Twenty-four year old Jatin Gujrathi, an MBA finance from the University of Poona, lives in Bhor, a taluka in Maharashtra, over an hour’s drive from Pune city. He helps his father run the family’s ready-made garments business. About a month back, a representative of Reliance Money, the financial products distribution company of the Anil Dhirubhai Ambani Group (ADAG), approached him to be their franchisee at Bhor.
In Saswad, yet another taluka of Maharashtra, Ravindra Gadekar, a young graduate who is currently part of his father’s electronic products store, has also been short-listed by the group to run a Reliance Money franchisee.
Gujrathi and Gakekar are among the hundreds of young men and women across 5,140 talukas who will manage Reliance Money’s ambitious foray into the Indian rural heartland to sell insurance—on tractors, crops, cattle and life—to mutual funds.
“Much of the prosperity that has come into the country has by-passed rural India, and this is largely because nobody has ever made it possible for the population to access these products,” says Sudip Bandyopadhyay, CEO, Reliance Money.
Over the next few months, Reliance Money plans to cover 1,000 talukas across Maharashtra, Gujarat, Andhra Pradesh, Karnataka and Madhya Pradesh, where it will set up one outlet each to be run by a local entrepreneur who will sell a basket of the company’s products to the local population. A taluka or tehsil is an administrative sub-division of a district.
By the end of the current financial year, the company, which sells products from insurance firms and mutual funds, will set up 10,000 franchisees across India. Each of the franchisee outlets will provide employment to five local youth, the company claims.
Reliance Money will follow up its franchisee initiative by deploying 10,000 Internet-enabled trading kiosks across the country, the biggest deployment by any company globally, to enable its customers to transact in equity, commodity derivatives, mutual funds and IPOs.
“It is a myth that rural India and the folks living in rural areas don’t know where the world is headed. A farmer in Madhya Pradesh and a spice plantation owner in Kerala are completely tuned to the trends in these commodities and their prevailing global prices,” insists Bandyopadhyay.
Reliance Money joins a host of Indian financial institutions that have discovered rural India as they seek to find new customers away from fairly saturated and high-cost urban pockets, especially for those need storefronts. Among mutual funds, for instance, UTI Mutual Fund has been aggressively making rural forays. And ICICI Bank Ltd, among other large banks, has made the rural customer a priority.
Meanwhile, Reserve Bank of India Governor Y.V. Reddy wants commercial banks to open branches in villages and cover un-banked areas. RBI data suggests that, on average, there is one bank branch for every 16,000 population but in reality urban centres have too many branches and rural India too few. On an all-India basis, only 59% of adult population in India have bank accounts. In rural areas, the coverage is 39% against 60% in urban India.
The unbanked population is higher in the north eastern and eastern regions. Regional differences are significant with the credit coverage at 25% for the southern region and as low as 7%, 8% and 9%, respectively, in north eastern, eastern and central regions. Out of 203 million households in India, 147 million are in rural areas and of them 89 million are farmer households. Overall, 51.4% of farm households have no access to formal or informal sources of credit while 73% have no access to formal sources of credit.
Reliance Money has tied up with Pradeep Lokhande, founder of Rural Relations, a rural marketing organization which has services in 28,000 villages, to identify potential candidates to manage its outlets. Lokhande often video tapes interviews with candidates and arranges video conferencing with Bandyopadhyay. “We are willing to spend whatever it takes to get the job done,” says Bandyopadhyay.
Still, nobody is yet clear how big a market rural India will become. Bandyopadhyay says Reliance Money will tap the thousands of families, who park their money in local chit funds.
“We will offer a safer way of investing their money and a better option to grow the money, given the fact that inflation and taxation levels have now made it impossible to get returns that they earlier got on bonds and other savings instruments,” says Bandyopadhyay.