Client Insights and Social Performance

(CISP)

Grameen Foundation India

Pushing digital platforms-

how "client ready" is the ecosystem?

Acknowledgements:

This presentation is a product of Grameen Foundation India (GFI). We would

like to acknowledge our field partners- Margdarshak Financial Services Ltd.

and Sonata Finance Pvt. Ltd. for their cooperation and collaboration to

ensure that we are able to collect valuable insights from their clients in rural

Uttar Pradesh. Further, the studies wherefrom this presentation draws its

data have been made possible because of partnerships with Citi Foundation,

JPM Foundation and Metlife Foundation.

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About Client Insights and Social Performance:

CISP is a consulting team housed in GFI, dedicated to providing advisory support to pro-poor organizations in the collection and application of easy to understand client/beneficiary level data that can be used as intelligence to provide services that are based on empirical evidence and can help organizations establish impact in the long run. Grameen Foundation’s global experience has helped the team to put together a suite of technical advisory products that cater to various needs of a pro-poor organization across the life span of a project. There is an added thrust to look at poor women, especially women entrepreneurs through the gender lens to emphasize upon a strategic approach that takes care of this segment of the program beneficiaries.

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Agenda

• DFS Landscape in India

• Options for transacting through the DFS Channel

• Context of CISP research in the past year

• Profile of the MFI Client (household) • Demographic Profile• Financial Inclusion – Status & Behaviours

• Profile of the MFI Client (individual) • Socio-economic Profile• Financial Inclusion – Status & Behaviours• DFS Experience

• Use Case of DFS – Sonata Microfinance

• Recommendations from our research

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DFS Landscape in India

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Policy and Regulation• Government mandate-

dreaming a Digital India• PMJDY- changing the banking

landscape• Unique Identification project-

Aadhar (88%)• Standardization of mobile phone

registration for banking• G2P payments enabled using

digital interface

Institutional Players• Rise of technology

intermediaries (B2B) such as wallet providers, data aggregators

• Rise of agent networks to increase penetration into under/unserved locations

Digital Infrastructure• Biometric capturing to ensure

safety and transparency• Adhaar enabled payment

systems• Interoperability of mobile

networks as well as banking systems

• Micro ATMs /Multi purpose POS machines

• 99% of the Indian households have access to bank accounts.• 88% have been seeded with Aadhaar- enabling payments, e-KYC access, receipt of subsidies and universal identification.

(Source – ICE 360 survey)

• 88% of Households have access to mobile phones.• Internet users are on the rise

• Urban India has 269 million (60%) and rural India has about 163 million (17%) users*• Demonetization has pushed the case for digital transactions

* Study by IMRB and Internet and Mobile Association of India

A glance at the existing Digital Infrastructure:

Bank Account

Yes

Smart Phone

UPI Wallet

Basic Phone

USSD

AadhaarSeeded

AEPS-Micro ATM

Debit Card

POS/Micro ATM

No

Pre Paid Card

POS

Smart/Basic Phone

Agent assisted wallet

Digital interface are numerous and continuously evolving

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GFI believes that when key pieces of the ecosystem –i) infrastructure to access banking products,ii) relevant use cases for the account, andiii) trust building, education and handholding are in place, it leads to improved usage and adoption of financial services and positive financial outcomes atthe client household level.

Under three different projects in the DFS space, research and baseline studies were conducted in rural UttarPradesh during the months of July-Oct 2016

Data from the field

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S. No Study Name Sample Size Donor Agency/Partner

State Year

1. Poverty Outreach Report 11,000 DFID UK, PSIG UP,MP, Bihar & Odisha

2014

2. Baseline Study - Scaling Digital Financial Services & Financial Education, India Program

395 Citi Foundation, Sonata

UP 2016

3. Baseline Study - Bringing mainstream bankingservices to the doorsteps of the poor

330 Metlife Foundation, Margdarshak

U.P 2016

4. Formative Research - Client Education & Increasing bank account usage

150 JPM Foundation, Sonata

U.P 2016

Significance of Uttar Pradesh:

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• Uttar Pradesh is the most populous state inIndia and home to 60 million poor people(below NPL – Rangarajan Line)

• Extremely diverse intra-regional socio-culturaldynamics

• Low on Quality of Life indices and is adevelopment hub

• 19 MFIs operate in the Uttar Pradesh , the statehas 11% share in MFI portfolio– (State ranks 3rd

along with Maharashtra) Source- Micrometer Dec 2016

• However of the total 75 districts, microfinanceis actively present in 45 districts.

Household and Client Profile

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Poverty Profile of MFI client households:

10

6 7

1926

10

1119

194

5

4332

0

10

20

30

40

50

60

70

80

90

100

Rural_MFI Rural_UP

Po

vert

y C

on

cen

trat

ion

%POVERTY LEVELS OF MFI Clients compared with State

>$4

$3.8-$4

$3.1-$ 3.8

NPL- $3.1

$1.9- NPL

<$1.90

35%44%

Poverty LineLine Values in

INR

Annual HH Expenditure

in INR

$1.9 25.13 54,281

NPL 36.39 78,602

$3.1 40.99 88,538

$3.8 50.25 108,540

$4 52.9 114,264

MFI client household- Salient features:

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• Average Household Size- 5.8

• Almost a two-thirds of the total household strength is either below the age of 12 or above the age of 65 years

• Average number of earning members per household-2.1

• Percentage of Household with women earning members- 45 %

• Total number of Household members from 5-18yrs age group attending school- 64%

• Percentage of Households which own a toilet-37%

• Percentage of Households which own drinking water source- 52%

Agriculture8%

Salaried Jobs9%

Farm Labour5%

Non Farm Labour

39%

Trade27%

Manufacturing6%

Services6%

Primary Occupation of HH

MFI clients- the WOMEN themselves:

43% of clients reported participation in economic activity in the last one year

4% 4% 4% 10% 29% 28% 3%

0% 20% 40% 60% 80% 100%

Rural

Income Sources of Women

Agriculture Livestock

Salaried Job Labour-Farm

Labour- Non farm Trade

Manufacturing goods/products Services

67% of clients are Illiterate or have below primary education. Only 6 % have completed education till higher

secondary.

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22%

0.8%

14%63%

Primary Decision Makers for Financial Decisions

Husband

Son

Client

Joint Decision

Household and Client-Financial Behaviors

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Financial Behaviours of Household- Savings

44%

20%

5%

13%

3%

4%

9%

0% 20% 40% 60% 80% 100%

1-500

501-1000

1001-1500

1501-2000

2001-2500

2501-3000

>3000

Monthly Savings Amount

21%

3%

15%

42%

6%

7%

5%

0% 20% 40% 60% 80% 100%

Not a regular saver-…

Daily

Weekly

Monthly

Quarterly

Half Yearly

Yearly

Frequency of Savings

95%

5%

HH Cash Savings - Status

HH with personalcash savings

HH without PersonalCash Savings

• Where are they savings?1. Bank (62%) 2. Home(51%)

• 97% of households have at least one bank account. 89% of the women clients surveyed have a bank account

• Average number of bank accounts per household is at 2.7

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Savings Behaviour

29%

82%

23%

46%

7%

6%

Education

Medical Care

Buying Assets

Livelihoods & Business Needs

Social Commitments

Did not use at all

Savings usage in last 1 year

4%

15%

39%

42%

Decreased greatly

Decreased

Stayed the same

Increased

Change in Savings Amount - Last 1 Year

15

82%

1%

1%

25%

21%

2%

17%

Used my savings

Sold Physical Assets

Mortgage Physical Assets

Loan from Friends/Relative

Loan from MFI

Loan from Money lender

No emergency faced

% OF CLIENTS

Coping mechanism in case of Personal/Medical emergencies

• Main usage of savings amount in last 1 year were medical care, livelihood and business needs, education needs which matches with the main motivation of clients for savings.

• About 81 % of clients claimed that their savings amount in last year has either increased or remained constant.

Household level Financial Product Usage• Household ownership of savings account has been

found high (>90 %) across the studies.

• Access to institutional borrowing is widespread but across the studies, dependency on non-institutional resources for credit like friends/relatives, loan sharks etc has been reported

• Access and usage of insurance, pension etc has been found to be abysmally low. Only a small percentage of clients use these products due to low awareness and utility of the products.

• Non-traditional products such as Shares, Mutual Funds are used by a negligible percentage of clients

• Usages of traditional banking products such as FD and RD was also low.

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95%

4%

46%

5%

0%

2%

2%

Savings Acount

Pension

Insitutional Borrowing

Insurance

Shares/Mutual Funds

FD

RD

FD-Fixed Deposit, RD- Recurring Deposit

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MFI clients- Women as the channel to bolster product usage

ACCESS

Women’s Access and Usage of Mobile Phones

Majority of the women own ordinary phones

Women who don’t own personal phone, 86% of them have access to household member’s phone

37%

Rural

Women Own Personal Mobile Phone

How difficult is it for you to read and understand messages received on your cell phone

Rural

Very Easy 5%Easy 15%

Difficult 5%

Impossible 72%

Mobile Awareness and Usage

• 92% able to answer a call onmobile

• 54% of clients knew how to diala phone number

• 10% of the clients can usemobile for sending messages.

• Only 1% of clients usedInternet on mobile phones

• Only 3% of clients were awareabout possible usage of mobilefor sending or receiving money

• 5% of clients were aware aboutmobile banking and 2% ofclients knew about usage ofmobile phones for billpayments

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9%12%

39%

40%

MOST COMFORTABLE MEDIUM TO ACCESS INFORMATION VIA MOBILE

SMS Video IVR None of the Options

Banking Access for Women

No81%

Yes19%

ATM Card

No4%

Yes96%

Pass Book

No Yes

No89%

Yes11%

Cheque Book

How Many Bank Accounts Linked To Phone?

Only 18 % of accounts are linked to mobile phones

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• 89% of clients have a personal savings account

• 58% women who own savings account informed that they had transacted through their accounts in the last 90 days

22%

0.8%

14%63%

Primary Decision Makers for Financial Decisions

Husband

Son

Client

Joint Decision

Available Modes To Operate The Bank Account

DFS Experience and Use Cases

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Digital Financial Services(DFS) Experience

15%

85%

YES NO

Clients with earlier experience of any financial trasaction through

mobile based service

2%

98%

YES NO

Percentage of Clients who have sent/received money through

mobile channel

3%

19%

5%

2%

5%

6%

SEND & RECEIVE MONEY

TALK TIME RECHARGE

TRAIN TICKET BOOKING

BILL PAYMENTS

MOBILE BANKING

OTHERS

Awareness about possible financial transactions through mobile based

services

• About 18 percent of the respondents in the JPM study had anexperience of transferring or receiving money to/from their relativesliving away from their home

• Out of these 18 percent, 87 percent of the respondents transferredthe amount using bank facilities such as direct depositing inaccounts, NEFT, RTGS etc.

• Other respondents claimed to do the money transfer through MoneyOrders, Mobile Wallets, through family and friends or other means.

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24%

1%

42%

HAVE HEARD ABOUT MOBILE

WALLET

USED MOBILE WALLET

WILLING TO USE MOBILE WALLETS

Awareness & Usage - Mobile Wallets

Sonata Finance is one of the leading MFIs working in several states of India including Uttar Pradesh. It aims to make

microfinance financially self-sustainable. GFI in partnership with Oxigen is working with Sonata for transiting to the DFS

platform. As part of the project, currently GFI has helped Sonata to adopt the digital platform for loan repayments using

mobile wallets through an agent assisted model.

Our research with the clients at Sonata helped us set the context for the need of the project.

To repay the weekly loan amount, clients had to travel to the branch which resulted in loss of work, travel expenses and

other opportunity costs.

On an average, a client spent about 47 minutes travelling to the branch locations.

The average amount spent by each client to branch costed about Rs. 49 for each visit, maximum being Rs. 180.

About 51.6 percent of clients reported loss of work in case of travel to branch and they lost an average of Rs. 187 due

to missing their work for the travel.

The average distance of the Sonata branch from the client location was found to be 11.89 KMs.

GFI designed the intervention for uptake of DFS using Agent assisted wallet repayment channel with these research findings.

Client outside the periphery of 10 KMs were offered the alternate agent assisted wallet repayment channel wherein the

clients could visit the Oxigen agents in their neighbourhoods, who in turn recharged their mobile wallets and help them in

repaying their loan amount.

Sonata Finance – Use Case of DFS

Coverage: 60 branches ->250 Field staff trained ->21,500 Clients trained->3,600 wallets opened

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Options best suited & Recommendations

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Bank Account

Yes

Smart Phone

UPI Wallet

Basic Phone

USSD

AdhaarSeeded

AEPS-Micro ATM

Debit Card

POS/Micro ATM

No

Pre Paid Card

POS

Smart/Basic Phone

Agent assisted wallet

The Options Suited for the MFI Client

USSD:Users have to read messages and respond with 10 secs, Per transaction cost is Rs. 0.5

AEPS :Account should be linked to Aadhaar , Nearly 60% accounts in UP are Aadhar linked, Micro ATM network has to develop

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Recommendations:

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• Understand the engagement triggers:

Information

Sanction and Uptake

Usage

Adoption

Influencers:Front line WorkersGroup Members

Influencers:Household MembersSimple sign up

Influencers:Transparent servicesValue proposition

Influencers:Grievance redressalFinancial outcomes (household AND individual)

Technology and digital mediums as catalysts

E-learning and digital training aids

Apps, POS/MicroATMS

Mobile phones, Service Points

Mobile phones, Service Points

Recommendations:

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• Match the Right Partners: Digitizing MFI repayments will usually require a partnership between a MFI and a digital payments provider.

• Leverage Existing Roles: Leverage existing hierarchies of the lending groups (SHGs) is a key.

• Cascade Skill Transfer: It is important to ensure that the skills are developed for various members of the group.

• Put Structure Around Desired Loan Officer Behavior: To a client, the loan officer is the face of the microfinance institution.

• Target Gatekeepers: If we want payments through mobile money, we need to first target people with the mobile in the household.

• Make Incentives Work Harder: Need to incentivize the borrowers appropriately to make them hook to the mobile payment mode even after the desired result

• Keep Sign-up Simple: It is of utmost importance to keep the sign-up simple as the end user has limited knowledge of the use of this channel and has limited documentation as well.

• Sell Acquisition to Agents: Agents don’t necessarily see mobile money as a stand-alone profitable business opportunity.

Thank You

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• http://amaranteconsulting.com/upload/publication/Summary%20DFS%20Report%20India%20June%202014_1.pdf

• http://www.livemint.com/Industry/VV2GgMnaZjZaJmq18GRKAJ/Financial-inclusion-and-digital-payments.html

• http://economictimes.indiatimes.com/news/economy/policy/india-ready-for-4-times-jump-in-digital-payments/articleshow/56557986.cms

• http://niti.gov.in/writereaddata/files/Step-by-step%20presentation%20on%20digital%20payments_English_0.pdf

• http://www.livemint.com/Industry/QWzIOYEsfQJknXhC3HiuVI/Number-of-Internet-users-in-India-could-cross-450-million-by.html

• http://www.livemint.com/Politics/kZ7j1NQf5614UvO6WURXfO/88-of-households-in-India-have-a-mobile-phone.html

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References

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