This indicates a bias towards assets based leverage than leverage on incomes in India.
Rising incomes in India thus indicates towards tremendous opportunities for loans based on 'income potential' on either side (a) asset creation side and (b) Liablity creation side. Also, fuelling of (a) will in parallel give rise to (b).
Demographic dividend
India's population is extremely young
50% of the population is under the age of 25, while 2/3rd is under the age of 35
Over the next several decades, India's young population will strengthen the workforce
India Population Pyramid - 2010
India Population Pyramid - 2020
India Population Pyramid - 2050
Education
Literacy levels are extremely low in India
Education is in high demand
Public education system is broken and private education is extremely expensive
Children in immaculate school uniforms leaving the most basic housing. Buying these uniforms must put immense strain on the family finances, but education is highly valued. The population is growing faster than schools can be built to accommodate them, so the schools work on a shift system.
The top end of over 700,000 people out of India's population of over one billion is estimated to have individual liquid wealth of about $1,00,000 (Rs 44,13,000) which is likely to go up to $1.1 million by 2009. This represents a cumulative liquid wealth of $203 billion, estimated to go up to $322 billion by 2009. These are the findings of a recent study done by market research firm Synovate.
700,000 Indians have $100,000 annual income
Ideas
Loans
Trends
A consumption boom
According to study by Bank of Baroda, India is riding a CAGR growth in excess of 35% for the last 5 years in 'retail loans' category
Despite this, the penetration of credit products as a % of GDP is still very low
Reasons could be (a) credit aversion (b) no distinction between good and bad paymasters (c) propensity to save is high due to insecure healthcare and social security concerns.
Consumption boom
Expensive weddings
Wedding expenses
Wedding Insurance
Gold lifestyle
Jewellers in India give lose guarantees that upon return of the jewellery, value of the metal in jewellery adjusted for workmanship costs will be redeemed. This acts as a big incentive for people to invest in jewellery as principal amount is secure. However, there is no formal guarantee mechanism to ensure the contract.
This can be an opportunity for banks to step in, whereupon the banks can underwrite the value of the jewellery and assure full value upon jewellery redemption. Banks can extend loans to people to buy jewellery, whereby interest is charged differently for the value of the metal (lower interest rate) and higher for the loan against workmanship.
Cheaper loans for jewellery
Microfinance
Microfinance is a major trend in India
1.4 million microfinance groups in India
Over 20 million members for microfinance groups
According to one estimate, 30 million non-agricultural enterprises and 50 million landless households in India collectively need approximately $30 billion credit annually
Microfinance is growing in South India, which contrasts with the stagnation in Eastern, Central and North Eastern India
Downside: Microfinance involves very high transaction costs given the small amounts of money involved for each loan, which necessitates high transaction costs
Peer-to-peer banking
Paisa pay from ebay has empowered C2C payments
A similar concept can be used for C2C cash payments.
Here, a customer can pay cash to a approved vendor who is associated with a mobile telephone network. This vendor, in turn, for a fee, can credit the payment account of the 3rd party. The 3rd party, can then collect cash from the telephone company or ask the telephone company to credit his/her bank account.
Ebay India
Kitty parties
Kitties are being organized as chit funds
People pay EMI's of small amounts, in a group, and then wait for purchase of a consumer product when their chance comes
Kitty for consumption
Islamic banking
Shariat stocks index
Shariat finance
Ideas
Microsavings instruments
Tie up with telephone firms to create microsaving pre-paid cards
In such cards, 10% of the amount paid will get credited to the payees account as a saving
Compounding of such savings after several years can yield high returns
Education loans
Provide loans for primary and high school education, besides college education
Loans for primary and high-school education
Wedding loans
Provide cheap loans by tying up with wedding organizers, caterers etc. The loans get cheaper due to bulk discounts on prices offered by them.
Streamlining microfinance
Loans based on gold
Already covered under trends
Insurance
Trends
Aspirational society
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No medical coverage
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Increasing savings rate
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Ideas
Insurance as a saving vehicle
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Rural Insurance - an opportunity or a risk?
Rural Insurance penetration is increasing
Seasonal premium collection system in line with harvest season, with no lapse of policy in case of seasonal fluctuations (affecting crops) can be organized
Distribution of agents can be ramped up by tying up with Fertilizer dealers, Tractor dealers etc.
Credit
Trends
Credit card penetration
Credit card penetration
Increasing savings rate
Savings as percentage of GDP was 29.1% in FY 2004 and 25.9% in FY 2005
With a strong GDP growth, rising salaries, and low social security, savings rate are likely to rise even further
According to a World Bank study, in Andhra Pradesh, 59% of rural households lack access to deposit accounts and 79% don?t have borrowing facility from the organised financial sector. Bankers too complain that though the rural potential is huge, they don?t have enough knowledge about the rural customer.
Credit cards for family members in India linked to credit rating of Non-Resident Indian family member (in the US or elsewhere)
Credit cards in India based on international family member's credit rating
COD for online shopping (???)
Retail store cards
Mobile phone credit cards
Sony's Felica system combines mobile phones with credit card style payment capabilities
With 140 million cell phones, but less than half as many credit cards, cell phones offer a great possibility for improving credit-card penetration in India