Avant-garde 3.

Company Overview
Svatantra Microfin Private Limited provides affordable financial solutions to customers,
enabling them to become economically self-sustainable. Svatantra lends microcredits to
women entrepreneurs in rural India for an income generating activity. It has over 90 branches
operating in 6 states (Maharashtra, Madhya Pradesh, Uttar Pradesh, Chhattisgarh, Rajasthan
and Orissa) in India with a portfolio size of INR 320 Cr and has catered to more than 200,000
clients. Being a new-age MFI, Svatantra aims to create differentiation in the microfinance space,
and has many firsts associated with it. It was honored to be the first microfinance institution to
receive the NBFC-MFI license from the Reserve Bank of India. It is a unique entity offering 100%
cashless disbursement and the lowest rate of interest at 22% amongst its peers. Svatantra is a
rural focused microfinance institution. The company follows Joint Group Liability model and
offers loans ranging from INR 5,000 to INR 35,000 per individual. It currently offers two main
products, Svatantra Income Generation Loan & Svatantra Home Improvement Loan. As a next-
gen MFI, Svatantra believes that innovation is central to create a sustainable and inclusive
platform for its rural customers. Svatantra has been honored with the prestigious Skoch Award
for financial Inclusion and Elets Technology Leadership Award for the best mobility app in BFSI
space.

Current Scenario

Chairperson, Ms. Ananya Birla, set out to generate social security in rural India through
Svatantra. Now that the company has grown to an existing customer base of 200,000, she with
the management team of Svatantra are deliberating on ways to maximize social impact even
further. The strategy head mentioned the need of a rural healthcare product by citing that 70-
80% of the healthcare expense by individuals in rural areas is borne out of pocket, landing them
in financial distress. He further substantiated the need for such a product by citing the average
spend on healthcare per household as 14% of the total household income. Ms. Birla agreed
with the importance of the role of healthcare assurance to ensure sustained financial health
and hence, maximize social impact in rural households.
She further elaborated on the need to build a healthcare insurance product by partnering with
an insurance company keeping the following points in perspective:

The product should be affordable for Svatantras clientele

The product sale and claim delivery process should be corruption free
Most importantly, the solution should be designed to genuinely benefit the clientele

This case is developed by and is the sole property of Svatantra Microfin Pvt. Ltd. This is for academic purposes only and is not intended to be
copied or displayed or reproduced at any place outside the campus.
 The solution should be technology enabled
The business model should be financially sustainable
The management team acknowledges the vision and has formed a taskforce of 4 members to
design a business model to take healthcare insurance to rural India effectively. The team has to
suggest a target group, design the product with an execution strategy and highlight the impact
generated for key stakeholders: Svatantra clientele, Svatantra and the insurance partner. They
also advised the team to assess the risks involved with such a proposition.

Industry Overview

Healthcare expenditure is the most common cause of loss of wealth in a low income household.
About 2/3rd of healthcare spend in India is out of patients pockets. As per NFHS 2016 report
only 28% of urban households and 29% of rural households are covered by a health scheme or
a health product.

Rashtriya Swasthya Bima Yojana (RSBY) was launched in 2008 to provide health insurance to
low income workers by the Government of India. The business model provided incentives for
each stakeholder namely, insurers, hospitals, intermediaries and government. It was a safe,
transparent, cashless and an IT intensive solution. Thus, it resulted in 119 Mn enrollments from
2008 to 2013 and a claim rate of 4.18%. During its peak period 2013-14, rural health insurance
penetration was higher than urban penetration. Currently, this scheme has been discontinued
in most of the states. Some states have come out with similar schemes but are struggling to
match the level and effectiveness of the RSBY scheme.
Private insurance players have not been able to reach out to the rural market with effective
products mainly because of lack of access and cost involved in setting up the network which
includes managing rural hospitals, enrolment of beneficiaries, creating adequate awareness and
education about the product and claims process while monitoring claims.

The management team at Svatantra observed that its rural clients lack appropriate healthcare
facilities and also very few of them have access to health insurance services. Lack of awareness,
convenience and affordability are the key reasons of low health insurance penetration. They
also get intimidated to visit hospitals in urban areas. Most of the clients either end up spending
all their savings or take loans from informal sources at very high interest rates for their
healthcare expenses. Many of them delay medical attention and decide to live with the
diseases or take help from local quacks which aggravates the situation further. Many of
Svatantras delinquent clients also have had some medical conditions in their families and have
spent large sums of money on treatment resulting in inability to meet their borrowing liabilities.

This case is developed by and is the sole property of Svatantra Microfin Pvt. Ltd. This is for academic purposes only and is not intended to be
copied or displayed or reproduced at any place outside the campus.
Given the need of a healthcare insurance product in the market, the past experience of some
MFIs in this space cant be overlooked. A few larger Indian MFIs started similar products but
could not sustain them due to numerous challenges:

1) Huge losses faced by the insurance companies due to the nexus between hospitals and
beneficiaries
2) Inadequate value proposition to the beneficiaries due to high prices and low sum assured
3) Lack of a good hospital network due to low medical packages resulting in challenges in
serving a claim. This situation was further accentuated by delay in payments to the
hospitals
4) Lack of awareness and education about the terms and conditions of the product to the
beneficiaries resulting in mismatch of clients expectations from the product
5) Negative impact on the loan portfolios of MFIs due to delinquencies stemming from the
failures to meet clients claims expectations

The Solution

The strategy team collated the following data to begin the product development and market
analysis:

Svatantra has served over 330,000 clients in 6 states and currently has 200,000 active
clients. Distribution of clients as per states is mention in the table below

Maharashtra UP Rajasthan MP Orissa Chhattisgarh

93,559 23,902 12,000 61,543 1,447 12,259

84% of clients are in loan cycle 1, 16% in loan cycle 2 and subsequent cycles
A health insurance product should serve a rural household which has 5 members
Monthly income of a rural household is INR 5,000
Minimum health insurance coverage should take into consideration expenses for top health
related issues namely, maternity, cataract, appendix, and an approximate range of
expenditure in case of these concerns is INR 30,000 to INR 50,000 per year
Percentage of individuals availing health insurance claim i.e.
for India is 4%
Claims ratio i.e. for health insurance industry in India is 0.685

This case is developed by and is the sole property of Svatantra Microfin Pvt. Ltd. This is for academic purposes only and is not intended to be
copied or displayed or reproduced at any place outside the campus.
The team has come up with the following structure to solve this problem:

Propose a target group for the product: This is a subset of our clientele selected on the
basis of geography, demographics and income/ paying ability
Design a health insurance product: Propose a premium and insurance coverage amount
Execution strategy: This includes defining the end to end delivery mechanism including
product sale to claims processing. Outlining the broad level marketing plan for the product.
Create a technology enabled platform: Use technology to integrate all stakeholders to align
the claims process
Impact measurement: This includes measuring the impact generated for Svatantra and its
partners (clients and insurance company)

Evaluation Criteria

1. Business Model
a. Product development including price and delivery mechanism
b. Feasibility of the execution strategy and process flow
2. Objective and approach
a. Hypothesis development and financial feasibility of proposed product
b. Clarity of approach
3. Risk assessment
a. Use of case facts
b. Efforts put in external research
c. Identification of key success factors / challenges

IMPORTANT INSTRUCTIONS

Teams shall submit a case analysis/solution in a single spaced, 12-point Times New Roman
font, 6 pager document (excluding TOC, Cover page). The first page of the document must
comprise of an executive summary of the solution suggested by the team. The executive
summary should be limited to one page only.
Wherever necessary, the participants must make references to the sources of information
and data. Only the data provided in the case should be used to design the product.
Last date for submission of case solutions is 5th November 2017. Teams must upload their
entries on the website.
For full details please visit www.svatantramicrofin.com,
follow www.facebook.com/svatantramicrofinance or
contact us at campus.connect@svatantra.adityabirla.com

This case is developed by and is the sole property of Svatantra Microfin Pvt. Ltd. This is for academic purposes only and is not intended to be
copied or displayed or reproduced at any place outside the campus.