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Product Development for Microfinance Part 3: Innovation in India IFMR's KGFS model rethinks what it means to provide financial services to the poor.
This is the third article in our series on Product Development for Microfinance. The first article presented three approaches to market research for financial institutions. The second article featured market research tips from Jan Chipchase of frog and Graham Wright of MicroSave. This week we spoke with Dave Wallack of IFMR Rural Finance. Dave discussed with us the KGFS model, an innovative approach to meeting the needs of their clients.
What was the process undertaken by the KGFS team to understand your clients needs and develop the model?
We saw that different providers of financial products and services were meeting requirements of the household on a piecemeal basis, but the household’s needs were multi-dimensional and interlinked. Customers wanted reliable, flexible, convenient and continuous services, but these needs were not being met. Over time, we developed a few core principles which evolved into the KGFS model:
The first KGFS branches started operations in Thanjavur district of Tamil Nadu in June 2008. Now there are well over a hundred branches and these branches are thriving.
In a world where most people seem to be talking about going “branchless,” why are branches a core part of the KGFS model?
The KGFS model is a deliberate strategic shift away from maximizing product sales and towards maximizing the financial well-being of households and enterprises within a community. The physical presence of the KGFS branch and our Wealth Managers in villages makes it easy for us to really know the financial life of each customer and their family. We learn about their daily lives, how they earn their money, what crops they plant, what animals they have, and what financial challenges they expect to face in the coming years. This ongoing dialogue with our customers ensures that we are there to observe, and at times preempt, actual and potential threats to each customer’s financial well-being. Each KGFS branch is manned by three Wealth Managers who are from the same or surrounding villages. After a careful selection process, KGFS employees are rigorously trained in basic mathematical, statistical and financial tools. The presence of brick and mortar KGFS branches also means that our Wealth Managers are accessible for general queries regarding financial products or more specific queries regarding their own financial lives.
Another key aspect of the KGFS model is the concept of wealth management. What was the unmet need in your clients’ lives to which this model responds?
The Wealth Management process is designed to systematically improve the financial well-being of households and enterprises. The process is engineered to help people plan for future responsibilities, to grow the resources they already have, to protect themselves from unnecessary risks that would stifle that growth, and to diversify themselves out of their local economy. Wealth Managers collect information about each member of the enrolled household, including assets, liabilities, income, and expenses along with goals to which the household aspires. The Wealth Managers use the data to present the client with a diagnostic, auto-generated report that details the state of the customer’s financial well-being. This report is the basis for a dialogue between the customer and the Wealth Manager about how to improve their financial well-being. A Wealth Manager is permitted to sell a product to a customer only if it contributes towards improving the customer’s financial well-being. Low-income households – especially those engaged in agriculture -- need to have the ability to move their resources between lean times and flush times, to protect their income from risk, and to diversify their assets. Wealth Management, encompassing a complete suite of financial products, addresses this need.
What steps does KGFS take to continue learning about your clients and adapting the approach?
KGFS follows a continuous and systematic effort to deepen the understanding of our clients and integrate it into our ever-evolving products and processes. Our robust Customer Management System acts as an online centralized warehouse for all household and enterprise data and enables us to conduct client level analysis and identify trends and patterns. This analysis leads to insights that change products, processes, and other aspects of the model. Our Wealth Managers and customers also play a role in the evolution of the model. We get a lot of feedback from our staff through an online portal accessible to all KGFS employees. Our employees are teeming with ideas and frequently share insights into how they believe we should tweak products and processes. Customers also have access to a helpline to address their queries and grievances and these conversations are documented and studied. Often we follow threads from this feedback into the field and study it in an unstructured manner so that we can learn how to improve aspects of the model. We aim to think beyond the conceptualization of products as they are defined in the mainstream market. Once the mind is locked into the way that products have been previously conceptualized, then it becomes difficult to see new combinations. We are looking at the full set of financial needs of households and have a freedom to completely rethink the boundaries of how products are defined. This is the value of the KGFS approach.
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