Independent Research and Policy Advocacy

Emergency Loan as an ATM

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Mr. M Dandapani Reddy of Badakushastali village, Orissa underwent a traumatic night on 9th March 2010, when his daughter N Rebati Reddy had fallen down and cut her chin. The accident required her to be rushed to the nearest medical centre in Berhampur late in the night for immediate medical attention; Dandapani had to arrange cash for the treatment quickly.

Being a Dhanei KGFS customer (Dhanei as we are fondly known here), he remembered being told by the WMs that his card would help him to get an emergency loan of up to Rs 2000 anytime he wished to avail. At that hour of the day, our branch in his village was closed. He then immediately rang up the Help Desk mobile number given on the card and was pleasantly surprised as it was attended immediately. The Help Desk enquired about the nature of emergency and provided him with a three-digit code and told him to go to the house of Jayanti Behera of the same village who had been appointed as Disbursement Agent (DA) for Emergency Loan.

On reaching her house, he handed over the card to the agent and she opened the lock of the cash box after checking against the given code and handed over Rs 2000.00 to him. All this happened within just 20 minutes.

Mr. M Dandapani Reddy at his tea shop

“…I got money when I was in trouble. Probably I would not have got the amount at that hour of the day so quickly and easily…“.  He was happy that he got the cash, we were happy that we could help one of our customers and importantly enable him to have his self-esteem intact without he having to scramble to make ends meet.

This is just one of the stories of the 26 customers who have availed Emergency Loan (Totaling Rs 52,000.00 till now) from us within 49 days of it being launched. Customers like Purna Chandra Sahu have likened the emergency loan to a 24×7 Live ATM, while some like Ganesh Sahu have requested for a higher ticket size for the loan.


Meanwhile, we also took the view of our Disbursement Agent Jayanti Behera (pictured left) as to whether she disliked somebody coming to her house at odd hours (though she had agreed to our terms and conditions earlier). She told us that she was very happy as she could be of some help to her fellow villagers.

At present the product is in its pilot phase and from the initial outlook it looks set to become very popular among the locals.

Ashit Mahapartra, CEO, Dhanei KGFS contributed to this post.

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13 Responses

  1. Thanks for sharing this with us Ashit. It is wonderful to see the constant product innovation on the ground.

    On the features of the product, I think it is pretty important to keep it restricted to small amounts and repayable within a week or a month at most. This will address true emergency needs for liquidity. We might even want to think of making this as a limit one-for-one against MMMF balances. Any loan that is a higher amount or longer-term repayment makes it a general purpose loan.

  2. Thanks for your valuable comments, Bindu. I think linking this to MMMF makes sense and will act like an ATM. I will work on this. We are not planning to increase the tenure (one month) or token size at the moment as it will dilute the purpose of the loan.

  3. I think we should reconsider this MMMF link. There may be implications of framing this as an 'ATM withdrawal of your own money', and not an 'emergeny loan' from an institution. The original idea behind this product was to replicate the notion of a 'hand loan', which many moneylenders provide in cases of emergency to tide over urgent, short-term, small liquidity crunch. It acts as a great relationship product, because it presents the institution as providing a source of finance to fulfill an important need, and managing the credit risk based on local relationship. So, with that idea, it should be a small, short-term, unsecured loan, and delinked from MMMF balances (the balance could even be zero). The returns are expected in terms of stronger relationship with clients, because they start taking risk on you (savings, insurance).

  4. Hi all,

    Both perspectives are important. I agree with Suyash and Bindu that the product is a handloan to tide over the emergencies,though we can leverage the operational simplicity of offline cash withdrawal through a human ATM (if I may call it) to launch other products. Withdrawing MMMF money is one.

    The hand loan product isn't intended to claim that it can cover for any/all amounts needed in emergency. Rather, it pegs or competes with that additional (and mostly insignificant) amount for which the borrower has to borrow and compromise on her self-respect.

    A word of caution here. During the field visit by the Wealth Manager, we must train and insist the wealth manager not to disclose that the person took loan from us to everyone. Same training needs to be given to the Disbursement Agent (DA).

    I would have waited until at least 50 disbursements happen and then gauge the variants that people are asking for. This will allow to read the behavior, repayment cycles, understand what truly is the value addition to DKGFS.

    That notwithstanding, I think we could take learnings from DKGFS's initiative and do the same product in Uttarakhand and Thanjavur as well. Both these entities face different operational efficiency challenge. SKGFS has its clients in the valleys and a human ATM disbursement of emergency loan will be much appreciated as the person need not climb the hill to take the loan. I believe, we'd see the switch from the moneylender to SKGFS more prominently there. It will be interesting to see how borrowers react in Thanjavur, where other MFI players operate.

  5. Ashit nice to know that DKGFS was there when there was a dire need. I share Suyash's views on this.
    It would be a nice idea to introduce at SKGFS considering the hilly terrain. I understand from the WMs there (I was there for the refresher training on 19th and 20th) that there are no moneylenders operating there !!. Relatives /friends reach out for any emergency. We can know whether the villagers will indeed take such a loan. I believe the offtake will be more at PKGFS.

    I agree with Anil on the `words of caution to WMs'. The best aspect of this loan to make the money available even at odd hours – emergencies can be at anytime.

  6. I like the fact that the blog is finally becoming a discussion forum and not just a news channel. If Ashit developed the Blog post why does his name not appear in the author's section.

  7. It is important to address clients’ emergency needs, however in absence of any security, repayment of these loans becomes key concern. Relationship with clients might work in some cases and might not in others. Moreover, to build and strengthen such relationship will take long time, and continuous efforts (the moneylenders can consider relationship based loans as they have decades long existance in the same villages). In such a scenario, can we consider having two slabs in loan size and linking them with clients' credit history, products availed by them and MMMF balance? For example, small amount emergency loans are given based on credit history and a little higher size based on the MMMF balance.

  8. Bindu: This is different from an MFI top-up loan only in the sense that a client could get this even if she has no outstanding loan from KGFS, and there is no joint liability (so, the loan size has to be quite small). Otherwise, it fulfills a similar function.

    Anita: The repayment concern needs to be tested, because the penalty of possible exclusion from other KGFS services may be much higher than the benefit of getting 500 rupees. I agree with you on some minimum pre-defined criterion for qualifying for this. This is what is being done at DKGFS, but for this to be a great relationship product, we have to arrive at a small set of very basic conditions only, and not a long credit history. Otherwise, the purpose may get defeated.

  9. Is there any interest on the emergency loan.
    If yes then how much?
    If no: then how is the model sustainable?

  10. Hi Aditya, to your sustainability question (whether or there is an interest component built in) , I would argue against trying to break- even each product on its own, since the cost of various operations undertaken to deliver a service is shared by many products.

    Specifically, for emergency loan, I think the parameter of success is not the commercial viability of the product but the immense goodwill it generates in case the disbursement of loan happens very quick/without much documentation or hassle and in the hour of need (mostly off branch hours). We need to test that impact when a reasonable amount of disbursements have happened outside the branch hours.

    The cost of maintaining a disbursement agent (DA) can be shared by other products as well, in case the DA serves as a collection and documentation/enrollment agency as well. Just ideas.

  11. Hi Thiru, we are not operating in the Rishikesh district. However, we would be glad to offer the design and process to anyone who likes to roll this out in that area. Please let us know if your organization would be interested in the same.

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