Kshetriya Gramin Financial Services (KGFS) launched

Kshetriya Gramin Financial Services (KGFS), an innovative financial service aimed at under-served rural areas, has been launched by IFMR Trust Holding Company (ITHC).

The first branch of ITHC's first KGFS company, called Pudhuaaru KGFS, was inaugurated on June 1, 2008 at Karambayam village in Pattukottai taluka of Thanjavur district, Tamil Nadu.

The first branch of the first KGFS company, at Karambayam village, Thanjavur

'Pudhuaaru' is the name of a tributary of the river Cauvery, which flows through Thanjavur district. It means 'new stream/river' in Tamil.

Like other KGFS companies to be promoted by ITHC, Pudhuaaru KGFS is a section 25 not-for-profit company. Each KGFS company will have a local name attached to it.

KGFS branches, such as the one in Karambayam, will offer multiple, client-centric financial services including savings, remittance, insurance, small-ticket loans and investments.

Explains ITHC CEO Anil Kumar, "KGFS is modelled as an intermediary between people in remote villages and various types of financial institutions."

KGFS will leverage loans of joint liability groups (JLGs) promoted by it at the village level.

"By securitising assets like JLG loans, we will enable reduced cost of lending to rural customers," Anil explains.

"Everyone gains in the process," he adds. "Capital markets get previously untapped markets. Rural customers get loans and other products at lower costs, at locations where such products were never offered before, and the KGFS and the holding company get opportunities to reach out to newer markets."

The head office of each KGFS company will be at the district headquarters. Initially, there could be one head office for two districts. At the next level will be block/taluka level branches. Finally, at the village level, there will be a thin 'front end' serving the customer.

KGFS Relationship Officers (ROs) will enroll customers and provide services in villages.

Customers and team members from IFMR Trust at the launch

Technology plays a vital role in the entire operations. There is a high level of automation for data capture and analysis. Customers will get to do all their transactions through a biometric smart card developed by Financial Information Network & Operations Ltd. (FINO), a company working on cutting edge solutions to increase the reach of financial services.

The smart card, which carries the customer's photo, is used to record all transactions at the field level, and then transfer the data to backend servers for processing.

Says Pankaj Misra, Vice President - New Initiatives, FINO, "The process is both simple and secure."

Customers have already been enrolled at Karambayam, a village on a highway with a busy local market, around 10 km from the nearest taluka town, Pattukottai.

Enrollment with KGFS is currently free and customers can start transacting almost immediately on JLG lending.

Banking products proposed to be launched shortly include 'jewel loans' (loans against gold jewellery).

Insurance products proposed to be offered initially include credit-linked insurance, life insurance and disability insurance.

New products will be designed and rolled out with inputs from IFMR's specialised research centres like Centre for Microfinance, Centre for Development Finance, Centre for Insurance and Risk Management, Centre for Innovative Financial Design and Centre for Advanced Financial Studies.

Says Thiagu Ranganathan, Consultant at Centre for Insurance and Risk Management, "We are considering products like weather insurance, livestock insurance and health insurance."

In all cases, says Anil, "The keywords will be quick processing and service to rural customers."

Top