New Delivery Formats In

Farm Credit & Insurance

Oct 8th, 2005 New Delhi

 Key Issues
z Three major issues

z Sustainability
z “How can the business be sustained in the long term?”

z Scalability
z “How can successful pilots transform the industry?”

z Business approaches
z “How should a business model be created that can deliver
low cost financial services to a large population?”

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 Example One : Partnerships in
Farm Credit
z The Issue
z Leading sugar company from south wants to
strengthen relationships with farmers
z Sugar cane farmers want to increase productivity
and hence their livelihood
z ICICI Bank to participate actively in the farm credit
opportunity

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 Example One : Partnerships in
Farm Credit
z The Partnership Solution

Provides inputs and agri advise

Farmer Sugar Company

Supplies sugar cane

Excess over principal and interest

paid out to farmers

Provides financing for tractors, farm Makes payment thru’ ICICI Bank
implements and irrigation equipment

ICICI Bank

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 Example One : Partnerships in
Farm Credit
z The Benefits
z Farmer
z Gets good agri inputs from corporate / third party that will
improve productivity
z Gets access to easy credit from bank to facilitate productivity
improvement
z Corporate
z Strengthens relationship with farmer community
z Improved productivity implies improved capacity utilization and
hence reduced costs
z Bank
z Reduced administrative costs for delivery of credit and reduced
credit losses

Hence SUSTAINABLE

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 Example Two : Partnerships in
Insurance
z The Issue
z Farmers livelihood at risk owing to
vagaries of weather and poor health
z Hospitals want to reduce per patient costs
and reduce administrative costs
z Banks want to participate in insurance
opportunities

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 Example Two : Partnerships in
Insurance
Covered 3 lac lives through various initiatives

Arogya Raksha Yojana in Anekal Taluka of Karnataka

• Partnered with Biocon and Narayan Hrudalaya

• First rural health insurance policy with cashless facility

• Innovative low cost health cover (Rs. 10 per month)

• Coverage for all kinds of common and complex surgeries –

bypass, hernia, fractures etc.

• In the first approximately 60,000 residents have been covered

• So far over 100 claims for surgeries have been pre-authorised

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 Example Two : Partnerships in
Insurance
• 60% of net sown area rain fed – uncertainty of
Need rainfall the biggest risk faced by farmers

• Most irrigation from non-perennial sources;

effective irrigated area only 20 %

• Farmers don’t have sufficient funds to tide over

cyclical losses often pushing them into vicious
debt cycle

• Insurance against losses due to vagaries of

Product weather
• Covers fluctuation rainfall, temperature and
humidity

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 Example Two : Partnerships in
Insurance
z The Benefits
z Farmer
z Protects himself from the vagaries of weather
z In case of ill health affecting livelihood, financial comfort about
costs
z Hospital
z Reduced administrative costs and improved productivity levels
leading to reduced cost per patient
z Bank
z Reduced administrative costs for delivery of insurance

Hence SUSTAINABLE and SCALABLE

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 Example Three : Business
Approach
z The Issue
z Farmer
z Credit is only one part of the requirement; what about savings?
Investments? Insurance?…..
z Bank
z Delivering credit is only a starting point; how should you offer a
range of financial services that are valued by the rural
community? And in a cost effective manner?

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 Example Three : Business
Approach
z The Solution
z Look at the full farmer life cycle and design
products and services that are relevant
z Example – Micro-savings

z Use technology and partnerships to administrative

costs for delivering financial services
z Example – Kiosks and rural ATMs

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 Example Three : Business Approach
Connectivity

STD/PCO:
Enabling voice
communication Multimedia
Internet Kiosk PC with Power
backup

Printer & Other

Kiosk Operator: Accessories :
•Entrepreneur
Enabling job work
•Provides commercial
services

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 Example Three : Business Approach

Rural ATM

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 Summary
z Partnerships can help
z Deliver livelihood-enhancing support to farmers
z Reduce administrative costs and credit losses for a
bank

And thereby create a win-win-win for all three parties

This makes the model scalable and sustainable

z Technology can help

z Bring a range of financial services to the farmers
doorstep
z Reduce delivery costs substantially

And make the model long-term

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