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Business must target social & development of rural area for its success…….Anirvan Ghosh & Aman Dhall
In May last year, as the monsoon played truant and the sun shone bright to singe the earth, Monica Agrawal trudged on foot through the dusty village of Kottacheruvu in Andhra Pradesh looking for business. For the corporate initiatives director at Aviva Life Insurance, there couldn’t have been a more ideal day to convince villagers about the value of her product. She couldn’t let go the opportunity.
This effort and commitment has been exemplary of the value insurance players and providers of other financial services are placing on the burgeoning rural market that is growing at a breakneck speed. Rural India constitutes two-thirds of the country. But then how do the providers of financial services, like insurance and mutual funds, convince a poor farmer to buy a product, which has no immediate returns, when he is facing drought?
“By making it as attractive as something that does give immediate returns,” says Ms Agrawal. To get the pulse of the rural folk, she has now visited a number of villages in AP and West Bengal, as her sales team fanned out across others.
The team found that premiums just had to be cheap, working out to as little as `5-50 a day. The convincing had to be done by someone known to the villagers, someone they could trust. That was where microfinance players such as BASIX and SKS Microfinance came into picture. Their job was simple: to provide the financial services providers with the distribution reach and offer insights into the rural markets. “Our agents keep going and meeting villagers regularly for loan requirements,” says D Sattaiah, chief operating officer at BASIX.
For Uday Sareen, country head, retail banking at ING Vysya Bank, this connect has come from partnering with over 12,000 self-help groups. “Our relationship manager spends time understanding the group, attend meetings, and counsel them on money management. The benefit of this is a long-term relationship and good credit history.”
Financial experts say in villages, a typical salesman would first offer a loan. And then, add “you know, you should also buy something equally important—that keeps your family safe in case something untoward happens to you.” Coming from someone whom the villagers trust and in a country where rural healthcare is woeful in remote areas, this rings a chord. This strategy has worked wonders not just for life insurance, but also for general insurance companies like ICICI Lombard, which also relies on microfinance agents to sell its products, mainly insuring crops against a truant weather. A unique aspect of weather insurance is that farmers need not lodge a claim. “We monitor the policy and calculate claims based on the certified data received from third party agencies automatically during the policy period,” says Alok Agrawal, director (corporate) at ICICI Lombard General Insurance.
Once the villager is convinced, there are products tailor made for him. Sattaih of BASIX has seen products like grameen suraksha, livestock insurance, health insurance and weather insurance, and rural personal accident policy to be the most popular. And how much is the spread? “We sold during fisyal year 2009-10 over 3.7 lakh polices amounting to `5.45 crore premium. And expect to sell over 11 lakh policies amounting to a premium collection of `54 crore premium during the fiscal year 2010-11,” he says, taking into account all the products of insurance companies that his MFI sells. The growth rate is over 200% in terms of polices and over 900% in terms of premiums collected.
“Our experience is that in rural areas business is not just about selling a product but also being an inherent
part of the social and developmental aspects,” says ICICI Lombard’s Agarwal. That means, that the benefits go beyond a village. For example, one of its policies covered around 800,000 artisan families and settled close to eleven lakh claims under the scheme which entitles beneficiaries to access healthcare facilities through 1,102 cashless OPD clinic facilities and over 2,858 hospitals across the country. The development commissioner for handicraft, ministry of textiles along with ICICI Lombard implements the scheme and covers the artisan, spouse and two children for comprehensive pre and post-hospitalisation expenses. This strikes at the heart of a deep-seated problem. “They are not confined to the village healthcare centre anymore,” he says.
Challenges for a mutual fund are even more—the villager first has to believe in mutual funds. “Talking in their mother tongue is a big step ahead,” says Avinash Ramnath, head of sales and marketing at Canara Robeco Asset Management. Changing their views on money, and gaining their trust has not happened overnight. He had to juggle various ways to connect with them.
The product most popular is systematic investment plans. “Since investment happens over a period of time, they trust it more,” says Ramnath. “A tried and tested way of explaining is by investing a small amount you could become an owner in a company,” says Rajnish Kumar, head of product and marketing at Fullerton Securities.
The rural parts also have rich farmers, particularly in states like Punjab. For them, the products are more similar to those sold in urban areas, says Aviva’s Agarwal. “We can sell them through PSU bank branches and also direct sales agents,” she says. Such farmers are better traveled, and have had the feel of doing business in bigger cities. “Their needs are different from the poor farmers, and so our agents too are trained for that.” Banking correspondents like Eko Financial Services adopt a number of local awareness programmes—street plays, loud-speaker vans, leaflet distribution, education at the customer service points. “As long as the need-gap is met through the model, it’s not hard to convince anyone—farmer or a labourer to open an account,” says Eko’s chief marketing officer Anand Raman.
In the final analysis, establishing a relationship with a local community is of paramount importance. And also go a step further to show your commitment. Kameshwara Rao, ING Vysya’s manager based in Kakinada, AP, wakes up while it is still dark during the sowing season. As farmers leave for their fields early morning, he visits them at the crack of dawn to help and service their requirements. “You show that you care, and they will respond,” says Sareen.
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