Samridhi has entered into an agreement with IDBI For-

tis Life Insurance Co Ltd. Amongst the fastest growing

private life insurance companies, IDBI Fortis, will pro-

vide affordable life insurance coverage to Samridhi‟s

entire clientele. The product is titled „Microsurance‟.

Samridhi Financial Services (SFS) will be amongst the

first few to benefit from the new product. The rates

being charged are amongst the most competitive in the

industry and a win- win deal for all the stakeholders

involved.

Samridhi has been selected as one of the partner in the RBS Foun-

dation/MicroSave Technical Assistance Programme based on the

Rapid Institutional Assessment (RIA) conducted by the MicroSave in

January. This is going to be an intensive partnership for one year

starting from April and a 'slowed down' partnership for next six

months subsequently.

To start with an exposure visit has been planned in March to see a

reputed mid sized MFI. The idea of the exposure is to see how

commercial microfinance operations are run professionally and in

the process take back any learning gleaned through the exposure.

For the month of April, the event is Mini AMI. Mini-Applied Microfi-

nance Institute is specially tailored for the smaller MFIs and will

have components on Process Mapping, HR, Finance and Accounts.

Samridhi ties up with IDBI Fortis for its

Insurance needs

Samridhi selected for RBS Foundation/

MicroSave Technical Assistance Programme

2 M A R C H , 2 0 0 9 V O L U M E 1 , I S S U E 1 I I

P A G E 2

Indian Microfinance

Indian Microfinance: what holds back the

“Game Changers”? Till the start of the 18th century, India con-

stituted over 35% of the world trade. To-

day with over 400 million people coming

under the BPL, India alone constitutes over

35% of the world‟s poverty. Thanks to our

colonial past which rendered the otherwise

working classes useless and in most of the

cases wage labourers.

The objective of the entire British education

system propagated by Macaulay was to pro-

duce clerks for British Administration which

they successfully achieved. Scientific tem-

perament which was Indian psyche‟s main-

stay was pushed back. The new system dis-

couraged the very notion of thinking which

resulted in no major scientific breakthrough

from India during that period. There have

been aberrations but those had been far and

between. Proof of that is so little number of

patents issued to Indian compared to tiny

countries like Taiwan and Japan. We are yet

to come out that phase as have not thought it

worth while to change ur education system

and bring back the glorious past. The so

called temples of Modern India, (IIT‟s and the

IIMs) are some of the efforts in the right di-

rection but it‟s too little too late. The entire

system needs to be restructured to bring the

innovative minds at work.

Putting aside the entire blame on theory, any

classical economist would tell that rational

human being or entity performs according to

the incentive system. So we need to go into

the rationale behind low level of innovations.

text.

Microsoft Publisher includes

thousands of clip art images

from which you can choose

and import into your newslet-

ter. There are also several

tools you can use to draw

shapes and symbols.

Once you have chosen an

image, place it close to the

article. Be sure to place the

This story can fit 75-125

words.

Selecting pictures or graphics

is an important part of adding

content to your newsletter.

Think about your article and

ask yourself if the picture

supports or enhances the

message you‟re trying to con-

vey. Avoid selecting images

that appear to be out of con-

caption of the image near the

image.

individual lending

Grameen Bank Model –

JLG based lending

It comes as no surprise

that India chose the sec-

ond model because it

suited the cultural envi-

ronment and sensibilities.

But what comes as a sur-

prise that it took almost

14 years before any Indian

entrepreneur thought of

replicating the model.

entrepreneur thought of

replicating the model.

Though there have been inno-

vations on the delivery side

like working only with women

and working strictly with the

groups but very few innova-

tions on the products and cus-

tomer service.

So let‟s see what are the costs

involved in innovating?

Though the SHG Model of

Microfinance was started in

India, the various constraints

involved with it have limited

its growth or replication in

other parts of world. This left

the case open for Indian En-

trepreneurs to replicating

others models of microfi-

nance which had two preva-

lent models in world

Latin American Model –

branch based banking/

"Perfection is achieved,

not when there is nothing

left to add, but when

there is nothing left to

remove." – Antoine de

Saint-Exupery

P A G E 3 V O L U M E 1 , I S S U E 1 I I

So as is clear at any given

point of time there is decision

to be made that what are

costs involved vis-a-vis what

are the rewards that can be

achieved through the innova-

tion.

This can be understood with

the help of the graph which

draws a relationship between

the lifecycle of the organiza-

tion and costs involved in in-

novations.

Few points which emerge

quite clearly from this discussion is

are as following

Cost of innovations will be quite

high for the organizations which

are bigger and it keeps increasing

with the size of the organisation.

Being large does not give enough

flexibility for such large organisa-

tions to make swift movements.

This leaves the net expected re-

ward net off from the cost lower

comparing with smaller players.

Also there is nothing which stops

the other smaller players in mar-

ket from copying the innovation. So as

to say there is no such entry barrier

for other smaller players.

As is clear from the graph that it makes

most sense to the organizations to in-

volve in innovations when they are in

midsize category (5,000 – 50,000 Clients)

s o m e

other players to take their

share in this pie leading to

mid level competition.

Prevalent strategy in this

stage is to improve upon

customer service.

When the competition in-

tensifies further then the

organisations try becoming

more accommodative of the

client requirements hence

leading to greater emphasis

In state of monopoly/

oligopoly which is compara-

ble to no competition/low

level of competition there

are abnormal profits to be

booked which does not lead

to innovations and the

strategy of the organisations

is to enter new areas and

create monopoly for what-

ever period of time.

This state would continue

for some time till there are

on product development.

The most conducive environment for innovation is

when there is fierce competition in the market which

is otherwise known as perfect competition. That is

when there are no abnormal profits to be made and

the margin is very little. At this time the larger players

will try to find their own segments and they would de-

fend their territories fiercely. This time is most apt for

“Game Changers” as most of the bigger players would

be too busy in defending their turfs.

where technical service

providers and PE funds can

collaborate to give a long

rope to players who are

innovative when it comes to

providing maximum value to

the customers.

For large organisations

though the unit

cost can be very

low but overall

cost is huge.

Lack of innova-

tions can also be

understood from

prism of

level of

competition in the market. As any economist would

tell that it does not make sense to innovate in a

seller‟s market as with economies of scale the organi-

sation can enjoy periods of abnormal profits. This es-

sentially discourages the organisations from engaging

in innovation.

Intuitively it is clear that if

some organisation is start-

ing then it makes no sense

in innovating as there is no

scale and fruits will be visi-

ble only once the organisa-

tion reaches number of cli-

ents where it is profitable

to implement the change.

But there is need to pro-

vide support to the organi-

sations in this stage to pro-

mote them to innovate. The

task is cut-out for different

stakeholders to provide

support in this stage. This is

There can be four different stages in

the competitive scenarios.

V O L U M E 1 , I S S U E 1 I I @ S A M R I D H I I N D I A . C O M

There are still large

territories in India

which incentives the

large organisations to

enter places where

they don‟t have to

innovate.

If any player wants to enter

such markets then the best

way to enter the market is

with the existing products

and after reaching a sizeable

size, the organisation should

start innovating to create a

niche for itself.

As has been explained in the graph that over a pe-

riod of time when the market matures, it gives impe-

tus to companies which can be classified as “Game

Changers” to target segments which have very spe-

cific requirements. At the same time it gives oppor-

tunities for the new entrants to enter the market

and provide „good enough” solutions to the clients

who are not looking for such high-end services. It‟s

still a few years away in India, before we start seeing

companies involved in such kind of innovations.

As a company “Apple” is known to be very innovative. We can draw a few lessons

from their strategies:

1. Never be afraid of cannibalization: this is major fear which keeps the compa-

nies in check from innovating as they start fearing cannibalisation of their ex-

isting product line. Be the first to cannibalize your own product line rather

than waiting for some other firm to do so.

2. Delegate the innovation to smaller team: it is very difficult to achieve some-

thing innovative in larger teams. Delegate the task of innovations to small

teams.

3. Keep communication lines open: new idea can come from anywhere, so don‟t

be close to new ideas coming from below the ranks.

Are there some lessons to induce innovations – case of Apple:

Here are some of the factors that might affect the sector’s innovating capability:

The opening up of the banking sector and the entry of new investors, an increase in the flow of funds should help the sector in a positive way.

Having NABARD as a regulator will keep a focus on reducing the cost of funds to the poor, which in turn will lead the companies to innovations in the delivery models side.

The usage of mobile phones as a remittance tool will also add a new dimension to the growth in the sector.

The entry of P2P model in Microfinance is already fast catching up.

With growing competition Indian microfinance field is expected to see more and more of innovations in the com-ing years. It will make the survival for the new entrants next to impossible if they don’t innovate. The time is ripe for the “Game Changers”.

What does the future behold?

2 M A R C H , 2 0 0 9

Dreams surely are difficult, confusing, and not everything in them is brought to pass for mankind. For fleeting dreams have two

gates: one is fashioned of horn and one of ivory. Those which pass through the one of sawn ivory are deceptive, bringing tidings

which come to nought, but those which issue from the one of polished horn bring true results when a mortal sees them.

Homer (800 BC - 700 BC), The Odyssey