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TRAINING REPORT

ON

STUDY OF MICRO FINANCING IN INDIA,WITH REFERENCE TO SKYLARK

GRAMIN UTHAN TRUST

Submitted to

MAHARSHI DAYANAND UNIVERSITY,ROHTAK

In partial fulfillment of the requirements

For the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

(INDUSTRY INTEGRATED)

(II Semester)

Submitted by

Name:Sudhir KumarRegn No.1073921959

SKYLARK SCHOOL OF BUSINESS & TECHNOLOGY

319,SHIV KRIPA,

PALAM VIHAR EXT.OPP.SPANISH COURT

GURGAON-122017

PH.0124-4097000(18 LINES)

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CERTIFICATE

This is to certify that Sudhir Kumar,a student of the Maharshi Dayanand University,Rohtak,hasprepared his/her Training Report entitled

STUDY OF MICRO FINANCING IN INDIA,WITH REFERENCE TO SKYLARK GRAMIN

UTHAN TRUST at,under my guidance.He/She has fulfilled all requirements leading to award of the degree of

MBA (Industry Integrated).This report is the record of bonafide training undertaken by him/her

and no part pof it has been submitted to any other University or Educational Institution foraward of any other degree/diploma/fellowship or similar titles or prizes.

I wish her/him all success in life.

Faculty Guide Signature:

Name of Faculty Guide:Ms.Rupa Chopra

Designation:FacultyQualification:M.Com,MBA

Seal of the ELC:

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STUDENTS DECLARATION

I hereby declare that the Training Report conducted at

Skylark green Energy Ltd.,Gurgaon

Under the guidance of

Ms.Rupa Chopra

Submitted in partial fulfillment of the requirements for the

Degree of

MASTER OF BUSINESS ADMINISTRATION

(Industry Integrated)

TO

MAHARSHI DAYANAND UNIVERSITY,ROHTAK

Is my original work and the same has not been submitted for the award of any other

Degree/Diploma/Fellowship or other similar titles or prizes.

Place: Gurgaon Students SignatureDt:3 May 11 Name:Sudhir Kumar

Regn.No.1073901959

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CERTIFICATE

This is to certify that Mr.Sudhir Kumar who is pursuing MBA (Industry Integrated) course ofMaharshi Dayanand University,Rohtak, at Skylark school of Business & Technology has

undergone management training at our organization from 25 April 11. to 15 Jul 11

His/Her performance during the training period was found to be Good

We wish him for future endeavours.

Authorized Signatory

Name:Skylark Green Energy Ltd.

Designation:

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Contents

Foreword....................................................................................................... i

Introduction...................................................................................................1

Development of Micro-Finance in India........................................3

Supply and Demand Side Developments ........................................5

3.1 Supply of micro-Finance ..................................................................5

3.2 Demand for micro-Finance...............................................................6

On Extending Micro-Finance .......................................................10

4.1 Flexibility in Premium........ ................................................................114.2 Micro-Finance and micro-finance ...................................................16

Conclusions.......................................................................................20

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Introduction

Finance is an essential part of running any business. If you are operating a smallbusiness you need more than just property Finance. Taking out the right Finance willhelp protect your business and minimize its exposure to risk.

Your Finance requirements will vary according to the type of business you areoperating, but you should be aware that some forms of Finance are compulsory, such asworkers compensation and third party car Finance.

When youre in business you deal with a variety of potential risks each day. Risk is notsomething you can avoid, but it is something you can manage. Risk management will

increase the probability of success and reduce the probability of failure of yourbusiness.

Types of Finance

Assets & revenue Finance People Finance Liability Finance

Assets & revenue Finance

To protect your assets and revenue-generating capacity, here are some of the types ofFinance available:

Building and contents

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Covers the building, contents and stock of your business against fire and other perilssuch as earthquake, lightning, storms, impact, malicious damage and explosion.

Burglary

Insures your business assets against burglary, and is most important for retailers or abusiness which maintains unattended premises.

Business interruption or loss of profits

Covers you if your business is interrupted through damage to property by fire or otherinsured perils. Ensures your ongoing expenses are met and anticipated net profit ismaintained through a provision of cash flow.

Fidelity guarantees

Covers losses resulting from misappropriation by employees who embezzle or steal.

Machinery breakdown

Protects your business when mechanical and electrical plant and machinery at the worksite break down.

Motor vehicle

It is compulsory to insure all company or business vehicles for third party injuryliability. Many different types of policies are available, so make sure youunderstand the options before making a decision. There are four basic options:

1. Compulsory third party (injury) covers you for claims made against youfor personal injuries and legal costs arising from the use of your car. You must

obtain this Finance to register your car.2. Third party property damage - covers your liability for damage to another

person or to the property of others and your legal costs. It doesnt include repairsto your own car if you caused an accident.

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3. Third party, fire and theft - covers you against the events covered above, as

well as fire and theft. It also insures against damage caused if your car wasstolen.

4. Comprehensive- covers you for all of the above plus damage caused to yourown car by you in an accident. If you're buying a car on an installment basis,financiers will usually insist on this cover.

People Finance

It includes:

Superannuation Workers compensation requirements

Finance cover for you and your employees:

Workers Compensation

You must provide accident and sickness Finance for your employees - workers

compensation - through an approved insurer. Workers compensation is covered byseparate state and territory legislation.

Personal accident and illness

If you are self employed you wont be covered by workers compensation, so you needto cover yourself for accident and sickness Finance through a private insurer. There areseveral types of life Finance. Some are investment-type funds where you contributeover a certain time and get back your investment plus interest earnings at the maturitydate. Others are designed to cover risk - things that could happen to you.

Income protection or disability Finance- covers part of your normalincome if you are prevented from working through sickness or accident.

Trauma Finance - provides a lump sum when you are diagnosed with one ofseveral specified life threatening illnesses.

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Term life Finance or whole of life cover - provides your dependents with

a lump sum if you die.

Total and permanent disability Finance - provides a lump sum only ifyou are totally and permanently disabled before retirement.

SuperannuationIf you are running a business or employing people, you are likely to havesuperannuation obligations to your employees. If you are self-employed you also needto provide for your retirement - superannuation is generally used to provide for aretirement plan.

Liability Finance

Types of liability Finance you need to consider:

Public Liability

Public liability Finance protects you and your business against the financial risk ofbeing found liable to a third party for death or injury, loss or damage of property orpure economic loss resulting from your negligence.

Professional Indemnity

Professional indemnity Finance protects you from legal action taken for losses incurredas a result of your advice. It provides indemnity cover if your client suffers a loss -either material, financial or physical - directly attributed to negligent acts.

Product Liability

If you sell, supply or deliver goods, even in the form of repair or service, you may needcover against claims of goods causing injury or damage. Product liability Finance coversdamage or injury caused to another business or person by the failure of your product or

the product you are selling.

What is Micro Finance?

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On a daily basis, the poor around the world face a multitude of risks that threaten toderail any progress they have made to work their way out of poverty. The death of afamily member, loss of property and livestock, illness, and natural disasters each poseunique dangers. Protecting people against these losses is an important step toalleviating global poverty.

Micro Finance - the protection of low-income people against specific perils in exchangefor regular monetary payments (premiums) proportionate to the likelihood and cost ofthe risk involved seeks to provide a suitable solution for managing these risks.

The Global Landscape

It is estimated that only eighty million out of the world's 2.5 billion poor are nowcovered by some form of micro Finance. Most remain without access to this criticalfinancial service. In India and China, where organizations are estimated to serve nearly

30 million micro Finance clients each, the percentage of poor lives insured hovers below3%. In Africa this figure is much lower just 0.3% of the continents poor are insured.According to recent data, in 23 of the poorest 100 countries in the world, there iscurrently no identified micro Finance activity, representing an unserved population of370 million.

History and Vision

The Micro Finance Agency has its roots within Opportunity International, a large

microfinance network motivated by Jesus Christs call to serve the poor. With a networkof 47 microfinance institutions, Opportunity International has been serving theentrepreneurial poor since 1971. In partnership with Opportunitys microfinanceinstitutions, we began working in 2002 on the development of a range of life, property,livestock, crop derivative, disability, unemployment and health Finance products tocover the risks faced by Opportunitys loan clients.Micro Finance Agency staff observed that the risks the poor face can often set them backmonths and years behind where their loans and savings products offered byOpportunity had taken them. For instance, a death of a family member from HIV/AIDS a pre-condition most Finance companies would not cover would often meanexpensive funeral costs and the loss of a breadwinner, resulting in increased economichardship for the family. In response, Micro Finance Agency staff developed anaffordable funeral benefit product that did not exclude any pre-conditions, includingHIV/AIDS. This transformed the mindset of retail Finance providers in the country,who later developed similar non-exclusive products in light of the competingenvironment.

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Through the experience of serving Opportunitys microfinance institutions and theirclients, Micro Finance Agency staff observed that the products most demanded by thepoor are not always the ones available. Health Finance, for example, is a critical need ofthe poor but the most limited in terms of supply. In addition, policies that are availableare often based on first world practices and are too complex for the simple coverage

demanded. Further, when offered on an individual, one-off basis, high premiumrequirements and a need to pay in a single lump sum preclude a huge sector of themarket from access. New distribution models and channels were needed to increaseaccess and reduce the effective price charged to clients.In 2005, the Micro Finance Agency was founded by Opportunity International as afully-owned subsidiary capable of offering Finance products and services to a widerange of customers.Our mission is to empower the materially poor to transform their lives by insuring themagainst financial risk and its consequences. Specifically, we seek to serve theeconomically active poor who live on $4 per day or less in developing countries and

provide a safety net to reduce economic setbacks.

Definitions of micro-Finance

Micro-Finance, the term used to refer to Finance to the low-income people, is differentfrom Finance in general as it is a low value product (involving modest premium andbenefit package) which requires different design and distribution strategies such aspremium based on community risk rating (as opposed to individual risk rating), activeinvolvement of an intermediate agency representing the target community and so forth.

Finance is fast emerging as an important strategy even for the low-income peopleengaged in wide variety of income generation activities, and who remain exposed tovariety of risks mainly because of absence of cost-effective risk hedging instruments.

Although the type of risks faced by the poor such as that of death, illness, injury andaccident, are no different from those faced by others, they are more vulnerable to suchrisks because of their economic circumstance. In the context of health contingency, forexample, a World Bank study (Peters et al. 2002), reports that about one-fourth ofhospitalized Indians fall below the poverty line as a result of their stay in hospitals. Thesame study reports that more than 40 percent of hospitalized patients take loans or sell

assets to pay for hospitalization. Indeed, enhancing the ability of the poor to deal withvarious risks is increasingly being considered integral to any poverty reduction strategy(Holzmann and Jorgensen 2000, Siegel et al. 2001).

Of the different risk management strategies2, Finance that spreads the loss of the (few)affected members among all the members who join Finance scheme and also separates

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More than twenty five per cent of the male working population is engaged in

agricultural pursuits. The categories of workers falling under agriculturalpursuits are: cultivators, agricultural labourers, and workers in livestock,forestry, fishing, hunting and plantations, orchards and allied activities.

The social sector as defined by the Finance regulator consists of: Unorganized sector informal sector economically vulnerable or backward classes, and Other categories of persons, both in rural and urban areas.

The social obligations are in terms of number of individuals to be covered by both lifeand non-life insurers in certain identified sections of the society. The rural obligationsare in terms of certain minimum percentage of total polices written by life Financecompanies and for general Finance companies, these obligations are in terms of

percentage of total gross premium collected. Some aspects of these obligations areparticularly noteworthy. First, the social and rural obligations do not necessarily require(cross) subsidizing Finance. Second, these obligations are to be fulfilled right from thefirst year of commencement of operations by the new insurers. Third, there is no exitoption available to insurers who are not keen on servicing the rural and low-incomesegment. Finally, non-fulfillment of these obligations can invite penalties from theregulator.In order to fulfill these requirements all Finance companies have designed products forthe poorer sections and low-income individuals. Both public and private Financecompanies are adopting similar strategies of developing collaborations with the various

civil societies associations. The presence of these associations as a mediating agency, orwhat we call a nodal agency, that represents, and acts on behalf of the targetcommunity is essential in extending Finance cover to the poor. The nodal agency helpsthe formal Finance providers overcome both informational disadvantage and hightransaction costs in providing Finance to the low-income people. This way microFinance combines positive features of formal Finance (pre paid, scientifically organizedscheme) as well as those of informal Finance (by using local information and resourcesthat helps in designing appropriate schemes delivered in a cost effective way). In theabsence of a nodal agency, the low resource base of the poor, coupled with hightransaction costs (relative to the magnitude of transactions) gives rise to the

affordability issue. Lack of affordability prevents their latent demand from expressingitself in the market. Hence the nodal agencies that organize the poor, impart training,and work for the welfare of the low-income people play an important role both ingenerating both the demand for Finance as well as the supply of cost-effective Finance.

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AN OVERVIEW OF THE MARKET

B Wealthy A

Middle Income

DC

Poor

E

Severely Poor

The market for micro Finance is represented by this pyramid diagram. Formal sectorFinance companies generally focus on the area identified as A. In this realm thecustomers are corporations and wealthy individuals, and the products are voluntaryproducts such as life Finance, and obligatory products required either by law (such asmotor third party liability) or by banks (such as property loss and credit life). Also

offered are products covering employees and civil liability. Most of the non-autorelated commercial products are being sold within the area marked B. The aggregatemarket for microfinance providers is generally in the area identified as C. Some MFPsrequire borrowers to obtain Finance for property, or credit-life Finance as a means ofprotecting the institutions interests. Area D indicates the broad range of productsoffered by the social security and public health Finance systems of developing countrygovernments. They include coverage for pensions, disability benefits, primary healthcare, and medications. The weakness of this sector is indicated by the dashed line thatsuggests incomplete coverage. The potential market for microFinance is indicated asE. This extends above the MFP range in providing access to individuals and others

that cannot obtain appropriate products from the commercial sector. The microFinancerange also extends below the MFP range because it addresses agricultural coverage insome cases, and is now being sold through many delivery channels other than MFPs.Just a few of these delivery channels include:

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Low-income focused retailers in South Africa Post offices in Indonesia On bags of agricultural inputs or through computer kiosks in India.

Micro-Finance delivery models

One of the greatest challenges for micro-Finance is the actual delivery to clients.Methods and models for doing so vary depending on the organization, institution, andprovider involved. In general, there are four main methods for offering micro-Financethe partner-agent model, the provider-driven model, the full-service model, and thecommunity-based model. Each of these models has their own advantages anddisadvantages.

Partner agent model: A partnership is formed between the micro-Financescheme and an agent (Finance company, microfinance institution, donor, etc.),and in some cases a third-party healthcare provider. The micro-Finance schemeis responsible for the delivery and marketing of products to the clients, while theagent retains all responsibility for design and development. In this model, micro-Finance schemes benefit from limited risk, but are also disadvantaged in theirlimited control.

Full service model: The micro-Finance scheme is in charge of everything;both the design and delivery of products to the clients, working with externalhealthcare providers to provide the services. This model has the advantage of

offering micro-Finance schemes full control, yet the disadvantage of higher risks.

Provider-driven model: The healthcare provider is the micro-Financescheme, and similar to the full-service model, is responsible for all operations,delivery, design, and service. There is an advantage once more in the amount ofcontrol retained, yet disadvantage in the limitations on products and services.

Community-based/mutual model: The policyholders or clients are incharge, managing and owning the operations, and working with externalhealthcare providers to offer services. This model is advantageous for its ability

to design and market products more easily and effectively, yet is disadvantagedby its small size and scope of operations.

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NEW MODELS FOR POOR COMMUNITIES

Much interest over the last few decades has focused on helping communities toestablish mutual or community-based Finance schemes. Professionals typically manage

mutual Finance companies. Community-based schemes, promoted by ILO STEP andCIDR among others, tend to be run by well meaning local people who give freely oftheir time, but are not Finance professionals. Often people who were simply in need ofFinance end up being Finance managers with these schemes. One member of themanagement committee of a community- based scheme in Tanzania noted that hewants Finance, but doesnt want to be an insurer. In community-based schemes, thelimited management capacity frequently leads to a range of difficulties. The key issuesof concern for community-based schemes include:

Pricing Often the process of pricing is focused on what people say they can payrather than being linked to the cost structure of benefits that the group wants toreceive.

Finance is subject to cash flow fluctuations and thus requires significant reserves.These schemes frequently have insufficient reserves or no reserves at all. Also,commercial reFinance is rarely available to unregulated Finance schemes thusleaving them with no ability to manage cash flow deficits.

Controls on management are weak and temptation is strong. Fraud bymanagement is frequently a problem.

These schemes are limited in size to those people within the defined local area.This reduces their ability to diversify a rather small risk pool, and enhances thepotential for adverse selection, both of which make sustainability a seriouschallenge for local management.

Finally, in many countries there is no legal framework for these schemes. Indeedregulators are often unwilling to allow such schemes for fear that they will not beable to adequately supervise many small schemes run by non-professionals. Thisis the case in India. Service providers, most typically hospitals and other

healthcare providers have offered pre-financing mechanisms that act somewhatlike Finance. These products, it is argued, will attract more people to the facilityand the people who come will be able to pay for the services. Often this becomesa problem because providers have limited ability to manage the Financeadministration issues. One overseer of a particular group of hospitals noted thatattempting to offer microFinance could present a dual threat to the hospital

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network for which he works. He noted that the hospital administrators do noteven know how to price their own healthcare services. Therefore, they mis-pricetheir premiums based on those prices, which are typically too low. The resultingincrease in patients using the Finance leads to even higher losses, due to higheradministrative costs and incorrect fees that do not cover the actual costs of

services. Governments also provide a form of microFinance through theprograms they provide for low-income Citizens. Unfortunately, in manycountries these programs are simply insufficient to address the financial risks ofthe low- income and destitute populations. Certainly there is a population thatwill not be covered by commercial or other non-government microFinance.However, if a proper balance could be found, it is possible that the combinationof government programs, commercial microFinance, mutual Finance, andtraditional commercial Finance could make each of these more efficient, andmake the government interventions more effective in addressing those that trulyrequire such services.

Need for Developing Micro-Finance in India IRDA perspective

Background

Micro-Finance refers to protection of assets and lives against insurable risks oftarget populations such as micro-entrepreneurs, small farmers and the landless,women and low-income people through formal, semiformal and informalinstitutions. Such products are often bundled with micro-savings and micro-credit, thereby allocating scarce resources to micro-investments with the highestmarginal rates of return. MicroFinance is the most underdeveloped part of

microfinance. Yet various schemes exist that are viable, benefiting both theinstitutions and their clients. Such schemes have generally served two majorpurposes: (i) they have contributed to loan security; and (ii) they have served asinstruments of resource mobilization. The greatest challenge for microFinancelies in the combination of viability and sustainability with outreach.

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Although introduction of sound practices such as appropriate policy sizes and

timely payment of installments of premium or positive incentives to renew ontime in order to avoid policy getting lapsed can be feasible, the ultimateeffectiveness of interventions focusing on institutional transformation and soundFinance practices will vary considerably, depending on the appropriateness of

the regulatory environment.

Development Goal

To enable microFinance to be an integral part of a country's wider Finance system, it isimportant for every insurer to adjust its costs of serving marginal clients in remoteareas, collecting premiums and installments, and offering doorstep services. It is alsoimportant to recognize a wide network of intermediaries in the rural and social sectorsand notify regulations in order to guide and supervise the micro-Finance service

providers and their customers.

Today we have a variety of microfinance institutions with national and local outreach.Many of them have already become corporate agents or have entered into referral

arrangements with insurers. However, semiformal institutions including savings andcredit cooperatives, NGOs and self-help groups which have immense potential incarrying the message of Finance as also solicit Finance business are yet to be utilized ina manner where their true potential can be harnessed to increase the Financepenetration levels. This is due to restrictions in the existing agency regulations in termsof minimum eligibility norms in order to become an agent.Depending on the existence and vigour of such institutions, the following alternativeshave emerged, for offering strategic entry points for microFinance development:

Adapting formal Finance arrangements to the needs of the micro-economy.

Upgrading non-formal (comprising semiformal and informal) Financearrangements with Finance companies.

Linking formal and non formal Finance institutions with banks and self-helpgroups.

Establishing new local institutions providing microFinance services.

The first three strategies may be inter-connected:

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adapting Finance companies to the requirements of the micro-economy is a first

step; then Linking them as wholesale institutions to self-help groups as retailers; and

finally, Upgrading self-help groups e.g. to the level of financial cooperatives or village

banks.

If insurers are to serve customers who differ widely in terms of service costs and risks,the only viable inducement for them is an adequate margin, lest they exclude smallfarmers, - micro-entrepreneurs and people in remote areas. Only sound social Finance,which combines a social mandate with profit-making, has a chance of sustainability.

Institutional Adaptation

The experience so far has been that formal financial institutions serve but a fraction ofthe population, which typically lies within the upper quartile of the social hierarchy.Through adaptation to the microfinance market requirements, they may graduallyexpand into the second-highest quartile and into segments of the lower quartiles.Within the foreseeable future they will normally not be able to fully serve that market.Non formal finance mostly rests on local institutions which are directly accessible to allsegments of the population. Self-Help Groups (SHGs) are member-owned and member-controlled local institutions. They may either be financial groups, with financialintermediation as their primary purpose; or non financial groups, with financialintermediation as a secondary purpose, such as vendors' associations, family planninggroups and numerous other types of voluntary associations.

The functions that need to be focused must include: providing guidance to members,collecting premium installments from members, Finance services to members,communication and exchange of experience, providing linkages with banks, NGOs ordonors, supporting the proposals of individual members to Finance companies throughrecommendations.

Linkage to Insurers

On a modest scale, various forms of life and health Finance have been successfullypracticed by different institutions in different countries, particularly as part of loanprotection schemes. Micro-Finance procedures and services should be set by insurersrather than the regulator. Appropriate procedures and services should be applied toattain:

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(1) Sound financial management,

(2) Convenient and safe savings premium collection and deposit facilities,

(3) Appropriate claim appraisal and processing procedures,

(4) Adequate risk management,

(5) Timely collection of premium installments,

(6) Monitoring and

(7) Effective information gathering, all of which may include cooperation betweendifferent formal and non-formal intermediaries in fields where each is most effective.

Proposed Micro-Finance Regulations

In order to introduce the concept micro-Finance it is necessary to draft suitable bring insuitable regulations to enable insurers to design and distribute and service micro-Finance products and discharge their obligations to the rural and social sectors as perprovisions of the Finance Act, 1938.

1. It is proposed that an insurer transacting life Finance business shall be permittedto provide life micro-Finance products as well as general micro-Finance productsprovided it ties up with an insurer transacting general Finance business for thegeneral micro-Finance products, and vice versa.

2. In addition to an Finance agent or corporate agent or Finance broker who areauthorized to solicit and procure Finance business, including micro-Financebusiness with an insurer in accordance with the provisions of the Finance Act,1938 and the regulations made there under it is also proposed to introduce theconcepts of micro-Finance product and micro-Finance agent .

Micro-Finance Product1. A life micro-Finance product means any term Finance contract with or

without return of premium, any endowment Finance contract or healthFinance contract, with or without an accident benefit rider, either onindividual or group basis, as per terms stated in the Table A below, filedwith the Authority:

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Table A:

Type of

Cover

Minimum

Amount of

Cover

Maximum

Amount

of Cover

Term of

Cover

Min.

Term of

Cover

Max.

Minimum Age

at entry

Maximum age at

entry

Term

Financewith or

without

return of

premium

Rs. 10,000 Rs. 50,000 5 year 7 years 18 60

Endowme

nt Finance

Rs. 10,000 Rs. 50,000 5 year 7 years 18 60

Health

Finance

Contract

Rs. 10,000 Rs. 15,000 1 year 7 year 18 60

Accident

Benefit as

rider

Rs. 10,000 Rs. 50,000 1 year 5 years 18 60

NOTE: The present average sum insured is around Rs. 5,000. This is highlyinadequate to provide any tangible relief even to an individual below thepoverty line. Therefore, it is suggested that the minimum amount of cover of Rs.10,000 appear more realistic.

2. A general micro-Finance product means any health Finance contract,any contract covering the belongings such as hut, livestock, any personalaccident contract, or tools or instruments, either on individual or groupbasis, as per terms stated in the Table B below, filed with the Authority:

Table B:

Type of

Cover

Minimum

Amount

of Cover

Maximum

Amount of

Cover

Term of

Cover

Min.

Term of

Cover

Max.

Minimum

Age at entry

Maximum age at

entry

Hut or

livestock

or Tools

or

implement

s or other

assetsagainst all

perils

Rs. 10,000 Rs. 20,000 1 year 1 year 18 70

Health

Finance

Contract

Rs. 10,000 Rs. 15,000 1 year 1 year 18 60

Personal

Accident

Rs. 10,000 Rs. 50,000 1 year 1 year 18 60

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Micro-Finance Agent

A micro-Finance agent shall be a Non Government Organization (NGO) or a

Self Help Group (SHG).

Explanation: For the purposes of this regulation:

A Non Government Organization (NGO) shall be a registered non-profitorganization under the Societys Act, 1968 with a proven track record of workingwith marginalized groups with clearly stated aims and objectives, transparency,and accountability outlined in its memorandum, rules and regulations anddemonstrates involvement of committed people.

Self Help Group (SHG) may be an informal group or registered under SocietiesAct, State Co-operative Act or as a partnership firm, consisting of 10 to 20 with aproven track record of working with marginalized groups with clearly statedaims and objectives, transparency, and accountability outlined in itsmemorandum, rules and regulations and demonstrates involvement ofcommitted people.

The minimum number of members comprising a group should be atleast ten forFinance of individuals, and atleast fifty for group Finance.

Scope and Functions

A micro-Finance agent shall be appointed by an insurer by a deed of agreement ormemorandum of understanding which should clearly specify the terms and conditions,duties and responsibilities of both the micro-Finance agent and the insurer, and he shallabide by the following:-

He shall work either for one life insurer or for one general insurer or for one lifeinsurer and one general insurer;

He shall be specifically authorized to perform one or more of the followingfunctions:--

a) Maintaining a register of all members and their dependants covered under theFinance scheme alongwith details of name, age, address, nominees and thumbimpression/ signature;

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American International Group, Inc. (AIG), world leaders in Finance and financialservices, is the leading international Finance organization with operations in more than130 countries and jurisdictions. AIG companies serve commercial, institutional andindividual customers through the most extensive worldwide property-casualty and lifeFinance networks of any insurer. In addition, AIG companies are leading providers of

retirement services, financial services and asset management around the world. AIG'scommon stock is listed in the U.S. on the New York Stock Exchange, as well as the stockexchanges in London, Paris, Switzerland and Tokyo.

Micro Finance is the process of delivering and servicing relevant and affordable lifeFinance products to the low-income socio economic strata. The focus of Tata AIG LifesMicro Finance program is rural India, where traditionally the far-flung, lower andlower middle-income segments have had limited access to life Finance services.

Cost of plans:Tata AIG Life Micro Finance plans are available with or without survival benefits and

with death benefits ranging from Rs.5, 000 to Rs.50, 000. With premiums as low asRs.5** per month, there is now an affordable life Finance product for nearly every ruralhousehold in India.

Policies Available:The following special Micro Finance products from Tata AIG Life are now available forthe rural population at the bottom of the pyramid.

Navkalyan Yojana Ayushman Yojana

http://www.tata-aig-life.com/MicroInsurance/AyushmanYojana/solutionAyushmanYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/AyushmanYojana/solutionAyushmanYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/AyushmanYojana/solutionAyushmanYojana.htm

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Sampoorn Bima Yojana

NAVKALYAN YOJANA

A regular premium payment, low cost term plan for the rural adults who seek lifeFinance protection without any maturity benefit.

Key features include:

Policy Term : 5 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-

Maximum Death Benefit (Sum Assured): Rs.50,000/- Premium payment frequency : Monthly, quarterly, half yearly & yearly Death Benifit : Sum assured to the policyholders nominee Maturity benefit : None

Rider : Option to attach Accident Death Benefit Rider for issue ages 18 to 55 yearsat a nominal extra charge.

Tax Benefits and Age Eligibility

Premiums paid under this plan are eligible for tax benefits as per the Income TaxAct, 1961 and are subject to any amendments made therein from time to time.*

Anyone between ages 18 and 60 can apply for this policy.

AYUSHMAN YOJANA

http://www.tata-aig-life.com/MicroInsurance/SampoornBimaYojana/solutionSampoornBimaYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/SampoornBimaYojana/solutionSampoornBimaYojana.htm

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A single premium plan where the policyholder pays the premium at the beginning ofthe policy term. This is especially useful for those rural people who have a seasonalincome.

Key features include:

Policy Term : 10 years

Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-Maximum Death Benefit (Sum Assured): Rs.50,000/- Death Benifit : Sum assured to the policyholders nominee Maturity benefit : On survival, 125% of the single premium paid.

Tax Benefits and Age Eligibility

Premiums paid under this plan are eligible for tax benefits to the extent of 20% ofSum Assured as per the Income Tax Act, 1961 and are subject to amendmentsmade therein from time to time.*

Anyone between ages 18 and 60 can apply for this policy.

SAMPOORNA BIMA YOJANA

A low cost Finance plan where the policyholder receives all the premiums paid duringthe policy term upon survival until the term of the policy. Premiums are payable for

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only 10 years, while the coverage is up to 15 years.

How do we operate?

We operate in 11 states with a specific relationship management team for each state. Adedicated & trained sales and marketing team manages the front end of the MicroFinance program. Our micro Finance distribution model collaborates with NGOs (Non-governmental organizations) and Rural organizations with community level SHG (SelfHelp Group) women advisors who provide Finance advisory services to the ruralcustomers at their doorstep. The grassroots level agents explain the product details inthe local language of the customer, thereby enabling the customer to make a decision.The training programs, brochures, contract documents, and application forms areavailable in 8 different languages other than English and Hindi

Key features include:

Policy Term : 15 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-

Maximum Death Benefit (Sum Assured): Rs.50,000/- Premium payment frequency : Monthly, quarterly, half yearly & yearly Death Benifit : Sum assured is paid to the policyholders nominee Maturity benefit : At the end of the 15 years, all the premiums paid will be

returned to the policyholder.

Tax Benefits and Age EligibilityPremiums paid under this plan are eligible for tax benefits as per the Income Tax Act,1961 and are subject to any amendments made therein from time to time.* Anyonebetween ages 18 and 60 can apply for this policy.

RESEARCH OBJECTIVE

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To find out potential depth in society for providing opportunities for further extention

for micro Finance

Sub objective:

Determine need and ability of people segment whose per day income is

less than 100 bugs. What really matters to him or her while think about

Finance.

Determine awareness about Finance among them. if aware then source of

information

To determine the govt. and private sector proceeding in this area andextent of their success

RESEARCH METHODOLGY

Data collection

For data collection, we developed a well defined questionnaire as a research

instrument, consisting questions aimed to measure the people perception about

Finance, their need and problems, bottleneck why hadnt insured, and target to find out

opportunities for further extention of micro Finance. We conducted unstructured

interviews (sample size) of 52 general people having income even less than 100 bugs per

day like vendors, rickshaw wala, coolies etc. at survey location (Kashmiri gate, old

Delhi railway station, prostitutional area etc. All the data generated was primary data

that was generated directly from face to face communication

Data analysis

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The data collected based on structured questionnaire is recorded on an excel sheet and

with the help of SPSS software a pie chart analysis along with pillar data analysis is

generated and based on this findings a qualitative inferences are made for each

analysis. The same is being presented in form of graphs and tables

SURVEY RESULTS

The following are our findings regarding the survey conducted by us. The following

graphs show the potential depth from different perspectives, as shown below:

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ANALYSIS AND INTERPRETATION

Table 1:

Gender of the respondents

S. No. Sex No of Respondents Percentage

1. Male 50 91

2. Female 05 09

Total 55 100

Chart 1:

Gender of the respondents

Inference:

The above reveals the fact that Majority of the respondents, about 91% belong to the

category of male and 9% belong to the category of female.

No of Respondents

91%

9% 0%0%0%0%0%0%0%0% 1

2

3

4

5

6

7

8

9

10

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Table 2: Age of the respondents Chart 2:

Inference:

The above reveals the fact that Majority of the respondents, about 38% belong to thecategory of 2 age and 33% belong to the category of 3 of age, 17% belong to category 2and 12% belong to the category 1 of age.

Table 3: Educational Qualification Chart 3:

Inference:

The above result reveal that majority of respondents (22+28)% were either uneducatedor educated only upto primary level

frequency

12%

38%33%

17%

1

2

3

4

Frequency

2%

54%

42%

2%

1

2

3

4

AGE

6

2017

9

0

5

10

15

20

25

1 2 3 4 5 6 7 8 9 10

AGE

Educational Qualification

1

28

22

1

0

10

20

30

1 2 3 4 5 6 7 8 9 10

catagory of education

no.o

frespondent

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Table 4: No. of family members Chart 4:

Inference:

Above result reveals that majority of respondent 55% live with joint family or have bigsize of family

Table 5: No. of earning member Chart 5:

Inference:

From the above result it can be clearly seen that about 63% of the respondent were theonly earning member of their family, 31% have 2 earning member because of size of

family.

freq

45%

55%

0%0%

1

2

3

4

freq

63%

31%

4%

2%

1

2

3

4

family size

0

10

20

30

1 2 3 4 5 6 7 8 9 10

age catagory

no.o

frespondent

freq

earning member

33

16

2 1

0

10

20

30

40

freq

earning member/family

no.o

frespondent

Series1

Series2

Series3

Series4

Series5

Series6

Series7

Series8

Series9

Series10

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Table 6: Income level Chart 6:

Inference:

The above result reveals that 46% of respondent have income level 1 while 42% and12% have income level 2 and 3 respectively.

Table 7: Account Holder Chart 7:

Inference:

The above result reveals that 64% of respondent dont have any account any where

while 36% have their own bank or post office account.

freq

46%

42%

12%

1

2

3

freq

64%

21%

15%

1

2

3

income level

24 22

6

0

10

20

30

freq

income catagory

no.o

fresponde

nt

Series1

Series2

Series3

Series4

Series5

Series6

Series7

Series8

Series9

Series10

account map

33

11 8

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

no.of account

no.o

faccount

holder

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Table 8: Background Chart 8:

Inference:

The above result reveals that majority of respondent belong to the background of type3(69%), then type 1 (19%) and type 2(12%).

Table 9: No. of dependent Chart 9:

Inference:

The above result reveal that majority of respondent (35+29)% have no. of dependentmore than 1 and less than 4. 16% have only 1 dependent and 12%have 4 or more than 4dependent in their family.

freq19%

12%

69%

1

2

3

freq8%

16%

35%

29%

12%

1

2

3

4

5

background

106

36

0

10

20

3040

1 2 3 4 5 6 7 8 9 10

background catagory

no.o

fresponden

t

dependent members

4

8

1815

6

0

5

10

15

20

1 2 3 4 5 6 7 8 9 10

no. of dependent/family

res

pondent

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Table 10: Whether has ID proof Chart 10:

Inference:

Above result reveals that 52% have ID proof but almost there were equal no that hadntany id proof.

Table 11: Faced prob with health or asset Chart 11:

Inference:

Above result shows that 23% of respondent didnt face any problem related with health

or asset but 77% faced a serious health of asset loss in past of their life.

Freq

77%

23%

1

2

freq

48%

52%

0%0%0%0%0%0%0%0%

1

2

3

4

5

6

7

8

9

10

ID proof

27

25

24

24.5

25

25.5

26

26.5

2727.5

1 2 3 4 5 6 7 8 9 10

1-yes,2-no

no.o

frespondent

health/asset problem faced

40

12

0

20

40

60

1 2 3 4 5 6 7 8 9 10

1-yes, 2-no

responses

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Table 14: Risk on job Chart 14:

Inference:

The above result reveals that 52% of the respondent didnt had any risk on job butalmost equal proportion 48% who had serious job risk.

Table 15: Risk toward assets Chart 15:

Inference:

Above result reveals that a majority of respondent 67% dont have any risk toward theirasset while 33% were those who have. Reason might be because of their low incomethey hadnt had any significant asset.

risk on job

48%

52%1

2

risk toward asset

33%

67%

1

2

risk on job

25

27

24

25

26

27

28

1 2 3 4 5 6 7 8 9 10

1-yes, 2-no

response

risk toward asset

17

35

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

1-yes, 2-no

response

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Table 16: Awareness about Finance Chart 16:

Inference:

Above result reveals that majority of respondent 92% were awared of Finance but 8%were also there who even didnt know what the Finance is.

Table 17: Source of information Chart 17:

Inference:

The result above reveals that 35% of the respondent got the information about Financefrom source 7, 31% got info. from source 5 and remaining from the source patternshown above.

source of information11%

1%0%3%

31%

7%

35%

11% 0%1%

awareness about insurance

92%

8%

1

2

awareness about insurance

48

4

0

20

40

60

1 2 3 4 5 6 7 8 9 10

1-yes, 2-no

response

source of information

8

1 0 2

22

5

25

8

0 1

0

10

20

30

1 2 3 4 5 6 7 8 9 10

source

responses

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Table 18: No. of Finance taken Chart 18:

Inference:

Above shown result reveals that a majority of respondent 60% were not insured fromany where , 38% had taken life Finance but 2% were also there who were very wellawared and had 2 or more than 2 Finance.

Table 19: Why not insured? Chart 19:

Inference:

The result got above reveals that 44% were not insured because of reason1, 41% becauseof reason3 and 15% were not insured because of reason 2.

insurance taken

60%

38%

2%

1

2

3

reason for no insurance

44%

15%

41%

1

2

3

insurance taken

31

20

1

0

10

2030

40

1 2 3 4 5 6 7 8 9 10

no.of insurance taken

responses

reason for no insurance

17

6

16

0

510

15

20

1 2 3 4 5 6 7 8 9 10

reason

respo

nses

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Table 20: Kind of Finance like to purchase Chart 20:

Inference:

Above result reveals that 46% of respondent like to have life Finance, 31% like to havehealth Finance but there are some 14% who are awared toward their child educationand like to have education Finance, while some 9% want to minimize risk toward theirassets and like to have asset Finance as well.

Table 21: Premium ready to pay Chart 21:

Inference:

Above result reveals that in this particular sector all the respondent were almost haveequally distributed opinion about premium package. 24% were ready to pay a soundpremium, majority were aligned toward premium package 2, 20% were ready to paypremium 3, while 27% agreed to pay premium package 4.

insurance like to have

46%

31%

14%

9%

1

2

3

4

premium map

24%

29%20%

27%

2

4

insurance l ike to have

27

18

85

0

10

20

30

1 2 3 4 5 6 7 8 9 10

type of insurance

responses

premium map

1215

10

14

0

5

10

15

20

1 2 3 4 5 6 7 8 9 10

type of premium

respons

es

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Table 22: How many members like to insured Chart 22:

Inference:

The above shown result reveals that majority of respondent 59% like to insured twomembers of their family apart from self but 35% were those who cant bear even so lesspremium of micro Finance product and like to insure only one member apart from selfrest are distributed as shown above.

Table 23: From where you like to Chart 23:

Purchase Ins. Policy

Inference:

The result above reveals that a majority of respondent 64% believes on facility location 3and likes to have Finance from there, 16% believe on facility location 4 and rest areshown above.

members like to be insured

2%

35%

59%

2%

2%

1

2

3

4

5

facility location

0% 7%

64%

16%

4% 9%1

2

3

4

5

6

members like to be insured

1

18

31

1 1

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

members/family

responses

facility location

04

36

92

5

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

location catagory

responses

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Table 24: Finance Duration Chart 24:

Inference:

The result found above reveals that a majority of respondent 38% like the Finance forthe duration of 5-10 years, 29% upto 15-20 years, 12% upto 10-15 years but some werealso those 21% who cant bear even so less premium and want to have Finance policyupto duration of 0-5 years.

FINDINGS

Study reveals that majority of people whose daily income is less than 100bugs have big family

Earning member in majority of family is only male.

Income level lies between 100-200 bugs per day

Majority of respondent didnt had any saving account because of no IDproof

Majority of respondent have more spending on travel & rent, after that onfood & cloth and Medicare & entertainment

Majority of respondent are the only earning member in family size of 5-8.

Majority of respondent hadnt significant asset Majority of them managed critical financial problem from some lender like

master of their service

They hadnt any significant job risk but yes they had asset loss risk

insurance duration

21%

38%12%

29%1

2

3

4

insurance duration

11

20

6

15

0

5

10

15

20

25

1 2 3 4 5 6 7 8 9 10

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Many of them awared about Finance but not of micro Finance and best

source of information medium found to be Radio and advertisement

banners.

Many of respondents were not insured just because of either high premium

or lack of complete information. Some complaint about bad approachability of Finance provider company to

them as well.

Majority of respondent shows keen interest in micro-Finance policy in lifeand health , some were very sensitive toward education and like to haveeducation Finance as well

Because of low income they are ready to pay 150-200 bugs per year forFinance and like to have atleast one more member of their family to be

insured

They are ready to pay premium 15-20 years.

CONCLUSION:

From the above statistical interpretation it could be concluded that potential lies in thesociety. There is a large segment of the population whose income level lies under theboundary line of poverty and since micro Finance target to those people whose incomelevel is even less than 100 bugs per day, it can penetrate population very well. Many ofour target segments have recommended many other facilities with micro Finance whichfound to be really concernable. Micro Finance product should be manufactured in such

a way that those respondents who had denied for having Finance for all familymembers only just because of premium, can also get access through it.

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