Post on 07-Apr-2018
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TRAINING REPORT
ON
STUDY OF MICRO FINANCING IN INDIA,WITH REFERENCE TO SKYLARK
GRAMIN UTHAN TRUST
Submitted to
MAHARSHI DAYANAND UNIVERSITY,ROHTAK
In partial fulfillment of the requirements
For the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
(INDUSTRY INTEGRATED)
(II Semester)
Submitted by
Name:Sudhir KumarRegn No.1073921959
SKYLARK SCHOOL OF BUSINESS & TECHNOLOGY
319,SHIV KRIPA,
PALAM VIHAR EXT.OPP.SPANISH COURT
GURGAON-122017
PH.0124-4097000(18 LINES)
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CERTIFICATE
This is to certify that Sudhir Kumar,a student of the Maharshi Dayanand University,Rohtak,hasprepared his/her Training Report entitled
STUDY OF MICRO FINANCING IN INDIA,WITH REFERENCE TO SKYLARK GRAMIN
UTHAN TRUST at,under my guidance.He/She has fulfilled all requirements leading to award of the degree of
MBA (Industry Integrated).This report is the record of bonafide training undertaken by him/her
and no part pof it has been submitted to any other University or Educational Institution foraward of any other degree/diploma/fellowship or similar titles or prizes.
I wish her/him all success in life.
Faculty Guide Signature:
Name of Faculty Guide:Ms.Rupa Chopra
Designation:FacultyQualification:M.Com,MBA
Seal of the ELC:
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STUDENTS DECLARATION
I hereby declare that the Training Report conducted at
Skylark green Energy Ltd.,Gurgaon
Under the guidance of
Ms.Rupa Chopra
Submitted in partial fulfillment of the requirements for the
Degree of
MASTER OF BUSINESS ADMINISTRATION
(Industry Integrated)
TO
MAHARSHI DAYANAND UNIVERSITY,ROHTAK
Is my original work and the same has not been submitted for the award of any other
Degree/Diploma/Fellowship or other similar titles or prizes.
Place: Gurgaon Students SignatureDt:3 May 11 Name:Sudhir Kumar
Regn.No.1073901959
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CERTIFICATE
This is to certify that Mr.Sudhir Kumar who is pursuing MBA (Industry Integrated) course ofMaharshi Dayanand University,Rohtak, at Skylark school of Business & Technology has
undergone management training at our organization from 25 April 11. to 15 Jul 11
His/Her performance during the training period was found to be Good
We wish him for future endeavours.
Authorized Signatory
Name:Skylark Green Energy Ltd.
Designation:
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Contents
Foreword....................................................................................................... i
Introduction...................................................................................................1
Development of Micro-Finance in India........................................3
Supply and Demand Side Developments ........................................5
3.1 Supply of micro-Finance ..................................................................5
3.2 Demand for micro-Finance...............................................................6
On Extending Micro-Finance .......................................................10
4.1 Flexibility in Premium........ ................................................................114.2 Micro-Finance and micro-finance ...................................................16
Conclusions.......................................................................................20
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Introduction
Finance is an essential part of running any business. If you are operating a smallbusiness you need more than just property Finance. Taking out the right Finance willhelp protect your business and minimize its exposure to risk.
Your Finance requirements will vary according to the type of business you areoperating, but you should be aware that some forms of Finance are compulsory, such asworkers compensation and third party car Finance.
When youre in business you deal with a variety of potential risks each day. Risk is notsomething you can avoid, but it is something you can manage. Risk management will
increase the probability of success and reduce the probability of failure of yourbusiness.
Types of Finance
Assets & revenue Finance People Finance Liability Finance
Assets & revenue Finance
To protect your assets and revenue-generating capacity, here are some of the types ofFinance available:
Building and contents
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Covers the building, contents and stock of your business against fire and other perilssuch as earthquake, lightning, storms, impact, malicious damage and explosion.
Burglary
Insures your business assets against burglary, and is most important for retailers or abusiness which maintains unattended premises.
Business interruption or loss of profits
Covers you if your business is interrupted through damage to property by fire or otherinsured perils. Ensures your ongoing expenses are met and anticipated net profit ismaintained through a provision of cash flow.
Fidelity guarantees
Covers losses resulting from misappropriation by employees who embezzle or steal.
Machinery breakdown
Protects your business when mechanical and electrical plant and machinery at the worksite break down.
Motor vehicle
It is compulsory to insure all company or business vehicles for third party injuryliability. Many different types of policies are available, so make sure youunderstand the options before making a decision. There are four basic options:
1. Compulsory third party (injury) covers you for claims made against youfor personal injuries and legal costs arising from the use of your car. You must
obtain this Finance to register your car.2. Third party property damage - covers your liability for damage to another
person or to the property of others and your legal costs. It doesnt include repairsto your own car if you caused an accident.
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3. Third party, fire and theft - covers you against the events covered above, as
well as fire and theft. It also insures against damage caused if your car wasstolen.
4. Comprehensive- covers you for all of the above plus damage caused to yourown car by you in an accident. If you're buying a car on an installment basis,financiers will usually insist on this cover.
People Finance
It includes:
Superannuation Workers compensation requirements
Finance cover for you and your employees:
Workers Compensation
You must provide accident and sickness Finance for your employees - workers
compensation - through an approved insurer. Workers compensation is covered byseparate state and territory legislation.
Personal accident and illness
If you are self employed you wont be covered by workers compensation, so you needto cover yourself for accident and sickness Finance through a private insurer. There areseveral types of life Finance. Some are investment-type funds where you contributeover a certain time and get back your investment plus interest earnings at the maturitydate. Others are designed to cover risk - things that could happen to you.
Income protection or disability Finance- covers part of your normalincome if you are prevented from working through sickness or accident.
Trauma Finance - provides a lump sum when you are diagnosed with one ofseveral specified life threatening illnesses.
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Term life Finance or whole of life cover - provides your dependents with
a lump sum if you die.
Total and permanent disability Finance - provides a lump sum only ifyou are totally and permanently disabled before retirement.
SuperannuationIf you are running a business or employing people, you are likely to havesuperannuation obligations to your employees. If you are self-employed you also needto provide for your retirement - superannuation is generally used to provide for aretirement plan.
Liability Finance
Types of liability Finance you need to consider:
Public Liability
Public liability Finance protects you and your business against the financial risk ofbeing found liable to a third party for death or injury, loss or damage of property orpure economic loss resulting from your negligence.
Professional Indemnity
Professional indemnity Finance protects you from legal action taken for losses incurredas a result of your advice. It provides indemnity cover if your client suffers a loss -either material, financial or physical - directly attributed to negligent acts.
Product Liability
If you sell, supply or deliver goods, even in the form of repair or service, you may needcover against claims of goods causing injury or damage. Product liability Finance coversdamage or injury caused to another business or person by the failure of your product or
the product you are selling.
What is Micro Finance?
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On a daily basis, the poor around the world face a multitude of risks that threaten toderail any progress they have made to work their way out of poverty. The death of afamily member, loss of property and livestock, illness, and natural disasters each poseunique dangers. Protecting people against these losses is an important step toalleviating global poverty.
Micro Finance - the protection of low-income people against specific perils in exchangefor regular monetary payments (premiums) proportionate to the likelihood and cost ofthe risk involved seeks to provide a suitable solution for managing these risks.
The Global Landscape
It is estimated that only eighty million out of the world's 2.5 billion poor are nowcovered by some form of micro Finance. Most remain without access to this criticalfinancial service. In India and China, where organizations are estimated to serve nearly
30 million micro Finance clients each, the percentage of poor lives insured hovers below3%. In Africa this figure is much lower just 0.3% of the continents poor are insured.According to recent data, in 23 of the poorest 100 countries in the world, there iscurrently no identified micro Finance activity, representing an unserved population of370 million.
History and Vision
The Micro Finance Agency has its roots within Opportunity International, a large
microfinance network motivated by Jesus Christs call to serve the poor. With a networkof 47 microfinance institutions, Opportunity International has been serving theentrepreneurial poor since 1971. In partnership with Opportunitys microfinanceinstitutions, we began working in 2002 on the development of a range of life, property,livestock, crop derivative, disability, unemployment and health Finance products tocover the risks faced by Opportunitys loan clients.Micro Finance Agency staff observed that the risks the poor face can often set them backmonths and years behind where their loans and savings products offered byOpportunity had taken them. For instance, a death of a family member from HIV/AIDS a pre-condition most Finance companies would not cover would often meanexpensive funeral costs and the loss of a breadwinner, resulting in increased economichardship for the family. In response, Micro Finance Agency staff developed anaffordable funeral benefit product that did not exclude any pre-conditions, includingHIV/AIDS. This transformed the mindset of retail Finance providers in the country,who later developed similar non-exclusive products in light of the competingenvironment.
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Through the experience of serving Opportunitys microfinance institutions and theirclients, Micro Finance Agency staff observed that the products most demanded by thepoor are not always the ones available. Health Finance, for example, is a critical need ofthe poor but the most limited in terms of supply. In addition, policies that are availableare often based on first world practices and are too complex for the simple coverage
demanded. Further, when offered on an individual, one-off basis, high premiumrequirements and a need to pay in a single lump sum preclude a huge sector of themarket from access. New distribution models and channels were needed to increaseaccess and reduce the effective price charged to clients.In 2005, the Micro Finance Agency was founded by Opportunity International as afully-owned subsidiary capable of offering Finance products and services to a widerange of customers.Our mission is to empower the materially poor to transform their lives by insuring themagainst financial risk and its consequences. Specifically, we seek to serve theeconomically active poor who live on $4 per day or less in developing countries and
provide a safety net to reduce economic setbacks.
Definitions of micro-Finance
Micro-Finance, the term used to refer to Finance to the low-income people, is differentfrom Finance in general as it is a low value product (involving modest premium andbenefit package) which requires different design and distribution strategies such aspremium based on community risk rating (as opposed to individual risk rating), activeinvolvement of an intermediate agency representing the target community and so forth.
Finance is fast emerging as an important strategy even for the low-income peopleengaged in wide variety of income generation activities, and who remain exposed tovariety of risks mainly because of absence of cost-effective risk hedging instruments.
Although the type of risks faced by the poor such as that of death, illness, injury andaccident, are no different from those faced by others, they are more vulnerable to suchrisks because of their economic circumstance. In the context of health contingency, forexample, a World Bank study (Peters et al. 2002), reports that about one-fourth ofhospitalized Indians fall below the poverty line as a result of their stay in hospitals. Thesame study reports that more than 40 percent of hospitalized patients take loans or sell
assets to pay for hospitalization. Indeed, enhancing the ability of the poor to deal withvarious risks is increasingly being considered integral to any poverty reduction strategy(Holzmann and Jorgensen 2000, Siegel et al. 2001).
Of the different risk management strategies2, Finance that spreads the loss of the (few)affected members among all the members who join Finance scheme and also separates
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More than twenty five per cent of the male working population is engaged in
agricultural pursuits. The categories of workers falling under agriculturalpursuits are: cultivators, agricultural labourers, and workers in livestock,forestry, fishing, hunting and plantations, orchards and allied activities.
The social sector as defined by the Finance regulator consists of: Unorganized sector informal sector economically vulnerable or backward classes, and Other categories of persons, both in rural and urban areas.
The social obligations are in terms of number of individuals to be covered by both lifeand non-life insurers in certain identified sections of the society. The rural obligationsare in terms of certain minimum percentage of total polices written by life Financecompanies and for general Finance companies, these obligations are in terms of
percentage of total gross premium collected. Some aspects of these obligations areparticularly noteworthy. First, the social and rural obligations do not necessarily require(cross) subsidizing Finance. Second, these obligations are to be fulfilled right from thefirst year of commencement of operations by the new insurers. Third, there is no exitoption available to insurers who are not keen on servicing the rural and low-incomesegment. Finally, non-fulfillment of these obligations can invite penalties from theregulator.In order to fulfill these requirements all Finance companies have designed products forthe poorer sections and low-income individuals. Both public and private Financecompanies are adopting similar strategies of developing collaborations with the various
civil societies associations. The presence of these associations as a mediating agency, orwhat we call a nodal agency, that represents, and acts on behalf of the targetcommunity is essential in extending Finance cover to the poor. The nodal agency helpsthe formal Finance providers overcome both informational disadvantage and hightransaction costs in providing Finance to the low-income people. This way microFinance combines positive features of formal Finance (pre paid, scientifically organizedscheme) as well as those of informal Finance (by using local information and resourcesthat helps in designing appropriate schemes delivered in a cost effective way). In theabsence of a nodal agency, the low resource base of the poor, coupled with hightransaction costs (relative to the magnitude of transactions) gives rise to the
affordability issue. Lack of affordability prevents their latent demand from expressingitself in the market. Hence the nodal agencies that organize the poor, impart training,and work for the welfare of the low-income people play an important role both ingenerating both the demand for Finance as well as the supply of cost-effective Finance.
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AN OVERVIEW OF THE MARKET
B Wealthy A
Middle Income
DC
Poor
E
Severely Poor
The market for micro Finance is represented by this pyramid diagram. Formal sectorFinance companies generally focus on the area identified as A. In this realm thecustomers are corporations and wealthy individuals, and the products are voluntaryproducts such as life Finance, and obligatory products required either by law (such asmotor third party liability) or by banks (such as property loss and credit life). Also
offered are products covering employees and civil liability. Most of the non-autorelated commercial products are being sold within the area marked B. The aggregatemarket for microfinance providers is generally in the area identified as C. Some MFPsrequire borrowers to obtain Finance for property, or credit-life Finance as a means ofprotecting the institutions interests. Area D indicates the broad range of productsoffered by the social security and public health Finance systems of developing countrygovernments. They include coverage for pensions, disability benefits, primary healthcare, and medications. The weakness of this sector is indicated by the dashed line thatsuggests incomplete coverage. The potential market for microFinance is indicated asE. This extends above the MFP range in providing access to individuals and others
that cannot obtain appropriate products from the commercial sector. The microFinancerange also extends below the MFP range because it addresses agricultural coverage insome cases, and is now being sold through many delivery channels other than MFPs.Just a few of these delivery channels include:
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Low-income focused retailers in South Africa Post offices in Indonesia On bags of agricultural inputs or through computer kiosks in India.
Micro-Finance delivery models
One of the greatest challenges for micro-Finance is the actual delivery to clients.Methods and models for doing so vary depending on the organization, institution, andprovider involved. In general, there are four main methods for offering micro-Financethe partner-agent model, the provider-driven model, the full-service model, and thecommunity-based model. Each of these models has their own advantages anddisadvantages.
Partner agent model: A partnership is formed between the micro-Financescheme and an agent (Finance company, microfinance institution, donor, etc.),and in some cases a third-party healthcare provider. The micro-Finance schemeis responsible for the delivery and marketing of products to the clients, while theagent retains all responsibility for design and development. In this model, micro-Finance schemes benefit from limited risk, but are also disadvantaged in theirlimited control.
Full service model: The micro-Finance scheme is in charge of everything;both the design and delivery of products to the clients, working with externalhealthcare providers to provide the services. This model has the advantage of
offering micro-Finance schemes full control, yet the disadvantage of higher risks.
Provider-driven model: The healthcare provider is the micro-Financescheme, and similar to the full-service model, is responsible for all operations,delivery, design, and service. There is an advantage once more in the amount ofcontrol retained, yet disadvantage in the limitations on products and services.
Community-based/mutual model: The policyholders or clients are incharge, managing and owning the operations, and working with externalhealthcare providers to offer services. This model is advantageous for its ability
to design and market products more easily and effectively, yet is disadvantagedby its small size and scope of operations.
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NEW MODELS FOR POOR COMMUNITIES
Much interest over the last few decades has focused on helping communities toestablish mutual or community-based Finance schemes. Professionals typically manage
mutual Finance companies. Community-based schemes, promoted by ILO STEP andCIDR among others, tend to be run by well meaning local people who give freely oftheir time, but are not Finance professionals. Often people who were simply in need ofFinance end up being Finance managers with these schemes. One member of themanagement committee of a community- based scheme in Tanzania noted that hewants Finance, but doesnt want to be an insurer. In community-based schemes, thelimited management capacity frequently leads to a range of difficulties. The key issuesof concern for community-based schemes include:
Pricing Often the process of pricing is focused on what people say they can payrather than being linked to the cost structure of benefits that the group wants toreceive.
Finance is subject to cash flow fluctuations and thus requires significant reserves.These schemes frequently have insufficient reserves or no reserves at all. Also,commercial reFinance is rarely available to unregulated Finance schemes thusleaving them with no ability to manage cash flow deficits.
Controls on management are weak and temptation is strong. Fraud bymanagement is frequently a problem.
These schemes are limited in size to those people within the defined local area.This reduces their ability to diversify a rather small risk pool, and enhances thepotential for adverse selection, both of which make sustainability a seriouschallenge for local management.
Finally, in many countries there is no legal framework for these schemes. Indeedregulators are often unwilling to allow such schemes for fear that they will not beable to adequately supervise many small schemes run by non-professionals. Thisis the case in India. Service providers, most typically hospitals and other
healthcare providers have offered pre-financing mechanisms that act somewhatlike Finance. These products, it is argued, will attract more people to the facilityand the people who come will be able to pay for the services. Often this becomesa problem because providers have limited ability to manage the Financeadministration issues. One overseer of a particular group of hospitals noted thatattempting to offer microFinance could present a dual threat to the hospital
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network for which he works. He noted that the hospital administrators do noteven know how to price their own healthcare services. Therefore, they mis-pricetheir premiums based on those prices, which are typically too low. The resultingincrease in patients using the Finance leads to even higher losses, due to higheradministrative costs and incorrect fees that do not cover the actual costs of
services. Governments also provide a form of microFinance through theprograms they provide for low-income Citizens. Unfortunately, in manycountries these programs are simply insufficient to address the financial risks ofthe low- income and destitute populations. Certainly there is a population thatwill not be covered by commercial or other non-government microFinance.However, if a proper balance could be found, it is possible that the combinationof government programs, commercial microFinance, mutual Finance, andtraditional commercial Finance could make each of these more efficient, andmake the government interventions more effective in addressing those that trulyrequire such services.
Need for Developing Micro-Finance in India IRDA perspective
Background
Micro-Finance refers to protection of assets and lives against insurable risks oftarget populations such as micro-entrepreneurs, small farmers and the landless,women and low-income people through formal, semiformal and informalinstitutions. Such products are often bundled with micro-savings and micro-credit, thereby allocating scarce resources to micro-investments with the highestmarginal rates of return. MicroFinance is the most underdeveloped part of
microfinance. Yet various schemes exist that are viable, benefiting both theinstitutions and their clients. Such schemes have generally served two majorpurposes: (i) they have contributed to loan security; and (ii) they have served asinstruments of resource mobilization. The greatest challenge for microFinancelies in the combination of viability and sustainability with outreach.
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Although introduction of sound practices such as appropriate policy sizes and
timely payment of installments of premium or positive incentives to renew ontime in order to avoid policy getting lapsed can be feasible, the ultimateeffectiveness of interventions focusing on institutional transformation and soundFinance practices will vary considerably, depending on the appropriateness of
the regulatory environment.
Development Goal
To enable microFinance to be an integral part of a country's wider Finance system, it isimportant for every insurer to adjust its costs of serving marginal clients in remoteareas, collecting premiums and installments, and offering doorstep services. It is alsoimportant to recognize a wide network of intermediaries in the rural and social sectorsand notify regulations in order to guide and supervise the micro-Finance service
providers and their customers.
Today we have a variety of microfinance institutions with national and local outreach.Many of them have already become corporate agents or have entered into referral
arrangements with insurers. However, semiformal institutions including savings andcredit cooperatives, NGOs and self-help groups which have immense potential incarrying the message of Finance as also solicit Finance business are yet to be utilized ina manner where their true potential can be harnessed to increase the Financepenetration levels. This is due to restrictions in the existing agency regulations in termsof minimum eligibility norms in order to become an agent.Depending on the existence and vigour of such institutions, the following alternativeshave emerged, for offering strategic entry points for microFinance development:
Adapting formal Finance arrangements to the needs of the micro-economy.
Upgrading non-formal (comprising semiformal and informal) Financearrangements with Finance companies.
Linking formal and non formal Finance institutions with banks and self-helpgroups.
Establishing new local institutions providing microFinance services.
The first three strategies may be inter-connected:
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adapting Finance companies to the requirements of the micro-economy is a first
step; then Linking them as wholesale institutions to self-help groups as retailers; and
finally, Upgrading self-help groups e.g. to the level of financial cooperatives or village
banks.
If insurers are to serve customers who differ widely in terms of service costs and risks,the only viable inducement for them is an adequate margin, lest they exclude smallfarmers, - micro-entrepreneurs and people in remote areas. Only sound social Finance,which combines a social mandate with profit-making, has a chance of sustainability.
Institutional Adaptation
The experience so far has been that formal financial institutions serve but a fraction ofthe population, which typically lies within the upper quartile of the social hierarchy.Through adaptation to the microfinance market requirements, they may graduallyexpand into the second-highest quartile and into segments of the lower quartiles.Within the foreseeable future they will normally not be able to fully serve that market.Non formal finance mostly rests on local institutions which are directly accessible to allsegments of the population. Self-Help Groups (SHGs) are member-owned and member-controlled local institutions. They may either be financial groups, with financialintermediation as their primary purpose; or non financial groups, with financialintermediation as a secondary purpose, such as vendors' associations, family planninggroups and numerous other types of voluntary associations.
The functions that need to be focused must include: providing guidance to members,collecting premium installments from members, Finance services to members,communication and exchange of experience, providing linkages with banks, NGOs ordonors, supporting the proposals of individual members to Finance companies throughrecommendations.
Linkage to Insurers
On a modest scale, various forms of life and health Finance have been successfullypracticed by different institutions in different countries, particularly as part of loanprotection schemes. Micro-Finance procedures and services should be set by insurersrather than the regulator. Appropriate procedures and services should be applied toattain:
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(1) Sound financial management,
(2) Convenient and safe savings premium collection and deposit facilities,
(3) Appropriate claim appraisal and processing procedures,
(4) Adequate risk management,
(5) Timely collection of premium installments,
(6) Monitoring and
(7) Effective information gathering, all of which may include cooperation betweendifferent formal and non-formal intermediaries in fields where each is most effective.
Proposed Micro-Finance Regulations
In order to introduce the concept micro-Finance it is necessary to draft suitable bring insuitable regulations to enable insurers to design and distribute and service micro-Finance products and discharge their obligations to the rural and social sectors as perprovisions of the Finance Act, 1938.
1. It is proposed that an insurer transacting life Finance business shall be permittedto provide life micro-Finance products as well as general micro-Finance productsprovided it ties up with an insurer transacting general Finance business for thegeneral micro-Finance products, and vice versa.
2. In addition to an Finance agent or corporate agent or Finance broker who areauthorized to solicit and procure Finance business, including micro-Financebusiness with an insurer in accordance with the provisions of the Finance Act,1938 and the regulations made there under it is also proposed to introduce theconcepts of micro-Finance product and micro-Finance agent .
Micro-Finance Product1. A life micro-Finance product means any term Finance contract with or
without return of premium, any endowment Finance contract or healthFinance contract, with or without an accident benefit rider, either onindividual or group basis, as per terms stated in the Table A below, filedwith the Authority:
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Table A:
Type of
Cover
Minimum
Amount of
Cover
Maximum
Amount
of Cover
Term of
Cover
Min.
Term of
Cover
Max.
Minimum Age
at entry
Maximum age at
entry
Term
Financewith or
without
return of
premium
Rs. 10,000 Rs. 50,000 5 year 7 years 18 60
Endowme
nt Finance
Rs. 10,000 Rs. 50,000 5 year 7 years 18 60
Health
Finance
Contract
Rs. 10,000 Rs. 15,000 1 year 7 year 18 60
Accident
Benefit as
rider
Rs. 10,000 Rs. 50,000 1 year 5 years 18 60
NOTE: The present average sum insured is around Rs. 5,000. This is highlyinadequate to provide any tangible relief even to an individual below thepoverty line. Therefore, it is suggested that the minimum amount of cover of Rs.10,000 appear more realistic.
2. A general micro-Finance product means any health Finance contract,any contract covering the belongings such as hut, livestock, any personalaccident contract, or tools or instruments, either on individual or groupbasis, as per terms stated in the Table B below, filed with the Authority:
Table B:
Type of
Cover
Minimum
Amount
of Cover
Maximum
Amount of
Cover
Term of
Cover
Min.
Term of
Cover
Max.
Minimum
Age at entry
Maximum age at
entry
Hut or
livestock
or Tools
or
implement
s or other
assetsagainst all
perils
Rs. 10,000 Rs. 20,000 1 year 1 year 18 70
Health
Finance
Contract
Rs. 10,000 Rs. 15,000 1 year 1 year 18 60
Personal
Accident
Rs. 10,000 Rs. 50,000 1 year 1 year 18 60
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Micro-Finance Agent
A micro-Finance agent shall be a Non Government Organization (NGO) or a
Self Help Group (SHG).
Explanation: For the purposes of this regulation:
A Non Government Organization (NGO) shall be a registered non-profitorganization under the Societys Act, 1968 with a proven track record of workingwith marginalized groups with clearly stated aims and objectives, transparency,and accountability outlined in its memorandum, rules and regulations anddemonstrates involvement of committed people.
Self Help Group (SHG) may be an informal group or registered under SocietiesAct, State Co-operative Act or as a partnership firm, consisting of 10 to 20 with aproven track record of working with marginalized groups with clearly statedaims and objectives, transparency, and accountability outlined in itsmemorandum, rules and regulations and demonstrates involvement ofcommitted people.
The minimum number of members comprising a group should be atleast ten forFinance of individuals, and atleast fifty for group Finance.
Scope and Functions
A micro-Finance agent shall be appointed by an insurer by a deed of agreement ormemorandum of understanding which should clearly specify the terms and conditions,duties and responsibilities of both the micro-Finance agent and the insurer, and he shallabide by the following:-
He shall work either for one life insurer or for one general insurer or for one lifeinsurer and one general insurer;
He shall be specifically authorized to perform one or more of the followingfunctions:--
a) Maintaining a register of all members and their dependants covered under theFinance scheme alongwith details of name, age, address, nominees and thumbimpression/ signature;
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American International Group, Inc. (AIG), world leaders in Finance and financialservices, is the leading international Finance organization with operations in more than130 countries and jurisdictions. AIG companies serve commercial, institutional andindividual customers through the most extensive worldwide property-casualty and lifeFinance networks of any insurer. In addition, AIG companies are leading providers of
retirement services, financial services and asset management around the world. AIG'scommon stock is listed in the U.S. on the New York Stock Exchange, as well as the stockexchanges in London, Paris, Switzerland and Tokyo.
Micro Finance is the process of delivering and servicing relevant and affordable lifeFinance products to the low-income socio economic strata. The focus of Tata AIG LifesMicro Finance program is rural India, where traditionally the far-flung, lower andlower middle-income segments have had limited access to life Finance services.
Cost of plans:Tata AIG Life Micro Finance plans are available with or without survival benefits and
with death benefits ranging from Rs.5, 000 to Rs.50, 000. With premiums as low asRs.5** per month, there is now an affordable life Finance product for nearly every ruralhousehold in India.
Policies Available:The following special Micro Finance products from Tata AIG Life are now available forthe rural population at the bottom of the pyramid.
Navkalyan Yojana Ayushman Yojana
http://www.tata-aig-life.com/MicroInsurance/AyushmanYojana/solutionAyushmanYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/AyushmanYojana/solutionAyushmanYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/AyushmanYojana/solutionAyushmanYojana.htm8/6/2019 Sudhir MBA
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Sampoorn Bima Yojana
NAVKALYAN YOJANA
A regular premium payment, low cost term plan for the rural adults who seek lifeFinance protection without any maturity benefit.
Key features include:
Policy Term : 5 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-
Maximum Death Benefit (Sum Assured): Rs.50,000/- Premium payment frequency : Monthly, quarterly, half yearly & yearly Death Benifit : Sum assured to the policyholders nominee Maturity benefit : None
Rider : Option to attach Accident Death Benefit Rider for issue ages 18 to 55 yearsat a nominal extra charge.
Tax Benefits and Age Eligibility
Premiums paid under this plan are eligible for tax benefits as per the Income TaxAct, 1961 and are subject to any amendments made therein from time to time.*
Anyone between ages 18 and 60 can apply for this policy.
AYUSHMAN YOJANA
http://www.tata-aig-life.com/MicroInsurance/SampoornBimaYojana/solutionSampoornBimaYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/SampoornBimaYojana/solutionSampoornBimaYojana.htm8/6/2019 Sudhir MBA
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A single premium plan where the policyholder pays the premium at the beginning ofthe policy term. This is especially useful for those rural people who have a seasonalincome.
Key features include:
Policy Term : 10 years
Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-Maximum Death Benefit (Sum Assured): Rs.50,000/- Death Benifit : Sum assured to the policyholders nominee Maturity benefit : On survival, 125% of the single premium paid.
Tax Benefits and Age Eligibility
Premiums paid under this plan are eligible for tax benefits to the extent of 20% ofSum Assured as per the Income Tax Act, 1961 and are subject to amendmentsmade therein from time to time.*
Anyone between ages 18 and 60 can apply for this policy.
SAMPOORNA BIMA YOJANA
A low cost Finance plan where the policyholder receives all the premiums paid duringthe policy term upon survival until the term of the policy. Premiums are payable for
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only 10 years, while the coverage is up to 15 years.
How do we operate?
We operate in 11 states with a specific relationship management team for each state. Adedicated & trained sales and marketing team manages the front end of the MicroFinance program. Our micro Finance distribution model collaborates with NGOs (Non-governmental organizations) and Rural organizations with community level SHG (SelfHelp Group) women advisors who provide Finance advisory services to the ruralcustomers at their doorstep. The grassroots level agents explain the product details inthe local language of the customer, thereby enabling the customer to make a decision.The training programs, brochures, contract documents, and application forms areavailable in 8 different languages other than English and Hindi
Key features include:
Policy Term : 15 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-
Maximum Death Benefit (Sum Assured): Rs.50,000/- Premium payment frequency : Monthly, quarterly, half yearly & yearly Death Benifit : Sum assured is paid to the policyholders nominee Maturity benefit : At the end of the 15 years, all the premiums paid will be
returned to the policyholder.
Tax Benefits and Age EligibilityPremiums paid under this plan are eligible for tax benefits as per the Income Tax Act,1961 and are subject to any amendments made therein from time to time.* Anyonebetween ages 18 and 60 can apply for this policy.
RESEARCH OBJECTIVE
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To find out potential depth in society for providing opportunities for further extention
for micro Finance
Sub objective:
Determine need and ability of people segment whose per day income is
less than 100 bugs. What really matters to him or her while think about
Finance.
Determine awareness about Finance among them. if aware then source of
information
To determine the govt. and private sector proceeding in this area andextent of their success
RESEARCH METHODOLGY
Data collection
For data collection, we developed a well defined questionnaire as a research
instrument, consisting questions aimed to measure the people perception about
Finance, their need and problems, bottleneck why hadnt insured, and target to find out
opportunities for further extention of micro Finance. We conducted unstructured
interviews (sample size) of 52 general people having income even less than 100 bugs per
day like vendors, rickshaw wala, coolies etc. at survey location (Kashmiri gate, old
Delhi railway station, prostitutional area etc. All the data generated was primary data
that was generated directly from face to face communication
Data analysis
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The data collected based on structured questionnaire is recorded on an excel sheet and
with the help of SPSS software a pie chart analysis along with pillar data analysis is
generated and based on this findings a qualitative inferences are made for each
analysis. The same is being presented in form of graphs and tables
SURVEY RESULTS
The following are our findings regarding the survey conducted by us. The following
graphs show the potential depth from different perspectives, as shown below:
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ANALYSIS AND INTERPRETATION
Table 1:
Gender of the respondents
S. No. Sex No of Respondents Percentage
1. Male 50 91
2. Female 05 09
Total 55 100
Chart 1:
Gender of the respondents
Inference:
The above reveals the fact that Majority of the respondents, about 91% belong to the
category of male and 9% belong to the category of female.
No of Respondents
91%
9% 0%0%0%0%0%0%0%0% 1
2
3
4
5
6
7
8
9
10
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Table 2: Age of the respondents Chart 2:
Inference:
The above reveals the fact that Majority of the respondents, about 38% belong to thecategory of 2 age and 33% belong to the category of 3 of age, 17% belong to category 2and 12% belong to the category 1 of age.
Table 3: Educational Qualification Chart 3:
Inference:
The above result reveal that majority of respondents (22+28)% were either uneducatedor educated only upto primary level
frequency
12%
38%33%
17%
1
2
3
4
Frequency
2%
54%
42%
2%
1
2
3
4
AGE
6
2017
9
0
5
10
15
20
25
1 2 3 4 5 6 7 8 9 10
AGE
Educational Qualification
1
28
22
1
0
10
20
30
1 2 3 4 5 6 7 8 9 10
catagory of education
no.o
frespondent
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Table 4: No. of family members Chart 4:
Inference:
Above result reveals that majority of respondent 55% live with joint family or have bigsize of family
Table 5: No. of earning member Chart 5:
Inference:
From the above result it can be clearly seen that about 63% of the respondent were theonly earning member of their family, 31% have 2 earning member because of size of
family.
freq
45%
55%
0%0%
1
2
3
4
freq
63%
31%
4%
2%
1
2
3
4
family size
0
10
20
30
1 2 3 4 5 6 7 8 9 10
age catagory
no.o
frespondent
freq
earning member
33
16
2 1
0
10
20
30
40
freq
earning member/family
no.o
frespondent
Series1
Series2
Series3
Series4
Series5
Series6
Series7
Series8
Series9
Series10
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Table 6: Income level Chart 6:
Inference:
The above result reveals that 46% of respondent have income level 1 while 42% and12% have income level 2 and 3 respectively.
Table 7: Account Holder Chart 7:
Inference:
The above result reveals that 64% of respondent dont have any account any where
while 36% have their own bank or post office account.
freq
46%
42%
12%
1
2
3
freq
64%
21%
15%
1
2
3
income level
24 22
6
0
10
20
30
freq
income catagory
no.o
fresponde
nt
Series1
Series2
Series3
Series4
Series5
Series6
Series7
Series8
Series9
Series10
account map
33
11 8
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
no.of account
no.o
faccount
holder
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Table 8: Background Chart 8:
Inference:
The above result reveals that majority of respondent belong to the background of type3(69%), then type 1 (19%) and type 2(12%).
Table 9: No. of dependent Chart 9:
Inference:
The above result reveal that majority of respondent (35+29)% have no. of dependentmore than 1 and less than 4. 16% have only 1 dependent and 12%have 4 or more than 4dependent in their family.
freq19%
12%
69%
1
2
3
freq8%
16%
35%
29%
12%
1
2
3
4
5
background
106
36
0
10
20
3040
1 2 3 4 5 6 7 8 9 10
background catagory
no.o
fresponden
t
dependent members
4
8
1815
6
0
5
10
15
20
1 2 3 4 5 6 7 8 9 10
no. of dependent/family
res
pondent
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Table 10: Whether has ID proof Chart 10:
Inference:
Above result reveals that 52% have ID proof but almost there were equal no that hadntany id proof.
Table 11: Faced prob with health or asset Chart 11:
Inference:
Above result shows that 23% of respondent didnt face any problem related with health
or asset but 77% faced a serious health of asset loss in past of their life.
Freq
77%
23%
1
2
freq
48%
52%
0%0%0%0%0%0%0%0%
1
2
3
4
5
6
7
8
9
10
ID proof
27
25
24
24.5
25
25.5
26
26.5
2727.5
1 2 3 4 5 6 7 8 9 10
1-yes,2-no
no.o
frespondent
health/asset problem faced
40
12
0
20
40
60
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no
responses
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Table 14: Risk on job Chart 14:
Inference:
The above result reveals that 52% of the respondent didnt had any risk on job butalmost equal proportion 48% who had serious job risk.
Table 15: Risk toward assets Chart 15:
Inference:
Above result reveals that a majority of respondent 67% dont have any risk toward theirasset while 33% were those who have. Reason might be because of their low incomethey hadnt had any significant asset.
risk on job
48%
52%1
2
risk toward asset
33%
67%
1
2
risk on job
25
27
24
25
26
27
28
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no
response
risk toward asset
17
35
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no
response
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Table 16: Awareness about Finance Chart 16:
Inference:
Above result reveals that majority of respondent 92% were awared of Finance but 8%were also there who even didnt know what the Finance is.
Table 17: Source of information Chart 17:
Inference:
The result above reveals that 35% of the respondent got the information about Financefrom source 7, 31% got info. from source 5 and remaining from the source patternshown above.
source of information11%
1%0%3%
31%
7%
35%
11% 0%1%
awareness about insurance
92%
8%
1
2
awareness about insurance
48
4
0
20
40
60
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no
response
source of information
8
1 0 2
22
5
25
8
0 1
0
10
20
30
1 2 3 4 5 6 7 8 9 10
source
responses
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Table 18: No. of Finance taken Chart 18:
Inference:
Above shown result reveals that a majority of respondent 60% were not insured fromany where , 38% had taken life Finance but 2% were also there who were very wellawared and had 2 or more than 2 Finance.
Table 19: Why not insured? Chart 19:
Inference:
The result got above reveals that 44% were not insured because of reason1, 41% becauseof reason3 and 15% were not insured because of reason 2.
insurance taken
60%
38%
2%
1
2
3
reason for no insurance
44%
15%
41%
1
2
3
insurance taken
31
20
1
0
10
2030
40
1 2 3 4 5 6 7 8 9 10
no.of insurance taken
responses
reason for no insurance
17
6
16
0
510
15
20
1 2 3 4 5 6 7 8 9 10
reason
respo
nses
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Table 20: Kind of Finance like to purchase Chart 20:
Inference:
Above result reveals that 46% of respondent like to have life Finance, 31% like to havehealth Finance but there are some 14% who are awared toward their child educationand like to have education Finance, while some 9% want to minimize risk toward theirassets and like to have asset Finance as well.
Table 21: Premium ready to pay Chart 21:
Inference:
Above result reveals that in this particular sector all the respondent were almost haveequally distributed opinion about premium package. 24% were ready to pay a soundpremium, majority were aligned toward premium package 2, 20% were ready to paypremium 3, while 27% agreed to pay premium package 4.
insurance like to have
46%
31%
14%
9%
1
2
3
4
premium map
24%
29%20%
27%
2
4
insurance l ike to have
27
18
85
0
10
20
30
1 2 3 4 5 6 7 8 9 10
type of insurance
responses
premium map
1215
10
14
0
5
10
15
20
1 2 3 4 5 6 7 8 9 10
type of premium
respons
es
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Table 22: How many members like to insured Chart 22:
Inference:
The above shown result reveals that majority of respondent 59% like to insured twomembers of their family apart from self but 35% were those who cant bear even so lesspremium of micro Finance product and like to insure only one member apart from selfrest are distributed as shown above.
Table 23: From where you like to Chart 23:
Purchase Ins. Policy
Inference:
The result above reveals that a majority of respondent 64% believes on facility location 3and likes to have Finance from there, 16% believe on facility location 4 and rest areshown above.
members like to be insured
2%
35%
59%
2%
2%
1
2
3
4
5
facility location
0% 7%
64%
16%
4% 9%1
2
3
4
5
6
members like to be insured
1
18
31
1 1
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
members/family
responses
facility location
04
36
92
5
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
location catagory
responses
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Table 24: Finance Duration Chart 24:
Inference:
The result found above reveals that a majority of respondent 38% like the Finance forthe duration of 5-10 years, 29% upto 15-20 years, 12% upto 10-15 years but some werealso those 21% who cant bear even so less premium and want to have Finance policyupto duration of 0-5 years.
FINDINGS
Study reveals that majority of people whose daily income is less than 100bugs have big family
Earning member in majority of family is only male.
Income level lies between 100-200 bugs per day
Majority of respondent didnt had any saving account because of no IDproof
Majority of respondent have more spending on travel & rent, after that onfood & cloth and Medicare & entertainment
Majority of respondent are the only earning member in family size of 5-8.
Majority of respondent hadnt significant asset Majority of them managed critical financial problem from some lender like
master of their service
They hadnt any significant job risk but yes they had asset loss risk
insurance duration
21%
38%12%
29%1
2
3
4
insurance duration
11
20
6
15
0
5
10
15
20
25
1 2 3 4 5 6 7 8 9 10
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Many of them awared about Finance but not of micro Finance and best
source of information medium found to be Radio and advertisement
banners.
Many of respondents were not insured just because of either high premium
or lack of complete information. Some complaint about bad approachability of Finance provider company to
them as well.
Majority of respondent shows keen interest in micro-Finance policy in lifeand health , some were very sensitive toward education and like to haveeducation Finance as well
Because of low income they are ready to pay 150-200 bugs per year forFinance and like to have atleast one more member of their family to be
insured
They are ready to pay premium 15-20 years.
CONCLUSION:
From the above statistical interpretation it could be concluded that potential lies in thesociety. There is a large segment of the population whose income level lies under theboundary line of poverty and since micro Finance target to those people whose incomelevel is even less than 100 bugs per day, it can penetrate population very well. Many ofour target segments have recommended many other facilities with micro Finance whichfound to be really concernable. Micro Finance product should be manufactured in such
a way that those respondents who had denied for having Finance for all familymembers only just because of premium, can also get access through it.
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