KGFS - a unique rural financial model faciliated by IFMR Rural channels

Kshetriya Gramin Financial Services (meaning, literally, "Regional Rural Financial Services"),KGFS, is a rural financial services delivery model designed and owned by IFMR Rural Finance and promoted by IFMR Trust as part of its mission “to ensure that every individual and enterprise has complete access to financial services”. KGFS is an innovative branch-based model that starkly differentiates itself from all other financial institutions, by virtue of its unique operational model.

It is our belief that four critical ingredients to ensure high quality delivery of financial services are convenience, flexibility, reliability and continuity. Convenience and flexibility are essential characteristics for ease of transactions, enabling even small ticket transactions. On the other hand, continuity and reliability bring in predictability for customers and are required for long term financial decisions. The existing channels of financial services delivery in remote rural areas in India, though contributing to access in some ways, fall short on one or the other criterion. These shortcomings have come in the way of these providers transforming themselves into models that support complete financial inclusion on full scale. There is also shortage in number of financial service delivery points in the rural India.

There are few, if any models, financially viable or otherwise, that currently exists and fulfils all the criteria that are considered necessary for high quality origination. Kshetriya Gramin Financial Services (KGFS) hence has been designed as a model that can withstand scrutiny on the four basic essential parameters and thus pave the way towards complete financial inclusion in remote rural India.

KGFS spreads its wings beyond the parameters of the traditional banking system or microfinance institutions by building trust and relationship with the local households. Each KGFS is a region specific unit or a local financial institution referred as ‘Strategic Business Unit (SBU)’ with largely locally hired staffs that understand the needs of the community, and speak the local dialect.

The model is based on the three basic operating principles. These principles guide and define our approach towards delivering financial services:

1. Geographic Focus

Each KGFS institution is designed to be a regional institution serving a specific territory with distinct geographic, economic, and linguistic characteristics. The geographic focus of the model makes sure that uniqueness of each service area is captured. This helps in getting better knowledge of the customer and the local economy which in turn helps in providing better products for the customers.

2. Wealth Management Approach

The second principle of the KGFS model is to provide tailored financial advice to every enrolled client. This is called a "wealth management" approach, a term common in private banking for affluent clients. The goal of this approach is to ensure that every client uses a tailored combination of financial services that best promotes the financial well-being of the client’s household. The model believes that clients can make “informed” choices if they have a better understanding of financial products and services available.

3. Wide Range of Financial Products

Central to the KGFS vision of complete financial inclusion is the conviction that households need a diverse range of financial services. This is reflected in its wealth management approach that takes a holistic view of the financial needs of a household. KGFS units in turn offer a bouquet of products to its customers including credit, insurance, savings and remittance products.