The typical loan term was 11-24 months.

Almost all BASIX s operating income from interest on these loans. Cost of capital approx 9% added 2% of provisioning for future loan losses It had an on-time repayment rate of 93.3% at fiscal yearend 2003. It begun bundling a life insurance policy with its standard loan covering approx 60000 borrowers as well to non borrowers.

 BASIX founded in 1996 by Vijay Mahajan Start-up capital by Mahajan, other promoters and debt from Swiss Agency, the ford foundation and Sir Ratan Tata Trust. Largest Microfinance institution in India. It served over 60000 borrowers in 4000 villages across 30 districts. Loan product were to an individual as well as group several clients together Average individual loan size was approx 8800

 By 2004,BASIX had around 250 CSAs Each CSA would visit 15 assigned villages several times a month CSA responsible for screening loan clients, making loans and ensuring on time repayment BASIX had little competition , prior to the company credit source was local money lender

 In 2004, N.V.Ramana MD of KBS bank offered new weather insurance. It had been marketed in 2 villages and the best sales force are deployed to sell the policy Only 148 farmers had elected to purchase the policy , paying a total of approx 74000 for coverage of 600 acres of land Company earned only 15% commission on policy sales and revenue was negligible.

Product design and Marketing

Basix wanted to introduce the product in a few villages before introducing it to all the villages. It chose Mahaboobnagar district to try the product initially.

Initial product design

It wanted to design separate policies for groundnut and castor. Groundnut needs 500 to 700 mm of water per year to produce a good yield. Crops sensitivity to rain loss was summarized through the Ky factor. This gives the percentage yield loss that would result from a 1% rainfall deficit.

 Due to the variation of the importance in rainfall a weighing scheme was implemented. Rainfall index is calculated by multiplying with period weights. The target was set at 653mm. If rainfall fell more than 5% of this value policy holders are eligible for a cash payment.

 This product was not suitable for cotton farmers as cotton needed more water. They could sell only 150 policies despite marketing.

Revised product,2004
A revised policy was developed based on feedback from farmers. This was divided into three phases.

Decision
Farmers were satisfied with the product as the payout was made on time. Ramana was in a dilemma.