The marketing of financial products in rural areas or semi urban areas, specially in the hinterland presents unique challenges as also learning opportunities. My own posting in the districts enabled me to gain insights into the process and I am sharing some experiences as they only amplify the viewpoint. While discussing the marketing of financial products, I am essentially focusing on the marketing and sale of mutual funds, ULIPS, tax free bonds, traditional life insurance products, medical insurance, infrastructure bonds, FD’s of companies etc.
The scenario in rural marketing is always complex, the distance from the company / corporate offering the product is vast, both in terms of geography and perception. The absence of qualified agents, bankers facing stiff targets for cross selling products, a perception of safety embedded in all products, dependence on subsidy and governmental programmes, arbitrage, mis- selling, lack of access to financial papers, inability to appreciate financial media channels etc makes the whole experience most interesting and at times amusing. Add to this the mixture of conservativeness and suspicion ingrained amongst ruralites while interacting with city bred officials (that is urban centric in thoughts and orientation) while they endeavour to market financial products during short visits to rural areas, it can be a formidable challenge for most.
I will start with my land lady at the district headquarters. Owning two houses, a lavish triple storey structure for herself and a reasonably comfortable house for me (both houses were adjoining), the lady owned vast property, urban as well as agricultural. One day I complimented her for the new Ford Fiesta parked in her driveway. She acknowledged the greetings and then said in chaste sophisticated Punjabi, it was thanks to me ! Now zapped, I asked her how so, she said the bank which had loaned her the amount was generous in sanctioning a loan of Rs 3.00 lakh and said it was charging a low rate of interest due to NABARD. Now mystified, I went over to the branch of the Regional Rural Bank located nearby, the Branch Head said he had loaned her Rs 3.00 lakh as crop loan under the Kisan Credit Card which entitled her to concessional rates of interest and no compounding of interest, all this because she was a farmer. Technically he was correct, and then came the clincher, as a well off farmer, she would certainly repay in time and would get an additional incentive for prompt repayment !!. Such cases did occur at times and was confirmed by colleagues, but then such is the reality. I also realized over time two aspects of finance a well off farmer or a ruralite intrinsically understood, the value of land and interest. Hence the obsession in buying land, as the farmers would say in Punjabi when asked about their obsession with land, boss, ask God to create land !!.
Then I must talk about Satvinder Singh, a progressive farmer and a close associate, owning 12 acres of land. He would come over and ask what to do with his cash surplus, ask about subsidy schemes of the government and so on as also at times request for putting in a word for more fertilizer for his cooperative society. One day he came over and proudly stated he was also a participant in the modern financial world, having invested in a single premium ULIP and in a mutual fund. He even advised me to invest as I would be doubling my money in three to four years and so on. With him were four more farmers, all having invested similar amounts, all excited at their diversification in such investments. I gently inquired if they knew how the money would be invested, about the functioning of stock exchanges, fluctuations in values, NAVs etc. The confident answer was that the Agriculture Banking Head of a major bank branch in the town had guided them and assured them about the return. Curious, I asked how they had come by so much liquidity, well, the branch head had simply first issued a crop loan (subsidized by the central government) through the kisan credit card and then after crediting their account, debited it for the ULIP / Mutual fund investments !!. After Satvinder and the farmers left the office, I went over to the branch, they sheepishly confessed they were way behind targets for loaning and selling insurance / mutual funds, the only recourse was to do what I have just described. I confronted them about the knowledge deficit of the investors about the products, it was met first with silence and then a lame excuse that these farmers being comparatively well off would be able to live through a crisis, if at all it occurred and this was occurring at many branches as regards the better off agriculturists only. When I inquired deeper, I realized even the bank officials were not aware about the intricacies and had attended a one day training session only. Needless to say, I spent hours later every week explaining the concept of such investments to such groups of farmers, as and when the stock markets tanked. Another interesting mode was to borrow at a low rate of interest (crop loans are subsidised) and then reinvest in fixed deposits with the same branch. This of course is not the norm, but the better off and astute agriculturists do at times exploit such opportunities, specially when bankers are under pressure to achieve targets. A caveat, this is not the norm or happening in all regions, or for that matter amongst all farmers; the marginal farmer is totally out of the loop on such financial innovation.
Relationships matter a lot in rural settings in winning trust and bringing about investments in financial products. The rural hinterlands have provided a fertile setting for scams and unfulfilled promises and assurances. The rural folk tend to connect unconnected dots, if a company had promised buy back for a commodity and subsequently failed to honour its promise, it makes it very difficult to market a new financial product in the same area, even if the two events are separate issues. This also explains the success of post offices in banking and that of old style bankers operating for a considerable time in a certain area. There is comfort in such relationships, even if cash could be withdrawn from an ATM, it would be in order for the customer to walk in and exchange greetings.
The barriers of limited broadband access, electricity outages, lack of understanding of terms and conditions, limited literacy of even the well of residents and ill-trained staff at offices of intermediaries are understood, but corporate India has been visibly negligent in tapping the comparatively well off and cash rich segment in rural areas. I even approached a major corporate specializing in marketing / selling of a diverse range of financial products to atleast venture out of Chandigarh and attend some meets which were being organized but the mindset was it would not be a viable venture. Bankers cannot be expected to sell such third party products effectively, strangely, I found some bankers themselves to be deficient in knowledge about mutual funds, though their branches had posters about such products. Thus massive knowledge inputs are required as also modes of reaching out to segments which can understand and invest in products with an awareness of its potential upside or downside.
These are of course personal recollections and interactions, many would have different experiences. But the essence is to realize that marketing of financial products in rural areas would require a different mindset, an understanding of rural cultures, development of channels for collection (say micro SIPs or ULIPs), a mode to reach out with publicity material and adequately trained staff, access to data / information about households which can afford to invest etc.
Dinesh K Kapila is presently posted as AGM at NABARD Shimla. These are his personal views and do not reflect the views of his employer.
------------------------------------------------------------------------------------ (published by NIMA in April 2012)
The scenario in rural marketing is always complex, the distance from the company / corporate offering the product is vast, both in terms of geography and perception. The absence of qualified agents, bankers facing stiff targets for cross selling products, a perception of safety embedded in all products, dependence on subsidy and governmental programmes, arbitrage, mis- selling, lack of access to financial papers, inability to appreciate financial media channels etc makes the whole experience most interesting and at times amusing. Add to this the mixture of conservativeness and suspicion ingrained amongst ruralites while interacting with city bred officials (that is urban centric in thoughts and orientation) while they endeavour to market financial products during short visits to rural areas, it can be a formidable challenge for most.
I will start with my land lady at the district headquarters. Owning two houses, a lavish triple storey structure for herself and a reasonably comfortable house for me (both houses were adjoining), the lady owned vast property, urban as well as agricultural. One day I complimented her for the new Ford Fiesta parked in her driveway. She acknowledged the greetings and then said in chaste sophisticated Punjabi, it was thanks to me ! Now zapped, I asked her how so, she said the bank which had loaned her the amount was generous in sanctioning a loan of Rs 3.00 lakh and said it was charging a low rate of interest due to NABARD. Now mystified, I went over to the branch of the Regional Rural Bank located nearby, the Branch Head said he had loaned her Rs 3.00 lakh as crop loan under the Kisan Credit Card which entitled her to concessional rates of interest and no compounding of interest, all this because she was a farmer. Technically he was correct, and then came the clincher, as a well off farmer, she would certainly repay in time and would get an additional incentive for prompt repayment !!. Such cases did occur at times and was confirmed by colleagues, but then such is the reality. I also realized over time two aspects of finance a well off farmer or a ruralite intrinsically understood, the value of land and interest. Hence the obsession in buying land, as the farmers would say in Punjabi when asked about their obsession with land, boss, ask God to create land !!.
Then I must talk about Satvinder Singh, a progressive farmer and a close associate, owning 12 acres of land. He would come over and ask what to do with his cash surplus, ask about subsidy schemes of the government and so on as also at times request for putting in a word for more fertilizer for his cooperative society. One day he came over and proudly stated he was also a participant in the modern financial world, having invested in a single premium ULIP and in a mutual fund. He even advised me to invest as I would be doubling my money in three to four years and so on. With him were four more farmers, all having invested similar amounts, all excited at their diversification in such investments. I gently inquired if they knew how the money would be invested, about the functioning of stock exchanges, fluctuations in values, NAVs etc. The confident answer was that the Agriculture Banking Head of a major bank branch in the town had guided them and assured them about the return. Curious, I asked how they had come by so much liquidity, well, the branch head had simply first issued a crop loan (subsidized by the central government) through the kisan credit card and then after crediting their account, debited it for the ULIP / Mutual fund investments !!. After Satvinder and the farmers left the office, I went over to the branch, they sheepishly confessed they were way behind targets for loaning and selling insurance / mutual funds, the only recourse was to do what I have just described. I confronted them about the knowledge deficit of the investors about the products, it was met first with silence and then a lame excuse that these farmers being comparatively well off would be able to live through a crisis, if at all it occurred and this was occurring at many branches as regards the better off agriculturists only. When I inquired deeper, I realized even the bank officials were not aware about the intricacies and had attended a one day training session only. Needless to say, I spent hours later every week explaining the concept of such investments to such groups of farmers, as and when the stock markets tanked. Another interesting mode was to borrow at a low rate of interest (crop loans are subsidised) and then reinvest in fixed deposits with the same branch. This of course is not the norm, but the better off and astute agriculturists do at times exploit such opportunities, specially when bankers are under pressure to achieve targets. A caveat, this is not the norm or happening in all regions, or for that matter amongst all farmers; the marginal farmer is totally out of the loop on such financial innovation.
Relationships matter a lot in rural settings in winning trust and bringing about investments in financial products. The rural hinterlands have provided a fertile setting for scams and unfulfilled promises and assurances. The rural folk tend to connect unconnected dots, if a company had promised buy back for a commodity and subsequently failed to honour its promise, it makes it very difficult to market a new financial product in the same area, even if the two events are separate issues. This also explains the success of post offices in banking and that of old style bankers operating for a considerable time in a certain area. There is comfort in such relationships, even if cash could be withdrawn from an ATM, it would be in order for the customer to walk in and exchange greetings.
The barriers of limited broadband access, electricity outages, lack of understanding of terms and conditions, limited literacy of even the well of residents and ill-trained staff at offices of intermediaries are understood, but corporate India has been visibly negligent in tapping the comparatively well off and cash rich segment in rural areas. I even approached a major corporate specializing in marketing / selling of a diverse range of financial products to atleast venture out of Chandigarh and attend some meets which were being organized but the mindset was it would not be a viable venture. Bankers cannot be expected to sell such third party products effectively, strangely, I found some bankers themselves to be deficient in knowledge about mutual funds, though their branches had posters about such products. Thus massive knowledge inputs are required as also modes of reaching out to segments which can understand and invest in products with an awareness of its potential upside or downside.
These are of course personal recollections and interactions, many would have different experiences. But the essence is to realize that marketing of financial products in rural areas would require a different mindset, an understanding of rural cultures, development of channels for collection (say micro SIPs or ULIPs), a mode to reach out with publicity material and adequately trained staff, access to data / information about households which can afford to invest etc.
Dinesh K Kapila is presently posted as AGM at NABARD Shimla. These are his personal views and do not reflect the views of his employer.
------------------------------------------------------------------------------------ (published by NIMA in April 2012)
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