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KGFS Wealth Management Model Aims for Complete Financial Inclusion; Has Implications for Other Markets, say CGAP and IFMR Trust

Chennai, India — Washington, D.C., May 9, 2012 /PRNewswire/ — In their latest Forum Report, The Pursuit of Complete Financial Inclusion, CGAP and IFMR say that client-centered business models can be sustainable while pursuing complete financial inclusion. IFMR Trust’s new, holistic approach to wealth management for low income and poor clients being used in India – the KGFS model – is one such example that may have implications for other regions.

Since their rollout in 2008, over 200,000 clients in remote parts of rural India have enrolled at KGFS branches and use a variety of available products. Some more successful branches have achieved enrollment rates of more than 70 percent of local households, demonstrating an unprecedented level of penetration. This huge demand for services also suggests a high level of client acceptance.

KGFS branches differentiate themselves from banks by offering localized and highly customized financial advice that matches a household’s financial situation and aspirations with a broad range of products and services including savings, loans, insurance, and remittances. The model rests on three principles: putting client needs at the center, reaching as many households in a geographic area as possible, and offering a wide range of services. Overall, the KGFS model aims for a shift from a supply-driven, one-size fits all focus to a customized sales process centered on client needs.

The power of finance lies in customizing it to each household while at the same time achieving scale. We are trying to reach markets that are not served by formal financial institutions and that gives us room to implement our strategy,” said Bindu Ananth, one of the authors of the CGAP and IFMR paper, and President of the IFMR Trust.

CGAP and IFMR argue that segments of the KGFS model may be relevant in other contexts. For example, the fundamental premise that engagement with customers is not defined by the product but rather by their financial well-being is one lesson that can be replicated in other markets around the world.

Despite the model’s apparent success so far, effective KGFS branches are not without challenges. Technological integration is essential to the model and has proven difficult due to the geography and unreliable electricity supply. Employee education is another hurdle – KGFS front line staff usually have only 12 years of schooling, so considerable resources are put towards recruiting and training.

According to Greg Chen of CGAP, “The most crucial piece of this model is recruiting and training wealth managers from the community itself, who can map client needs to available products. KGFS front line staff persons, or wealth managers, have to gain a thorough understanding of a client’s well being and their aspirations before offering holistic advice on services.”

The paper, The Pursuit of Complete Financial Inclusion, and accompanying video interview with Bindu Ananth are now available on the CGAP website.

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