BANKING, INVESTMENT, TELECOM & INSURANSE SERVICES IN RURAL MARKETING -

 BANKING, INVESTMENT, TELECOM & INSURANSE SERVICES IN RURAL MARKETING

MARKETING OF SAVINGS   &  INVESTMENT SERVICES-

Major players

The sources of finance can be categorized into two-unorganized & organized. 

The unorganized-

Relatives, 

Friends &

Money lenders. 

The organized – 

Commercial banks, 

Non-banking financial institutions, 

Co-operative credit societies & 

Microfinance institutions

Regional Rural Banks (RRBs)

RRBs were originally conceived as low-cost institutions with a rural flavor & their primary role was like to that of commercial banks, 

 in raising deposits & lending onwards for a profit. 

These banks targeted rural & semi-urban areas for deposit & primarily, lending small loans to marginal farmers. 

Presently, 86 RRBs are operating in the country with 15k branches in 615 districts. 

RBI report stated that 86 RRBs extended new loans to the extent of Rs 400 bn to 9.4 mn borrowers.

The share of priority-sector loans issued was 82.6 %. 

In terms of the number of borrowers covered, the share of the priority sector was about 84 % of the total loans issued during 2008-2009

Co-operative banks

The co-operative credit structure (CCS) of India was set up to serve the needs of both short-term & long-term rural credit in the country. 

Short-term credit is  supplied in rural India by 3 institutions

State co-operative banks (SCB)

District central co-operative banks (DCCB)

Primary agricultural credit societies (PACS)

Long-term credit is supplied by the 

Primary Co-operative Agriculture  & 

Rural Development Banks (PCARDB). 

The state co-operative banks, now 29 in no, finance, co-ordinate  & control the workings of the central co-operative banks in each state. 

There are now 367 central co-operative banks  & over 92,000 primary agricultural credit societies  with a membership of  10 Crore+

Commercial banks

There are  6 lacs villages in the country there are only about 45k rural branches of public-sector banks & regional rural banks.

 The result is a huge demand-supply gap. 

Around 60% of India's rural population does not have access to banking services.

Govt. policy - All domestic banks (inc. pvt bnk) & foreign bnk are, required to provide 40% & 31 % of their net banking credit to the priority sector

Two innovations, namely micro-finance & Kisan Credit Card (KCC)  have emerged as the major policy tools to address the problems associated with the distributional aspects of rural credit.

SAVINGS & INVESTMENT

An imp.  activity in the finance sector is the mobilization of savings in the form of deposits &  channeling the funds for investment

Savings & investment behavior

A survey conducted by Max-NCAER revealed that around 81% of households at the all India level save some part of their earnings-

the figure is 88%  for urban India & 

78% for rural India 

Reason

The predominant reasons for savings in a majority of households are emergencies (81.2 %) & education for children (79 %). 

Other reasons for savings are ensuring security for old age (66.7 %), saving for social ceremonies (63.9 %), saving for buying or building a house (44.8 %), for improving or expanding business (43.5 %), for buying large consumer goods (19.8 %) & gifts( 17.5 %).

Preferred mode of saving

42 % of households keep their savings at home & about 45 % of the households opt for bank deposits. 

The other modes of savings are deposits in 

CO-OPERATIVE SOCIETIES (3 %)

in POST OFFICES (5.4 %)

in INSURANCE (1.8 %)

in others like CHIT-FUND - (2.7 pei cent).

Owning an account in a financial institution

About 59.2 % of households in rural India hold accounts in a financial institution.

Indebtedness

A fourth of rural households (25.2 %) have outstanding loans. Incidence of indebtedness is low in case of regular earning households. 

It is high (27.5 % of households) in case of those who are self- employed in agriculture.

Stability of household income

About 50 % of rural households are confident about stability of their incomes. 

This shows that half of rural Indian households live in uncertainty about their incomes.

Investments-

 It is observed that the propensity to invest is higher among the regular income-earning households.

Savings & investment opportunities

Financial institutions & India Post have opened up opportunities for rural people to save & invest their surplus amounts.

Bank deposits

All the commercial banks offer savings accounts & FD schemes. 

They are promoted through adv. in the print media & leaflets. 

By a notification issued in January 2006 the Reserve Bank of India (RBI) allowed banks to appoint "business correspondents" to offer savings accounts on behalf of banks in remote rural locations. 

The business-correspondent model offers an alternative structure to branch-based banking to ensure outreach of formal-sector financial services to every citizen in the country.

Postal saving schemes

India has a very organized & well-maintained postal network with post offices even in small villages

The Postal Department offers many financial services termed as postal saving schemes

The saving schemes include National Saving certificates, Post Office Savings Account'   / Public Provident Fund'

Kisan vikas patra,  postal Life Insurance  &  Senior Citizen Savings Scheme. 

These saving schemes tend to compete with the bank deposits as they offer tax benefits under Section 80 C of the Income

Tax Act. Mutual funds

In India, mutual funds are financial instruments. 

These funds are collective investments that gather money from different investors to invest in stocks, short-term money markets, financial instruments, bonds & other securities & distribute the proceeds as DIVIDENDS.

The mutual funds in India are handled by fund managers, also referred as portfolio managers. 

The RBI has permitted commercial banks & RRBs to offer mutual funds.

MARKETING STRATEGIES OF BANKS

Commercial banks & post offices have to recognize the need for an innovative marketing mix & 

design new products & take advantage of IT solutions Offer innovative & affordable products

Bank of India (BoI) has started mobile banking service in rural areas.

 The service will be useful in villages that do not have banks. 

villagers would be given a special type of SIM card 

The customers can conduct their banking transactions through the mobile phone & would also get to know the balance in their account.

The State Bank of India (SBI) has started a zero-balance bank account programme for villagers'  Called the SBI finy account, there are no physical branches or officials, just a paid volunteer who is .equipped with a small box & a cell phone

The advantage for the villagers is that they can withdraw money from their accounts at any time of the day or night  

SBI hopes to cover 1 lac  villages.

The bank has also tied up with India Post for some services.

ICICI Prudential Liquid Plan, a money market mutual fund (MMMF) product offers easy liquidity & low entry requirements. 

It invests solely in money market instruments that are forms of debt that mature in less than one year & are very liquid

Improve service quaIity

In rural areas, service is more important as the customers are less educated. 

The need to bridge the service gap is highlighted by the NCAER

Organize promotion

Investor education in mutual funds is the key to take the message of this investment avenue forward in these markets.

"Business correspondents" have to be appointed to offer savings accounts on behalf of banks in remote rural locations.

Advertisements in TVs, FM radios, print media, transit media & hoardings are used to promote savings &investment products.

Engage in CSR activities

Community service programmes have to be undertaken for the benefit of the rural people.  

Canara Bank has schemes such as rural clinic services, rural service volunteers, jala yoga (provide safe drinking water,  Hari Kalayana Yojana (literacy classes, health care, cleanliness campaign, tree planting, sanitation, drainage etc ) 

a retail mobile marketing van for sale of household products, articles made by women entrepreneurs and handicrafts workers

MARKETING  OF  INSURANCE  SERVICES

MARKETING OF INSURANCE SERVICES

The insurance sector in India is  booming & growing at the rate of 15-20 %. 

Together with banking services, it contributes 7% to GDP. 

The insurance sector in India was liberalized in March 2000 with the passage of the (IRDA) Bill, lifting all entry restrictions for private players & allowing foreign players to enter the market with some limits.

Presently, there are 20 life insurance companies &  non-life insurance companies in the market.

Size & Growth

Acc. to a May 2008 ASSOCHAM report titled, "Insurance in Next Two Years,“  the size of the insurance sector was est. at USD 12.8 bn.  

it is likely to see a never-before growth of 200 %, reaching USD 51.2 bn

Rural India is an opportunity worth USD 30 billion for the insurance companies if they provide the right product mix. 

Acc. to the international consultancy firm, Celent, the rural life insurance market will grow to a potential of USD 1.9 bn by 2015 from the current USD 487 mln. 

Out of the 80 % households with awareness about life insurance in rural India, only 25 % were policy owners. 

India's untapped rural market holds tremendous growth opportunities for life insurance companies with business worth USD 231 mn for insurance firms. 

Only 8-10 % of the rural households are covered by life insurance. 

Types of Insurance-

The various fields covered by insurance companies in India include-

Life Insurance- For Students, Children, Family, Individual, etc.

Health insurance- For Self, For Family, Accidental Insurance Premium, Medical Claim Policies, Etc.

Non-Iife insurance- Home insurance & property insurance, Auto insurance, infrastructure-projects insurance, travel insurance, real estate insurance, mobile insurance, etc

Reassuarance -insurance for the insurer. 

Reassurance helps primary insurers take risks that are beyond their capacity but, without damaging their financial stability when mass settlement cases arise. 

Such cases occur at the time of Natural calamities. 

The major player-

General Insurance Company (GIC), has taken up the role of national insurer. 

GIC is paid 20 % of the re-insurance business of all insurance companies.  

Insurance companies employ insurance agents & brokers to sell their insurance policies & products.

A work license from the insurance regulation department is a must to sell any insurance plan.

The insurance premiums offered vary from company to company & also from policy to policy. 

The premium asked for depends on the risk factors involved as in the case of the lives of Indians  

Major players-

The major players in the insurance sector are-

LIC  still remains the largest life insurance company accounting for 64 % market share.

ICICI Prudential is the biggest private life insurance company in India. 

It experienced a growth of 58% in new business premium.

Bajaj Allianz ranked 2nd (after LIC) in the number of policies sold in 2007-2008.

SBI Life ranked 6th in 2007 -2008 in terms of the number of new policies sold.

Reliance Life Insurance Co. Ltd ranks 5th in new business premium & 4th in the number of new policies sold in 2007-2008.

HDFC Standard Life ranks 6th among insurance companies & 5th among private players.

Birla Sun life moved to the 7th Position in 2007-2008.

Max New York was pushed down to the 8th position from the 7th in 2007 -2008.

Kotak Mahindra Old Mutual Life Insurance Ltd reported a growth of 80 % moving from the 11th to the 9th position in 2007-2008

Marketing strategies

The Government is keen on promoting insurance in rural areas

RBI has imposed certain restrictions & announced liberal measures

Focus on rural sector 

IRDA issued certain obligations to insurers that they need to fulfill to safeguard the interests of the rural & social sector. 

Accordingly, 5%, 7% 10 %, 12 % & 15 % of insurers in that order, during the first 5 financial yrs, should be from the two sectors

An analysis of data from 7 life insurers for 2007 -2008, accounting for at least 80 % of the market, reveals that all of them topped their individual targets laid down by IRDA'

Combo products

Instead of offering single protection for life or non-life aspects, insurance companies are now coming up with combo plan

The problem being faced by the companies is the existing norm that allows a life insurer to have tie-ups with only one non-life insurance company.

Soon the rule may be changed to allow insurance companies to have more riders. 

In fact, combo products offer many advantages. 

First, cost to the customer will come down,  income of the channel will go up, 

The commission value as charged by the agent as a % of the premium will also go Up 

Above all, the cost of the channel will come down. 

Multiple risks can be covered & cost of office can also be shared between the life & the non-life insurance companies

Grassroots level distribution-

Rural & Social sector policies are sold through a multi-channel approach, including hiring agents

from villagers & tie-ups with banks, NGO & micro-finance institutions.

RBI-has allowed  such as individual, price shop owners, PCO operators, agents of government-sponsored small savings schemes, insurance agents, petrol pump owners & retired teachers to act as business correspondents / AGENTS of banks. 

A notification by the RBI said that allowing banks to appoint business correspondents (agents in common parlance) was Part of its financial inclusion initiative.

Touching promotions

Promotion of life insurance requires creative approaches.  

cannot be put across in straight-forward communication. 

Advertisements in TVs, FM radios, print media, transit media & hoardings are used to promote the insurance concept & products. 

concept selling is a difficult exercise. 

ICICI banks innovative Kamdhenu Cattle Loan Campaign

won an award at the WOW Event & Experiential Marketing Awards, 2009 as it could touch rural hearts. 

Thus, penetration in urban India is 48% (which means that almost one out of every two paid workers in urban India is insured), while it is only 27 %in rural areas

Life lnsurance Corporation (LlC)

The Life Insurance Corporation (LIC) of India, founded in 1956, is the largest life insurance company in India owned solely by the Government of India. 

LIC presently has 7 zonal offices & 100 divisional

     offices situated across the country. 

In addition to an even distribution of 2,048 branches located in different towns & cities of India, 

LIC also has a network of around 10 LACS agents who solicit life insurance policies to the public.

MARKETING  OF  CELLULAR SERVICES

The Telecom sector is one of the booming sectors of the Indian economy. 

There are a large number of mobile subscribers in India & with the next 100 mn to come from non-urban areas. 

Many Indian mobile service providers are targeting the rural market with aggressive tarifs & low-cost handsets. 

Bharti Airtel

BSNL

Idea Cellular

Tata Teleservices

 Reliance Communicarrons

Vodafone

Target market

Cellular services constitute one of the most popular telecom offerings of current times,  with  Internet. 

It has attracted a consumer segment which wants to be in touch with colleagues, friends & relatives 24*7 

Earlier the services were introduced with high prices & catered only to the high-income groups who could afford the hefty outgoing & incoming charges. 

With the advancement of technology & growth in volumes, the cell phone has become a mass product. 

It is being considered as a necessity item & today, we can see a cell phone in every pocket. 

cell phone has become part of the POOR MAN'S LIFE.

PENETRATION-

According  (TRAI), the country currently has more than

400 mn wireless subscribers. 

Tele-density has also reached the 38 mark of which rural density is STILL LOW at 12 %. 

A  (CII) and Ernst & Young study report said that around 100 mn (40 %) of the next 250 mn Indian wireless users are likely to be from rural areas & by 2012, rural users will account for over 60 % Of The Total Telecom Subscriber base.

Lowest prices

The prices offered by cellular companies in India are some of the lowest in the world. 

Time &again, charges of predatory pricing have been leveled against the cellular companies for offers such as lifetime free prepaid services. 

These type of offers are introduced in order to capture the market & attract more customers as every operator is trying to control maximum market-share.

Intense competition

The market is characterized by intense competition. 

 The reaction from competitors is instantaneous & hence, there is hardly any first-mover advantage. 

It is a completely different scenario in the case of FMCG 

Goods (FMCG), as any FMCG needs days & sometimes weeks to be introduced into the market.

The products or services introduced by cellular providers have to catch the attention of the customers right away. 

Otherwise, they would be ineffective. 

In some cases, competitors have responded to such offers by announcing their own plans within a span of few hours.

Value-added services for revenue generation

A serious problem faced by the cellular industry is the low average revenue per user (ARPU). 

One has to discover new ways of generating revenue.

Cellular service providers are now looking at the efficient use of technology in order to attract new & permanent customers  & thus aim at long-term sustainable growth. 

The best example is the short messaging service (SMS) facility,

which is now a major revenue earner for all cellular operators. 

The market potential of SMS has proved to be great. 

It facilitates various forms of communication such as chatting, voting, advertising, campaigning & participating in contests & Auctions. 

Even e-commerce can be conducted through SMS.  

Reuters Market Light  (RML): 

Technology & Data Analytics Solutions

Reuters has dispensed comprehensive agriculture-related information on a pilot basis in Maharashtra since April 2007

IFFCO Kisan Sanchar Limited: 

    It is a joint venture between Bharti Airtel  &  IFFCO to      provide rural-specific telecom services to rural households 

Lowest prices-

The prices offered by cellular companies in India are some of the LOWEST in the world. 

The penetrating price policy has given the opportunity to expand  the market.

Time & again, charges of predatory pricing have been leveled against the cellular companies for offers such as lifetime free

    prepaid services. 

These type of offers are introduced in order to capture the market & attract more customers as every operator is trying to control maximum market-share.

Soochna Se Samadhan- 

This was started by ONE WORLD NETWORK in collaboration with Reliance Mobile from 2006.

Mandi-on-mobile service: 

It is run by the state-run BSNL in Uttar Pradesh.

Fisher Friend project- 

This was a pilot project launched in Tamil Nadu & Pondicherry aimed at the fishing community.

Nokia Life Tools- 

A project by Nokia, a package providing Agricultural information & educational services, slated to be commercially launched in 2009

Major players & initiatives

OEMs are also looking at getting a piece of the rural mobile-market pie. 

Nokia tie-up with  Airtel & Idea for launching an educational initiative  to give rural users a live experience on mobility services that include hands-on training on making the first phone call & sending SMS with localized content.

 Nokia's retail strategy is focused on making Nokia handsets available in every town or village that has a mobile retail outlet & mobile network. 

The company also has deployed Nokia vans across the country to further reach out to tier 3 & 4 towns & villages & to educate rural consumers on the benefits of mobility.

BSNL

BSNL is attracting consumers through its low-cost schemes. 

Being a state-owned player, BSNL could cover rural areas & this helped it increase its subscriber base.  

Vodafone

Vodafone took over Hutch's Indian business in 2007. 

The country was painted red with the "Hutch is now Vodafone" campaign to publicize its arrival. 

Vodafone introduced a new service offer " Gappa

    Goshti' It was a unique offering to the rural population Keeping in mind affordability, accessibility & customization to their needs. 

It is an innovative product designed to suit the needs of the market & to create a long-term association with the rural markets of India  

ldea Cellular

In 2008, Idea Cellular of the Aditya Birla Group company launched an "education for all" ad campaign featuring its brand ambassador, Bollywood actor Abhishek Bachchan. 

To promote this thought, they have also tied up with an NGO Nanhi Kali, & NDTV. 

For Idea, the rural segment accounts for 40 % of total sales & 50 % of net subscribers.

Reliance

Reliance Communications Infrastructure Limited has announced the signing of a joint venture with KRIBHCO, a premier co-operative society. 

This joint venture is a significant step forward that would result in an unmatched platform that would go a long way in providing mobile services in rural India.

Bharti Airtel

Bharti-Airtel is adopting various routes in varied market segments. 

They have tie-ups with low-cost handset manufacturers to reach out to the lower-end market segment. 

They have also tied up with Canteen Stores Department (CSD) to launch Airtel Jai Jawaan prepaid cards for defense personnel.

These cards are available across 1,900 CSD outlets in the country, starting from Leh to Kan-yakumari, Misamari to Kuchh.

Some operators are also inking deals with rural initiatives such as ITC's e-Choupal, Haryali Bazaar

    stores of DCM Sriram, & Godrej’s Aadhar stores. 

Industry sources say that the state-owned BSNL is

planning to tie-up with rural co-operative banks to push its service more aggressively

In one of the innovative methods, Bharti Airtel has tied up with Mumbai's famous "Dabbawalas'

These lunchbox carriers distribute homemade food packed in lunch boxes to Mumbai office goers.

Everyday, this strong community of around 5,000 people take lunch boxes to thousands of Mumbaikers with  100 % accuracy. 

now, after this tie-up, they would distribute Airtel mobile prepaid cards, recharge coupons, & bundled handsets. 

The company is all set to leverage the large distribution network of the "Dabbawalas" to reach out to a larger consumer base.