentives the large organisations to enter
places where they don‟t have to innovate.
As has been explained in the graph that over a pe-
riod of time when the market matures, it gives impe-
tus to companies which can be classified as “Game
Changers” to target segments which have very spe-
cific requirements. At the same time it gives oppor-
tunities for the new entrants to enter the market
and provide „good enough” solutions to the clients
who are not looking for such high-end services. It‟s
still a few years away in India, before we start seeing
companies involved in such kind of innovations.
Are there some lessons to induce innovations – case of Apple:
As a company “Apple” is known to be very innovative. We can draw a few lessons
from their strategies:
1. Never be afraid of cannibalization: this is major fear which keeps the compa-
nies in check from innovating as they start fearing cannibalisation of their ex-
isting product line. Be the first to cannibalize your own product line rather
than waiting for some other firm to do so.
2. Delegate the innovation to smaller team: it is very difficult to achieve some-
thing innovative in larger teams. Delegate the task of innovations to small
teams.
3. Keep communication lines open: new idea can come from anywhere, so don‟t
be close to new ideas coming from below the ranks.
What does the future behold?
Here are some of the factors that might affect the sector‟s innovating capability:
 The opening up of the banking sector and the entry of new investors, an increase in the flow of funds should
help the sector in a positive way.
 Having NABARD as a regulator will keep a focus on reducing the cost of funds to the poor, which in turn will
lead the companies to innovations in the delivery models side.
 The usage of mobile phones as a remittance tool will also add a new dimension to the growth in the sector.
 The entry of P2P model in Microfinance is already fast catching up.
With growing competition Indian microfinance field is expected to see more and more of innovations in the com-
ing years. It will make the survival for the new entrants next to impossible if they don‟t innovate. The time is ripe
for the “Game Changers”.
Dreams surely are difficult, confusing, and not everything in them is brought to pass for mankind. For fleeting dreams have two
gates: one is fashioned of horn and one of ivory. Those which pass through the one of sawn ivory are deceptive, bringing tidings
which come to nought, but those which issue from the one of polished horn bring true results when a mortal sees them.
Homer (800 BC - 700 BC), The Odyssey
VOLUME 1, ISSUE 1II 2 MARCH, 2009 @SAMRIDHIINDIA.COM