Webinar on Integrated risk management solutions

Integrated risk management
solutions
Date: Tuesday / 31 / March / 2020

Interfacing with the webinar system
Advancing social justice, promoting decent work
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Introduction to webinar and speakers
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Panelist:
Reinhard Marcellino
Social Finance Fellow
KOMIDA
Moderator:
Aparna Dalal
Senior Research Officer
The ILO’s Social Finance
Programme
Panelist:
Preeti Sancheti
Social Finance Fellow
CLIMBS
Panelist:
Craig Churchill
Chief
Programme

Risk is...
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The possibility of loss. It can be imposed from
outside or taken voluntarily in the pursuit of
opportunities
 WDR 2014

Perpetual cycle
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A framework for risk management
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Examples of risk preparation
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Examples of risk coping
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Rationale for developing integrated risk management solutions
• Informal coping mechanisms offer limited protection
• Less available to poorer households
• Unreliable: Break down when needed most
• Risk-induced losses exacerbate poverty
• Formal financial services can offer greater benefits at a lower cost
than informal mechanisms
• Vulnerability to risk undermines the impact of enterprise loans
• Risks adversely affect lender’s portfolio quality
• Use of enterprise loans for other purposes demonstrates demand
• Can deepen and broaden the impact of a financial institution
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Different products
for different risks
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In managing risks, which product, when?
• Insurance is appropriate for large losses that are unlikely to occur
• Savings is the cheapest and most versatile, if one has built up a
buffer
• Savings is most appropriate for expected expenses – hence the
need for financial education
• Credit can be used to fill in the gap, assuming that the household
has sufficient repayment capacity
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Coping with risk: Savings or credit?
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Children Education Saving
KOMIDA

Key Fact Figures
• 87% of parents around the world consider children education as a top
priority (World Economic Forum, 2018)
• Indonesia is ranked 13th as a country with the most expensive
education cost (HSBC, 2018)
• 20,000 USD is the amount of parents will pay until the children finish
college in Indonesia (HSBC, 2018)
• 15%-20% is the education inflation rate of Indonesia (Allianz
Indonesia, 2018)
• Only 1 out of 4 people in Indonesia that finish Senior High School,
and only 8 % of the population finish college (Badan Pusat Statistik,
2017)
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We would like to reduce the external funding and
focus on building internal portfolio. As of today the
distribution of funds is 65-35. In 2020 We aim to
make it 50-50.
 H. Slamet Riyadi, Managing Director of KOMIDA

Main topics discussed with members
• Savings purpose and behaviors
• Risks experiences and their coping strategy
• Future demand of family-related product
• Children health & education plan
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Customer Value Proposition – Building product features
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SIPADAN Sprint Design
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Product Prototype – Simpanan Pendidikan Masa Depan (SIPADAN)
Contract Period: 6 months to 6 years
Interest Rate: 4%
Saving Target: IDR 125,000 up to IDR 15,000,000
Saving Amount: IDR 5,000 up to IDR 50,000
Withdraw Period: May - Jun & Nov - Dec
Add'l Benefit: life insurance & special prizes for educational
facilities ie: laptop
Early withdrawal: penalty of 1x from weekly deposit
Admin Fee: IDR 2,000 for closing account
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Member’s perspective
Product is designed to help members' children have saving for
their educational needs. Saving can be used not only for school
fees but also to buy other needs such as uniforms, books and
school activities.
KOMIDA’s perspective
Product is designed to increase the amount of saving as well
as the frequency of saving from members through contractual
saving product. This is expected to increase internal funding
from KOMIDA specifically through members.

SIPADAN Design - Pilot
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Product Name SiPadan (Simpanan Pendidikan Masa Depan)
Purpose Children Education
Deposit Frequency Weekly
Deposit Amount Min Rp 5.000,- Max Rp 300.000,-*
Interest 4%
Contract Period Min 6 month Max 72 month
Restrictions on Withdrawal
only after maturity in May-June & November-December
period
withdrawal before maturity is subject to a penalty of 1x
weekly deposit.
Trigger of withdrawal
Deposit withdrawal must be accompanied by a
withdrawal form in accordance with the above
provisions, or if a member dies
Amount of Withdrawal 100% from saving target + interest
Frequency of Withdrawal 1x when matured
Payment Method Cash through KOMIDA’s staff/branch
Value Added Benefit Life Insurance for member + lottery reward
Distribution Channel KOMIDA Branches
Multiple Accounts? No
Administration Fee Rp 2.000,-
Insurance? Yes, provided by cooperative
Insurance Charges & Benefit
Insurance premium are deducted from saving deposit
1% per year (12 months), deducted when funds are
sufficient each year. If member dies during the saving
period, KOMIDA will pay 1.5 Mn IDR sum assured and
saving will be returned.
Change of Account Ownership No
Change of Payment Term Ya -
Grace Period As regulated by KOMIDA -
Operational guideline As Attached
Currency Rupiah

Pilot Highlight
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“I want to save in SIPADAN, however I need to pay the
loan first. Also I have other saving product in KOMIDA”
39 40
106
0
50
100
150
200
Total Customer Pilot Target
SIPADAN Account Opening -
Sukatani Branch
Run Rate (Apr 26)
As of Mar 23
Launch Date: Jan, 27th 2020
Duration: 90 days each branches
Pilot Target: 320 accounts
Total of Pilot Branch: 10 branches
Launched: 1 branch (Sukatani)
Total Customer: 39
We understand that the issue is not on the product
design/features but related to the customer’s
ability to set aside their come to save and their
economic preferences
Customer’s Feedback

Key Lessons
• A proper market research is key in product designing process.
• Through market research, we will have new insights that will help us find a right solution for
customer (ie: mother expectation in the future is not about their health but about their
children)
• Low income mothers do save.
• Its just a matter of their preferences and saving capacity. (ie: some mothers unable to save
in SIPADAN because at the moment they still have loan with KOMIDA). Our challenge is
then, how to come up with a product that is affordable but answering their needs?
• It is better to have something small and slowly adding new features instead of having
everything ready. The reasons are because:
• time constraint. The faster we have something, the faster we can do pilot and get feedback,
the better we make the product.
• the product can be reviewed and adjusted accordingly instead of destroying the whole
concept.
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SAVINGS LINKED SOLUTIONS
CLIMBS OIC NICO

Background
• Mindanao Philippines :
• Second largest island in the Philippines , all 3 organizations I’m working with are
head quartered in Mindanao
• Philippines experiences about 20 typhoons every year.
• The devastating Sendong and Pablo typhoons in 2012 / 13 are still fresh in the
minds of the residents
• This year this region has experienced several earthquakes as well
• Partners :
• OIC – A large Cooperative in Mindanao region. 18 branches. 189K members
• NICO – Cooperative 5 Branches, 19K members
• Members are in different professions – from Farmers , daily wage earners ,
salaried workers and most rely on Co ops for their savings and credit needs
• CLIMBS insurance provides the insurance to the members of the Co Ops.
Mandatory Insurance is bundled with credit and savings. Voluntary insurance is
also offered through the cooperatives to its members
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Methodology in Product Design
• One on one interview with members including FGDs
• Interviews with staff
• Questions about risks faced, coping mechanism,
saving and credit behavior
• Brain storming product ideas
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Some customer insights (1)
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Some customer insights (2)
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OIC’s SAFE PLUS – For the Co Op Kid!
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OIC’s Health & Disaster Savings
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Launch Results
• Product was announced at the General Assembly in week 1 of March and initial
feedback has been encouraging
• Accounts Opened:
• 6 Health and Disaster – Savings collected PHP 22,000 ($440)
• 4 SAFE Plus – Savings collected PHP 18,500 ( $370)
•
• Feedback:
• Members are excited about the “bundled insurance”
• Members would like a higher cover of insurance for Health and Disaster
• Members wanted “ Fire” to be included in the perils covered.
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NICO’s Health Saver
• Need : To launch a health program for members and increase savings
• Savings solution with bundled Insurance
• Interest Rate 6 % per annum compounded annually
• Min Amount - P6000p.a/ Max P30,000p.a ($120 - $600)
• Term – 5 years
• Withdrawals permitted anytime for Medical Emergency
• Pre termination penalty to ensure persistency and ensuring savings are used for
Health purpose only
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NICO’s Health Saver
• Bundled hospital insurance – Premium PHP 500
• 500($10) X 10 days / policy year – Member + Nominated Member 1
• 250 ($5) X10 days/ policy year – Nominated Member 2
• Member can nominate Parent / Spouse – (Age 18 – 69) or Children (Age 4-12)
• Contestability period 15 days for natural disease and 3 months for pre existing
diseases
• Insurance premium to be deposited by member for first year
• Second year onwards can be deposited or will be deducted from savings.
• In case of hospitalization member to do the following:
• Avail Phil health benefit.
• Avail Hospital Income Benefit Insurance
• In case of shortfall, withdraw from health saver account.
• In case of further shortfall, apply for a loan with NICO.( Subject to approval for
regular members only)
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Launch Results
• Launch Date 13th Jan
• Total No of Members : 19,000
• Total No of Members that have opted for plan : 354
• Amount of Savings Collected :PHP 734,100 ($14,682)
• Members response:
• Positive response.
• Some members want to save more than the limit of PHP 30,000($600) / annum
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Key Learnings
• Product awareness amongst members is a challenge
• Neither of the SACCOS have an incentive plan for staff
• We’ve introduced an incentive program for the first time
• In all the 3 products we are trying to ensure that members use savings for
expected expenses vs taking a loan
• Also in all 3 cases we are highlighting the bundled insurance, often when the
insurance is bundled, member is not aware of the insurance component.
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Questions and Answers
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Panelist:
Reinhard Marcellino
Impact Insurance Fellow
KOMIDA
Moderator:
Aparna Dalal
Senior Research Officer
Programme
Panelist:
Preeti Sancheti
Impact Insurance Fellow
CLIMBS
Panelist:
Craig Churchill
Chief
Programme

Thank you!
www.ilo.org/socialfinance

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