Building Social Security as a Strategy of Financial Inclusion:

A Case Study of DHAN Foundation, India

April 20, 2009

M.P.Vasimalai, Executive Director, DHAN Foundation

18, Pillaiyar Koil Street, S.S.Colony, Madurai – 625 010, INDIA

E.mail: dhan@md3.vsnl.net.in

1. Basic Development Philosophy in Building Social Security

1.1 Organising the unorganised:

Building social capital as an effective demand stream

Ensuring entitlement of poorBuilding viable relationship with mainstreamMandating development agenda for

mainstream at grassroots

Four Generation Concept: A long term Perspective

• Social Intermediation : 3 – 5 years

• Financial Intermediation : 3 – 5 years

• Business (Livelihood)

Intermediation : 3 – 5 years

• Civic Inter mediation : 3 – 5 years

1.2 Building Partnership: Development Collaboration from the Start

• Utilising mainstream resources

• A new way of working: Community at the

centre

• Role evolution and devolution of different

stakeholders

Role Evolution & Devolution of Development Partners

S. No.

PhasesSHG/

PeopleNGO

Bankers/Insurance

Companies

1. Pre-formation ObserverExplorer initiator

On looker

2. FormationPassive participant

Promoter & Facilitator

Observer

3. Stabilization - I Passive owner Coach Experimenter

Role Evolution & Devolution of Development Partners (cntd…)

S.No.

PhasesSHG/

PeopleNGO Bankers

4. Stabilizatiaon - II Active ownerResource person

Finance

5. Growth Manager Advisor Collaborator

6.Expansion and Diversification

Self-propeller Nurturer of diversification areas

Collaborator & Financial advisor

1.3 High Quality Committed professionals at Grassroots

• Generate Alternatives to liberate from poverty

• Shift Roles and enabling community

• Giving back to the society: makes ‘others life’

meaningful

1.3 High Quality Committed professionals at Grassroots (cntd…)

Graduated mentoring

Explorer

Learner

Contributor

Leader

1.4 Mothering Development Innovations: Value Addition

Thematic focus Community Banking

Water Security

Revitalizing Agriculture

Development Education

IT with poor

Local Management

Institutions for Upscaling

Graduating project to programme and to Institution

Need for catalyzing institutions

• People Mutuals

• Kalanjiam Development Financial Services

• Sustainable Health Care Advancement

• Market Linkage

1.5 Method of Facilitating Development Intervention

Community Organizing

Intermediating Technology (Programmes)

Mobilising Mainstream Resources

for Development

2. Enabling Micro Finance for Social Security

2.1 Primary Purposes of Self-Help Groups:

Community Banking

Insulates Investment Credit

• Savings First to build their ‘equity’ to ‘own’ and

to establish their ‘rights’

Separate line of credit for consumption

(Food security and Emergencies

Regulates ‘cash flow’ of a family

Converts ‘cold money’ to ‘hot money’

Institutionalizes informal savings, Credit and

Insurances

Reduces ‘Transaction cost’ significantly

2.2 Nested People Mutual Institutions for Social Security

Primary Groups 15-20 poor members (Self Help Group)

Cluster Development Association (20 – 30 group)

at local Government level

Federation of SHGs (200 groups)

social security

Banks

Insurance Companies

People Mutual: Catalyzing

Social Security

Sustainable Health care

advancement

2.3 Graduation Steps for Poverty Reduction

Category Asset base Working Capital Emergencies

1. Survival Nil Nil 50 - 200

2. Subsistance Partial assetsRs.1000 to 2000

(15 to 30)100 - 200

3. Self EmployedAdequate assets

Rs.5000 – 10000

(80 – 160) 500 - 700

4. Entrepreneurship Surplus assets>Rs._ 50000

(800 – 1000) 5000

CategoryIncome

Surplus / Deficit

Social Security products

State support

1. (Just) married 2-5 yearsMarginal surplus

Life, health Partial 50%

2. Children (up to 20 years) DeficitLife, health activity

Partial 50%

3. Employed children (up to 5 to 10 years)

High surplusLife, health activity

Partial

4. Marriage of children (5 – 10 years)

Mostly deficitLife, health activity

Partial

5. Old age phase

50 – 55 years onwardsHigh deficit Pension Nearly 50%

3. Evolution of People Mutual for Social Security: A Good Practice of South – North Partnership

3.1 Building on the social capital

A long term commitment for partnership: Oxfam

Novib and DHAN Foundation

• Nearly two decades

Add on services with micro finance

Integration with savings

3.2 Partnership Support for ‘mutual’ evaluation

Pilot projects of community and DHAN

Role of Oxfam Novib

Role of Rabobank foundation

Role of Eureka-Re

Role of MIAN Volunteers

Significant individuals contribution

3.3 Partnership

• Second phase of partnership

• Technical missions

• Resource Institution

Amount in millionsProducts and product development

Insurers People covered

Insured amount

Premium amount

Partnership with mainstream

Life

LIC

Private insurers

Other public sector insurers

247720

155349

19149

16327

1963

522

24.00

6.00

0.71

Health

NIC 49940 92 2.50

Livestock

NIC, UII 7324 73 3.00

Sub total 479482 18977 36.21

Mutual insurances

Life

Health

Crop

Livestock

69482

49940

1042

206

604

125

2

3

2.30

3.00

0.30

0.10

Sub total 120670 734 5.70

Total insurance coverage 599886 19711 41.91

3.5. Technical Missions

S.No. Mission and Team Focus

1 July 2004 by

Mr.Arend Stolk

Ms.Annette Houtekamer Van Dam

Conceptualising the approach and activities of People Mutuals Negotiation with insurance providers Product design workshop

2 November 2004 by

Ms.Annette Houtekamer Van Dam

Mr.Michael Berende

Mr.Simon Kadijk

Product development Software Capacity building on insurance principles

3 March 2005 by

Ms.Annette Houtekamer Van Dam Mr.Michael Berende

Mr.Simon Kadijk

Progress evaluation of mutual insurance programme Negotiation with insurance providers on crop and health insurances Software Advanced level training on technicalities of insurance

1.Technical Missions Cond…

S.No. Mission and Team Focus

4 September 2005 by

Ms.Annette Houtekamer Van Dam Mr.Michael Berende

Mr.Simon Kadijk

Knowledge building workshop among mutual insurance practitioners of Asia, which gave birth to ASKMICapacity building of professionals on mutual insurance principles, practices, financials, solvency and reinsuranceTechnical training manual

5 February 2006 by

Ms.Annette Houtekamer Van Dam Mr.Simon Kadijk

Technical workshop cum training on insuranceSolvency building and sustainability of mutuals

6 September 2006 by

Ms.Annette Houtekamer Van Dam Mr.Simon Kadijk

Mr.Willem de Jager

Technical training on financial management, solvency building and auditingTechnical training manual updationCrop insurance policy seminarMutual crop insuranceNurturing phase of People Mutuals since December 2006

1.Technical Missions Cond…

S.No. Mission and Team Focus

7 October 2007 by

Ms.Annette Houtekamer Van Dam

Mr.Simon Kadijk

Mr.Willem de Jager

Mutual health insuranceCapacity building on cash pooling, solvency building and standards for mutualTraining mutualMutual insurance software

8 September 2008 by

Ms.Annette Houtekamer Van Dam

Mr.Simon Kadijk

Mr.Willem de Jager

Capacity building on accrual accounting, cash pooling and internal audit systemsVirtual training programme on insurance Studies and documentationSoftware for health mutualsTraining cum workshop on crop insuranceTraining cum workshop on health insuranceKnowledge cum design workshop on micro pension

Four Aspects of Social Security

• Adequacy

• Timely

• Control

Administration

Affordability

Availability Access

3.5 Role of State, Market and Community Mutuals Co-operations

StateCommunity

MutualsMarket

AvailabilityState products

Experimentation: Incremental products

Product development

AccessEnabling policies

Insurance literacy for retention

Beyond mandated reach: generation

Affordability Subsidy Self productsScale with cost effectiveness

Administration Facilitation Local managementInterface with larger system and re insurance

3.7 State ProductsLife : Unorganised sectors and solatium

Health : Central and State Government

Maternity : Nutritional support for pregnant and

lactating mothers

Marriages : Girl marriages

Education : Scholarship and girl child education

Physically

challenged : Mobility and care support

Old age Pension : State Government offers with

central Govt. support

4. Opportunities and Challenges

4.2 Climate adaptation: Disaster Risk Reduction

New product development: Pilots

Capacity Building

Research studies and policy advocacy

Networking & networks

4.1 Basic Research

Risks and vulnerability study of different

geographical contexts

Risks and vulnerability of different livelihood

activities

Health Risks and vulnerabilities

Institutional Risks of Micro finance

Savings and credit risks

4.3 Upcaling of Social Security Initiatives

Partnership for upscaling

Catalysing Institutions

Mainstream Institutions

Resource Institution for the sector

Sharing and guiding similar initiatives in Asian and

African Countries

Savings First

Credit Next

Insurance the Best

Thank You