I finally have to beg for food. Straight from the airport to the meeting, the late flight does away with lunch. With a tummy that threatens to growl out of control, I stop Nachiket Mor mid-word—not an easy task, I assure you—to ask if there is some food in the guest house. I’m in Chennai to look at what IFMR Trust—where Mor is chairman of the governing council—is doing that it gets customized financial services to the remotest Indian.
Mor pushes a Nutribar at me and a cup of coffee, and goes right back to his presentation. Soon we are deep into the innards of a software that matches individual profile to a set of financial products. Key in a simple personal accident policy to the financial life cycle of a village daily wager and see the rest of his life’s financial chart move from red to blue, from despair to hope.
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Clearly, the man is beyond hunger, thirst, heat or cold. The guest house is cooking without air-conditioning and only I seem to be noticing it. When he is not looking, I quickly put on the fan. He’s in Mission Mode India 2020. He is mentoring IFMR Trust to develop a model that is high on responsibility and low on costs, that takes into account the unique features of the last-mile family in product construction to develop a system in financial services that will move the bottom of the pyramid out of decades of status quo.
And I am in search for the holy grail of a model that is fair to the customer, distributor and product manufacturer. What I hear about the Kshetriya Gramin Financial Services (KGFS) operation of the trust is intriguing. The idea is to set up a branch network that offers a full suite of financial services, including credit, investments and insurance, to those who are outside the formal banking system.
While microcredit, in the joint-lending group, or self-help group route, will first give out credit, the idea is to leverage the relationship to sell products designed specially to solve local problems rather than vend products that are first designed and then sold.
In the final model, a sophisticated software will take in the unique details of each person that the rural wealth manager will key in and spit out a list of products that this person can afford and must buy. The wealth manager is an employee and not a fee-for or commission agent.
Big deal? Well, read on. First, the entire operation is pivoted on the use of technology, with VSAT and broadband linking each branch to the central office. Two, each member will carry a fingerprint-using biometric card that is fully portable across all the branches of the KGFS network. Three, probably the most important part, KGFS takes upon itself all responsibility of a product whose outcome is harmful to the customer.
The argument is that just as a doctor is liable for wrong medical advice, so also the seller of financial products should be liable for selling a product that has a bad outcome. For example, a daily wager pawned her gold jewellery to take a loan. She was the sole earning member of a family of five. She died. KGFS is yet to begin offering a life cover but as a full-service wealth manager, it took this as its own fault for not having a life cover in place.
Says Bindu Ananth, president of IFMR Trust: “We returned the gold, not out of a sense of pity, but out of a sense of responsibility.”
An overnight train journey later, Ananth and I are in bustling Thanjavur, the headquarters for the first roll-out of this plan. An hour into the rice-bowl hinterland and we are at the first branch at Karambayam that is just over a year old.
A group of women, who are on their second cycle of taking a joint loan, drop by to make the EWI (equated weekly instalment). The cows they bought last year with a loan from KGFS are now an asset and they are here for more. They nudge Ananth into offering the gold coin-linked saving product in a different way.
While we are chatting, a man cycles up. Very matter-of-factly, he buys a Rs1 lakh personal accident cover for Rs40. His wife has been a borrower with this branch and he feels confident enough to make this financial transaction that I see my urban friends sweating over.
Two other projects—one in Uttrakhand and another in Orissa—are off the ground as well. By 2015, three million villagers will be able to access wealth management services without travelling for more than 3-7km. The full commercial roll-out of the experiment is still to happen. But if it does, this will be fairly inspirational to many others in the financial services space who are trying to move the agent up the value chain to provide real service.
Imagine dealing with a wealth manager who does not earn commissions or fees and will be liable for a wrong sale if you have a bad outcome when you buy a product he recommends. Quite path breaking.
And yes, I do finally manage to eat. Dinner at the local tiffin place called Sangeetha. Incidentally, its breakfast of idlis and coffee can give Shakthi Mess, a tiny food-is-serious-business thatched-roofed lunch kitchen in Pattukotai in Thanjavur district, tough competition. Both redefine South Indian food for me. Or maybe that Nutribar has put food in perspective.
Monika Halan is a certified financial planner and is currently working as adviser, Pension Fund Regulatory and Development Authority. Your comments and personal finance queries are welcome at firstname.lastname@example.org