What are the issues regarding distribution of financial products in rural markets?

Rural population may not have required knowledge about savings, investments and review of investments. They have insecurity feeling too if invested, they fear they will loose their investments at any moment of time. Some of them don't have PAN, ration card, proof for date of birth etc, these are all proceedural aspects, these defects can be cured. Further they are low income group.  We can develop rural infrastructure to develop the marketing of the financial products, as far as compition aspect  is concerned, that will be seen every where wherever there is goods or service is involved, to some extent compitition may be controlled. But what is the use of controlling compitition and developing infrastructure where there is no awareness or know how, this is to be brought to them before being started distribution of such financial products. They should know good and bad sides of being invested, advantages of making savings and having investments etc.

I completely agree with Deepa's idea of ''lack of rural infrastructure'', Niranjan's idea of ''Operational Challenges'' & Ramanathan's idea of ''lack of awareness''. While agreeing to the above ideas, I would say that the summary issue regarding distribution of finanical products in rural markets is HIGH TRANSACTION COSTS.

The investment needed by the companies in terms of technology, travel, creating awareness, training, manpower, distribution, etc etc is far exceeding the revenues earned by these companies! Added to this, the risk factors bcoz of rural socio-political-economic dynamics and the harsh realty of fluctuating agrarian economy increase the cost of transactions!! This is universal fact in rural marketing in India i.e. this fact is applicable not only to financial products but all the sectors!!!

This is the basic reason why the organisations try to engage NGOs, MFIs, Communities like SHGs, etc as distributors, since the companies by themselves find no economic sense in reaching these rural markets. The classical examples that support my argument are HUL's SHAKTI program, ITC's e-choupal platform.

Still in India, marketing in rural areas is a problem. Many villages in India lack infrastructural facilities like roads, electricity, telecommunications and Internet networks. This creates operational hurdles for players to enter into these markets further discouraging the rural households to reap the benefits provided by the players.

In my opinion, the funds available for investments among rural households are observed to be lower than the urban household due to lower incomes. Further, rural households could avoid huge investments in risky financial products for longer time period since rural consumption of goods and services are subjected to irregular income in the hands of people.

I believe, the competition among various financial product players is getting fierce over the years through the influx of new financial service providers/vendors in the industry. This has led these companies to concentrate more on the urban areas than the semi-urban and rural areas since semi-urban/rural areas would require either setting up new branches resulting in high capital outlay or setting advanced technologies for providing non-branching facilities as well as providing educational facilities to the rural population.

In my experience, companies are facing operational challenges in rural markets such as obtaining relevant documents for verification. Some of the most commonly required documents include a PAN card, ration card,birth certificate, etc.

A majority of rural households are involved in agricultural activities who occasionally fail to make such regular investments since their incomes are largely dependent on vagaries of monsoon and most financial products require regular investments at defined time intervals by the investors.

the prevalent approach towards the rural market has always been constraint centric rather then solution oriented .rural consumer are in fact ,easier to persuade in comparison to those in urban market who will first try to explore assortment available.they are can transformed in to users if simple things are taken into consideration :-

1.since the financial products and benefits associated to them are intangible or have long gestation period .but they are essential for protecting  future or tackling uncertainy ,this aspect need to communicated well and intreaction is required at all stages .

2.intial projects can be worked up with the help of local POST OFFICES which is credible source for them in comparison to any private organisation individually.

Exclusive products for rural marketing should be developed . Rural landlords, rural workers,etc, keeping inview, the time of income generation,soureces income, quantum of income etc., by these different segments.