1. Consumer Finance Innovations in India
Nachiket Mor
Bindu Ananth
November 13, 2012
Columbia University

2. Product menu driven approaches dominate
consumer finance
 Design and provision of several disaggregated, standalone
products available from a variety of “product manufacturers”
 The customer facing front-end in this system is typically an
agent marketing the products
 Agent often not independent of manufacturer but subject to
disclosure norms
 Low emphasis on expertise of the agent
 Products may have overlapping functions
 Customer chooses from a menu, absorbs mismatch between
her needs and available products
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3. This approach has dominated most efforts towards financial
inclusion, which is often defined in terms of standardised access
to one or a few “simple products” – 52 week loan or a low-
balance savings account
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4. Simplicity & complexity in products
 Product A: a crop loan to a farmer; equated monthly
installments
 Product B: a crop loan to a farmer; principal and interest
payments contingent on observed rainfall in her
neighbourhood
Does “simplicity” solve consumer problems?
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5. What would good consumer finance look like?
 Financial propositions tailored towards individual needs
and risk profiles
 The back-end could be a variety of product
manufacturers but the customer-facing front-end is
unified and local
 Very high emphasis on provider expertise (analogous to a
doctor)
 Informed consent by the consumer
 Provider liable ex-post for sale of “unsuitable” services
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6. Great idea, can it be executed at scale?
 The KGFS model for remote rural India
 5 local financial institutions, 140 branches,
270,000 clients, 450 wealth managers
 The earliest KGFS (4 years) is profitable
 Branches provide 18 financial products
 No incentives for product sale
 Every customer has a personalised financial plan, that
forms the basis for product sale
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7. Low-cost branches at the village level
Thanjavur, Tamil Nadu Tehri, Uttarakhand
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8. Wealth Managers often high school graduates
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9. The basis for a financial plan
 Household data collected and verified during
enrollment
 We apply an automated framework that optimises:
 Liquidity (short and long-term)
 Assets and liabilities (eliminate negative carry)
 Human capital
 Diversification
 This suggests a specific portfolio of services
 Wealth Manager works with each client to ensure
take-up
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10. Future work
 Auditing for suitability of sale
 Development of customer archetypes for acceleration
of wealth manager learning
 Learning about techniques that aid customer take-up
of suitable services
 Developing wealth manager incentives linked to
financial well-being outcomes
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11. www.ifmr.co.in/blog
Thank you
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