Rural financial services

vis-à-vis Micro insurance

& Micro pensions.

Presented by:
-B. Niharika
-B.Dinesh
-Anjali Singh
-Najish Farhan
-Sampath
-Randhir P.
Topics Covered

■ Rural Financial Services

■ Micro Insurance
■ Micro Pension
RURAL FINANCIAL
SERVICES
 INTRODUCTION

■ Rural finance is a line of credit specifically intended for the

requirements of agriculture industry.
■ Ranging from mortgage assistance to land development and farming
equipments
■ In a country like India, farming finance is a service of utmost
importance and closely related to the continued progress of the
country, as agriculture continues to play a central role
Rural financial service
providers
■ Nationalised banks
■ Private banks
■ Credit societies
■ Co-operative banks
■ Informal loans
 What is Micro Insurance

■The “micro-” portion of the definition

refers to the subset of insurance
products that are designed to be
beneficial to and affordable for low-
income individuals or groups
Examples of Risks and Crises

Category Examples
Natural Risks Heavy rainfall, landslides, earthquakes, floods,
drought
Health Risks Illness, injury, accidents, disability, epidemics
Life-cycle risks Birth, maternity, old age, family break, death
Economic Risks Unemployment, business failure, technological or
trade related shocks
Social Risks Crime, domestic violence, riots

Environmental Risks Pollution, deforestation, land degradation

How Do Poor People Protect
Themselves from Risk?

Prevention and • Careful sanitation

Avoidance • Identifying business opportunities

• Saving
• Accumulating assets (i.e., livestock)
Preparation • Buying insurance

• Taking emergency loans

• Depleting savings
Coping • Selling productive assets
• Defaulting on loans
• Reducing spending
Characteristics of Micro
Insurance
■ Group Insurance Schemes
■ Women’s associations, saving and credit groups, cooperatives-
specific schemes
■ Flexible mode of premium payments
■ Distribution channel
What Are Some of the Difficulties in
Providing Insurance to Poor People?
Requires specialized capacity, which is
Technical complicated by the lack of reliable data
Specialization characteristic of low-income, informal
markets

Marketing and Most poor people do not understand

Sales insurance or may be biased against it

Requires a distribution system that can

Distribution handle small financial transactions efficiently
Channels in convenient locations, and engender trust
Micro-insurance Legislation in India

■ Regulated by Insurance Regulatory and Development Authority (IRDA)

India
■ Obligations of Insurers to Rural Social Sectors – 2002
- A quota system, which compels insurers to sell a percentage of their
policies to low income and rural clients
Micro-insurance Legislation in India

■ Quota for Rural clients:

- Life insurers must sell 7 % of total policies by
number (not value) in the first year with
increasing amounts up to 16 % in year 5.
- With general insurance, 2 % of gross premium
income must come from rural areas in the first
year, 3 % in year 2, and 5 % thereafter.
Examples of Micro Insurance
Delivery
Partner-Agent Model Full-Service Model
 The provider is responsible for all
■ Insurers utilize MFIs’ aspects of product
delivery mechanism to manufacturing, sales, servicing,
provide sales and basic and claims assessment
services to clients  The insurers are responsible for
all insurance-related costs and
■ There is no risk and losses and they retain all profits
limited administrative
Community-Based
burden for MFIs Model Provider Model
 The service provider and the
■ The policyholders own insurer are the same, i.e.,
and manage the hospitals or doctors offer
insurance program, and policies to individuals or
negotiate with external groups
health care providers
Partner Agent Model

■ Agents act as intermediaries between an insurance

company and its market.
■ The MFI acts as the agent, marketing and selling the
product to its existing clientele through the distribution
network it has already established for its other financial
services.
■ The insurance provider acts as the partner, providing the
actuarial, financial, and claims-processing expertise, as
well as the capital required for initial investments and
reserves as required by law.
BRIEF
OF
MICRO
PENSIO
N
IN
INDIA
Meaning of Micro Finance ?

SAVIN
GS

WOR
RETIREME
K
NT
LIFE
 Need for Micro Finance ?
- 7.4% covered under pension plans
- 45% of males, 75% of females
SAVIN - Nuclear families

GS

WOR 85% in informal sector

K RETIREME
LIFE NT

Low income group prefer less investment at more frequencies

Present Status

■ India is having a very young and immature pension industry.

■ Public or Social pension and micro pension.

■ Source - https://www.thehindubusinessline.com/opinion/the-
poor-need-a-micropension-scheme/article10010240.ece
THANK
YOU