The Pursuit of Complete Financial Inclusion: The KGFS Model in India

Three core operating principles differentiate the KGFS model: (1) complete coverage of the population in a focused geographic area, (2) customized client wealth management services, and (3) a broad range of products.

The KGFS approach is still fairly new, though it has moved beyond being a small experiment. Five separate KGFS institutions are working in very different regions of the country and serve a total of 200,000 clients. The oldest KGFS has been in operation since June 2008, and the most recent commenced operations in February 2012. At the end of 2011, KGFS institutions had 110 branches and managed a loan portfolio of $10 million. Some branches of these institutions have become profitable, though none of the five KGFS institutions has broken even yet on a consolidated basis. Early client response to these institutions shows a significant proportion of households, over 50 percent, enroll within the first 18 months of a KGFS branch opening nearby.

The model's customized wealth management approach starts with identifying household needs and goals to provide services centered on client needs and without biases to sell one product or another. Clients have begun to use multiple financial services from KGFS institutions, especially insurance and pensions. More than 60 percent of enrolled clients across all KGFS institutions use insurance services; 22 percent use only insurance. At the same time, credit remains important, with slightly more than 55 percent accessing a loan product. The ultimate aim is meaningful improvement in the financial well-being of households, an outcome KGFS is evaluating with external research help.