Client Empowerment through Creating a Full Financial Picture

Low-income households are faced with complex financial decisions almost on a daily basis. Incomes are uncertain and variable, and using meagre resources in the most efficient manner is difficult. At a functional level, households need only two things – liquidity, to meet their short term and long term requirements, as well as a mechanism for managing risk. However, the financial markets they face are incomplete and segmented, further complicating their choices. Thus, the problem is two-fold – that of access and capability.

Much of the innovation in the financial services industry today is focused on access. The growth of microfinance and other delivery channels such as mobile banking and agent networks in India has been unambiguously important for millions of poor households. However, the present channels of financial services delivery place the onus of choosing the best financial strategy on the consumer. The constant innovation in the financial services space makes it almost impossible even for the financially savvy to keep up. As a result, the consumer places high levels of trust in their financial service provider, who has little or no incentive to act in a manner that maximises the client’s welfare and few regulatory disincentives to refrain from selling products that are unsuitable.

How the KGFS model provides complete access to finance

The KGFS model was built on the belief that complete access to financial services requires delivering them in a convenient, reliable, flexible, and continuous manner. Each KGFS serves a rural population of around 3.5 million and each branch is expected to cover around 2,000 households within a radius of 4-5 kms. The physical proximity of a branch and locally hired staff is a critical component of product innovation and customization. There is a high reliance on technology and all KGFS branches have real time connectivity to enable automated transaction processing and data capture. The customer has access to a complete suite of products at the branch, including credit, remittance services, insurance, pensions and investments, which are provided on behalf of regulated mainstream entities.

Wealth Management approach leading to provider accountability

But the true strength of the model lies in the ability to deeply engage with and offer every household customised financial advice taking into consideration its balance sheet and the risks it is exposed to. The belief is that while it is integral for the client to be fully informed about a certain product and contract related features, the decision of choosing the optimal product may be too technical for the client to take on her own. For example, on the decision of how much life insurance to purchase, the client may not have the right set of tools to calculate her human capital and estimate how much cover she requires or navigate through the assortment of choices in the market. On the other hand, the provider with its deep expertise in financial services and the detailed information about the client’s financial profile is better positioned to make the appropriate recommendations. While the final choice of product purchase rests with the client, the provider takes accountability for appropriateness of the recommendation and disclosure.

At KGFS, products are sold only after a thorough analysis of the household profile is done using an automated ‘financial well-being report’. This report is generated on the basis of detailed information that Wealth Managers collect about each member of the enrolled household, including incomes, expenses, assets and liabilities along with goals which the household wishes to fulfil. The report assists KGFS staff in delivering customised Wealth Management advice on products / strategies a household should follow given their unique financial situation.

Recognising however that building awareness is a part of providing financial services, KGFS also runs well-structured ‘community-connect’ programs locally in the form of competitions at schools or even public meetings where KGFS staff interact with clients on subjects related to finance and how, if used well, can empower them to take control of their finances. All communication material related to charges and key product features are also prepared and delivered in the regional language.

Over the last four years, KGFS has worked on perfecting this wealth management framework that is at the core of everything we do, be it product development, choice of technology, staff training or incentive structures. The sole objective of Wealth Management is to maximise the financial wellbeing of the household to which the individual client of KGFS belongs. The front-line staff members at a KGFS branch are hence called Wealth Managers, are not expected to “sell” any financial products to the customers. The Wealth Manager is akin to a general physician who bears great responsibility for the health of her clients – a well prescribed treatment and prevention regime can add years of life and energy to a person. In contrast, a poorly prescribed treatment will not only fail to improve the health of a person but also has the potential to do much damage. Wealth Managers go through intensive training and are supported by technology to be able to actively work with their clients to explore opportunities to reduce their financial vulnerability and to maximise their wealth over time. Their incentives are linked, not to how many products they sell, but to whether they recommend the right combination and extent of products to their clients.

In summary, we believe that the provider’s role in building financial capability is not limited to disclosure of product features alone. It may also be too much to build financial expertise in clients and expect them to make the right choices on their own. The client has to be presented with the right products and the appropriate advice that enables her to make the right choices, and hence ensure efficient financial outcomes. We may not do financial capability in a way that is easily recognizable or identifiable – it is not an add-on or complementary activity. Indeed it is deeply embedded in the core of our wealth management approach.


24 August 2012 Submitted by Dr V.Rengarajan (not verified)

In the context of MF industry started moving from micro credit to microfinance, KGFS model is deservingly an unique business model in providing diversified financial products viz., loan, insurance, investment, remittances, micro pension without confining to micro credit alone collectively by a single institution. While I appreciate the KGFS innovative activities , I would like to share some of my observation on the innovative products and services from demand perspectives towards effectively bridging the gap.
An insight on the products profile gives an impression that they are designed more with business orientation to the general rural public without much micro credit product diversification for the poor clients having diverse capabilities. Identification of poor clients are not transparent. For instance, as indicated, the growth (credit) products such as jewel loans, gold plans ?, salaried loan are not necessarily poor client oriented for income generation . MF considers by and large collateral free loans for the poor. It appears that there is not much farm oriented credit products linked with crop insurance for the poor small and marginal farmers with the exception of livestock loan. Further, the size of loan and repayment tenure are structured uniformly for all credit products irrespective of pattern of income generation from the activity financed. No mention is made on moratorium period for these products.
While the provision of protection products in terms of insurance and pension through a single window to the clients is well conceived , it is not clear whether these protection financial services are integrated with credit product so that the client borrowers are automatically covered and protected.? Or how all these package of services collectively reach to the same cohort of the poor clients instead of isolated manner for ensuring sound financial well being in the poverty segment.?
Thank you for sharing my views
Dr. Rengarajan.

24 August 2012 Submitted by Shweta Aggarwal (not verified)

Dear Dr. Rengarajan,

Thank you for your views and your appreciation of the model. You’ve highlighted a number of vital points and I will try and address all of them:
1. Regarding Insurance and Pensions: KGFS does not bundle its products, so it becomes even more imperative to ensure that those needing protection receive it immediately. To facilitate this, wealth managers on the ground are trained to prioritise financial needs and explain the same to the customer. For instance, in the case of a daily wage labourer supporting a family of 4, term life, personal accident insurance and pensions, all are vital to protect current and future cash flows. Our wealth managers are trained to convince and reason with customers to highlight their importance regardless of the want. We also believe that not all customers need all products. At times it is essential that not the same cohort of customers have all the products. For instance a woman who does not earn but has availed a jewel loan, may not need insurance and pensions at the same urgency as her working husband or children.
Following the Wealth Management approach ensures that each customer, over a period of time, will have a suite of products necessary to be financially well-off.

2. Product Suite: At KGFS we believe that the role of finance is to help the household smooth consumption across all time periods in all states of the world. We offer a variety of loans including the basic JLG to more complicated Micro-enterprise loans and investment instruments like Money Market Mutual Funds where the minimum investment amount is Re.1. Over 50% of our enrolled clients have declared their primary occupation as agriculture (or agri related activities) and have availed a suite of products from KGFS. We do hope to offer not only agriculture specific products, but also products more fine-tuned to the needs of migrant workers, students, and pensioners amongst others.

We appreciate the time you have taken out to share your views and hope this was helpful.


24 August 2012 Submitted by Rishi M (not verified)

The KGFS model is very impressive in what it is trying to achieve, but I was wondering whether the model is scalable as the success of the model depends on highly skilled and knowledgeable wealth managers. Please could you shed some light on future growth plans or KGFS’s strategy to scale?

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