Optimizing Microfinance Distribution Channels by Centre for Micro Finance

Introduction In India, microfinance institutions (MFIs) and self-help groups (SHGs) traditionally provide loans to low-income borrowers. However, outside of providing credit, there are also other critical development needs that could be served through microfinance channels. Utilizing these channels to provide health products or education could be of great value for low-income households, which are most vulnerable to illnesses and resultant economic shocks. This report packet details three examples of innovative products recently introduced through the distribution channels of MFIs or SHGs. The case studies herein discuss product design, roll out and lessons learned from using microfinance channels to deliver the following nonfinancial products: 1)

SKS Health Insurance

BISWAâ&#x20AC;&#x2122;s Sale of Insecticide Treated Nets through Microcredit Contracts

Education of Adolescent Girls in Rural India by Leveraging Self-Help Groups

Abstracts for the three case studies are provided below and full versions of the studies can be found in this packet. We hope that you find this research pertinent and useful and we, the authors, are eager for feedback and additional questions. - Centre for Micro Finance and Freedom for Hunger, November 2008

Implementing Health Insurance through Micro-credit: A Case Study of SKS Microfinance Authors: Theresa Chen, Alison Comfort, and Natalie Bau This Centre for Micro Finance report documents the steps involved in SKS’ development of their health insurance product from conceptualization to rollout to operational processes and challenges. These insights will help other microfinance institutions with design and rollout of their own insurance products.

Leveraging SHGs to Advance Girls’ Access to Resources and Influence in Rural India: Learning Games for Girls Authors: Sheila Chanani and Bobbi Gray This Freedom for Hunger report details product attributes of their adolescent health education training program, Learning Games for Girls, and discusses the development and implementation of this product. Following the authors’ discussion of the pilot program’s deployment through SHGs, the authors highlight key challenges and lessons learned from providing services to this target population.

Fighting Malaria with Microfinance: A Case Study on BISWA Microfinance Utilizing Microcredit Contracts to Increase the Use of Insecticide Treated Bednets Author: Dan Kopf This Centre for Micro Finance case study highlights BISWA Microfinance’s pilot project in which they offered SHG members across 50 villages the opportunity to purchase bednets through cash or credit contracts. The paper focuses on the process of developing the product and the key challenges and lessons gleaned during implementation.

Leveraging SHGs to Advance Girlsâ&#x20AC;&#x2122; Access to Resources and Influence in Rural India: Learning Games for Girls Sheila Chanani, Bobbi Gray

Freedom from Hunger

We gratefully acknowledge the financial support of the Nike Foundation and acknowledge the partnership and hard work of SMVS staff and animators and the research team from the Centre for Micro Finance. We also extend thanks to the women and girls who participated in this program.

Optimizing Microfinance Distribution Channels

Background and Significance

Approximately twenty percent of India’s one billion citizens are adolescent girls between the ages of 10 and 19. These girls are often caught in a cycle of poor health, early marriage, early and repeated pregnancies, limited mobility and poverty. Sixty to seventy percent of Indian adolescent girls are anemic ; more than one-half are married before reaching the legal age of 18 ; and thirty percent of women ages 15–49 give birth for the first time before the age of 18. By age 25, eighty-five percent of women have given birth. Young age at marriage and first pregnancies are both strongly associated with limited educational and economic opportunities, which further perpetuate gender inequities. For many girls, adolescence marks the initiation into economic roles. Adolescent girls first learn to assist their mothers in almost all tasks and gradually take over their mothers’ domestic chores, adopting stereotypical gender roles. A study by the Population Council in India revealed that if a girl earns money from an economic activity, in most cases these earnings are handed over to others. This lack of decision-making over their own finances continues into adulthood, increasing their own vulnerability to financial and health shocks and reducing their opportunity to work towards their own financial goals. Because adolescence is a transitional stage to adulthood, how adolescent girls navigate social and economic changes, as well as the changes in their bodies and health, determines their own future well-being as well as the future livelihoods of their own children, communities, and ultimately their country. Thus, adolescence is considered a pivotal intervention point to assist girls in gaining greater access to and control over their health, improving their food security, and improving social and economic resources and opportunities. Self-help groups (SHGs), built fundamentally on small savings and credit transactions, represent a critical economic opportunity and social support network for millions of women in rural India. There are estimated to be more than three million women’s SHGs in India, encompassing more than 50 million members and this dynamic phenomenon is growing fast. The possibility for women’s SHGs to eventually link to formal financial institutions further enhances opportunities to women by providing a secure and supportive place to save and borrow. These funds help women cope with economic and health shocks, seize economic opportunities and meet life-cycle needs.

International Institute for Population Sciences (IIPS) and Macro International. 2007. National Family Health Survey (NFHS-3), 2005–06: India: Volume I. Mumbai: IIPS.

International Center for Research on Women (ICRW). Reducing Iron-Deficiency Anemia and Changing Dietary Behaviors among Adolescent Girls in Maharashtra, India. 2004. < http://www.icrw.org/docs/2004indiareprohealth8.pdf> (October 8, 2008).

Family Health International (FHI). Health Adolescent Project in India. 2001. <http://www.fhi.org/en/RH/Training/ trainmat/hapiindiaprogram.htm> (March 28, 2007).

International Institute for Population Sciences (IIPS) and Macro International. 2007. National Family Health Survey (NFHS-3), 2005–06: India: Volume I. Mumbai: IIPS.

CEDPA, Adolescent Girls in India Choose a Better Future: An Impact Assessment. Washington, D.C. September 2001.

Ram, F., R.K. Sinha, S.K. Mohanty et al. Marriage and Motherhood: An exploratory Study of the Social and Reproductive Health Status of Married Young women in Gujarat and West Bengal, India. Population Council: New Delhi, India. 2006. <http://www.popcouncil.org/pdfs/MarriageMotherhood.pdf> (March 28, 2007).

Optimizing Microfinance Distribution Channels

Despite the success of the SHG movement and the impacts of savings and credit on family well-being, the development community realizes that other services—in addition to credit and savings—must be available for families to lift themselves out of poverty. Freedom from Hunger, known for its promotion of integrated services and their benefits, has developed Learning Games for Girls, which is a series of dialogue-based education sessions focused on health, social and economic topics that are critical to the food security and well-being of adolescent girls and young women. Using the SHG platform, Reach India, Freedom from Hunger’s initiative in India, delivers the Learning Games for Girls through a low-cost, sustainable network of Service Centres that promote and train a vast existing network of self-help promoting institutions (SHPIs). These SHPIs already reach millions of women in some of the poorest rural communities of the poorest states of India, and by utilizing the existing field agents working with SHGs as animators for Learning Games for Girls, Reach India optimizes the most ubiquitous microfinance platform in India today. Through this existing network of women SHGs, adolescent girls are invited by their mothers or mothers-inlaw to participate jointly in the Learning Games. SHGs therefore represent: •

A forum for social support to girls,

•

An opportunity to save and borrow— enhancing girls’ economic opportunities,

•

An opportunity to share knowledge and skills— leading to positive changes in behavior,

•

An expansion of girls’ social networks,

•

Along with the growth and influence of SHGs in village life, a potential leadership opportunity for girls.

The purpose of this paper is to highlight product attributes of Learning Games for Girls, discuss the development and implementation of this product, and present the key challenges and lessons learned from providing services to this target population.

2. The Focus of Learning Games For two decades, Freedom from Hunger has been developing non-formal adult education sessions for poor, illiterate and rural women to improve their families’ food security. However, the education methodology of Learning Games for Girls represents an innovation, as it centers on the learning needs of adolescent girls, a new target demographic. Learning Games for Girls was designed to help adolescent girls gain the knowledge, skills and

Khandker, Shahidur. 2005. “Micro-Finance and Poverty: Evidence Using Panel Data from Bangladesh.” World Bank Economic Review 19(2): 263-286.; Dunford, Chris and April Watson. From Microfinance to Macro Change: Integrating Health Education and Microfinance to Empower Women and Reduce Poverty. 2006. United Nations Population Fund.; Zeller, M., Sharma, M., Ahmed, A.U. & Rashid, S. (2001) Group-Based Financial Institutions for the Rural Poor in Bangladesh: An Institutional- and Household-Level Analysis. International Food Policy Research Institute (IFPRI), Research Report No. 120, Washington, DC.

MkNelly, Barbara and Christopher Dunford. 1999. “Impact of Credit with Education on Mothers and their Young Children’s Nutrition: Lower Pra Rural Bank Credit with Education Program in Ghana.” Freedom from Hunger.

Optimizing Microfinance Distribution Channels

attitudes necessary to improve their lives and become healthy, informed, food-secure and empowered adult women. Although adolescent girls face unique risks and challenges, there are few services available to meet their specific needs. They also operate in a home and community environment where they have few resources and assets, and have very little decision-making authority and mobility. Learning Games for Girls begins to address that gap by covering topics of importance and interest to adolescent girls—health and finance—using fun and interactive activities. These activities focus on behavioural changes within the girl’s control—practices she can implement in spite of restrictions in her environment. Encouraging mothers to participate in these Learning Games with their adolescent daughters and/ or daughters-in-law enables mothers to support their family members in the learning process. Beyond equipping girls to develop practical decision-making skills that help them manage their health and finances, the Learning Games helps them establish links with girls in their village. These links lay the foundation for future involvement in women’s SHGs. Learning Games for Girls consists of ten, thirty-minute sessions. An introductory session provides an overview of the entire module that encourages exchange among mothers and daughters. Four sessions focus on financial education and are designed to train girls to save money, bargain, prioritise spending, and develop and follow a savings plan. The other five sessions focus on health, equipping girls to prevent and treat diarrhoea, improve their nutrition, sexual and reproductive health, and prevent HIV/AIDS. The sessions are designed to meet adolescent girls’ desire for lively, creative activities—games, stories, skits, songs, rhymes, etc.—to learn new information and skills. Pair- and group-work also provide girls with a non-threatening way to talk, address problems and bond around common solutions and actions. Even the quietest of girls can be drawn into the Learning Games. In the process, the Learning Games: •

develops key life skills, such as decision-making, assertiveness, negotiating and selfawareness;

•

gives girls a chance to share and improve practical skills related to caring for their health and finances; and

•

builds a platform for girls’ entry into SHGs, which are important providers of social networks and financial resources for women.

Delivering Learning Games for Girls

To scale the delivery of innovations such as Learning Games for Girls, Freedom from Hunger launched Reach India, a social enterprise modeled on commercial franchise principles to deliver proven products to the many local organizations that serve poor people through SHGs. Launched in January 2007, Reach India’s mission is to bring knowledge, life skills, microfinance and linkages to massive numbers of poor rural women to build futures of health, hope and dignity for themselves and their families.

Optimizing Microfinance Distribution Channels

3.1 Reach India Model Reach India is structured as a network of franchise training teams, referred to as Service Centres. Reach India franchise trainers train a large and diverse number of SHPIs to deliver SHG members Learning Games and other non-formal lifeskills education. These interventions target the needs of adult women and adolescents, and equip members with new skills and knowledge in the areas of health, business, and family finance. Service Centres offer hundreds of SHPIs in their geographic area a progressively larger portfolio of health, business and family finance training topics. Reach India optimizes the benefits of decentralization by leveraging the active presence of thousands of SHPIs, and the simplicity and transferability of Learning Games for Girls to minimally educated field workers and SHG members. Service Centres are independent, for-profit entities that derive revenue from two sources: a) SHPIs that have training budgets or corpus funds that can be used to cover the cost of training their staff, and b) third-party payers—namely local, regional, national or international organizations that sponsor individuals from one or more SHPIs to participate in a Reach India training. Many of these third-party sponsors are international non-governmental organizations that provide support to local organizations, not unlike Freedom from Hunger has in the past. These organizations include World Vision, Catholic Relief Services, or Christian Children’s Fund. Local governments also sponsor participants, as do some international donors, such as the David and Lucile Packard Foundation. Reach India’s “Capacity Centre” staff in Kolkata acts as an in-country franchisor, recruiting and training a growing network of independent Service Centres. The Capacity Centre ensures quality control, provides start-up financing, adapts materials, and trains Service Centres on the standard business systems.

Designing Learning Games

4.1 Market Research Because adolescent girls have different needs than their mothers or older women, and because this was a new target audience for Freedom from Hunger, Freedom from Hunger conducted a literature review to reveal the documented health and financial needs of adolescent girls globally, and then specifically in the east and northeastern states of India. In addition, Freedom from Hunger conducted market research using qualitative methods to interview adolescent girls, their caretakers and other community members to gain a richer understanding of the key challenges and constraints that adolescent girls face.

4.2 Product Development, Field-Testing, and Finalization Research results had to be balanced with the likelihood that participation in a short learning session could influence positive behavior change and family food security, and that the girl would not be highly dependent on obtaining additional resources to adopt new behaviors. For example, market research revealed that human trafficking was a real fear and danger for the girls. Although this is a key challenge that girls face, we decided to address topics such as nutrition and savings, as they focus on critical resources that families need to achieve food security. Freedom from Hunger developed module-level achievement-based objectives and ten prototype

Optimizing Microfinance Distribution Channels

Learning Games. Freedom from Hunger then field-tested them with actual girls to assess their ability to engage in discussion, to address their interest in the proposed topic, and to determine whether the session as designed could be delivered by modestly educated field staff of many local organizations in India. As a result of the field test, Freedom from Hunger made final changes to the sessions, translated them into the local language, and made them available to the Reach India network for training-of-trainer sessions.

Pilot on Delivery Mechanisms

In addition to the distribution of the Learning Games through Reach India, Freedom from Hunger conducted a pilot study to explore the relative effectiveness of various delivery models in reaching and influencing adolescent girls. As SHGs are the focal point of the intervention, the pilot study was intended to reveal the best means to integrate and engage adolescent girls in existing SHGs. A small group of animators was selected by Sri Mayapur Vikas Sangha (SMVS), a medium-sized SHPI in Nadia, West Bengal, to participate in the pilot-testing of various delivery mechanisms.

5.1 Pilot-Study Interventions Freedom from Hunger considered four delivery mechanisms for reaching adolescent girls through SHGs. One mechanism—Experienced Women Referrals—was designed such that SHG members first participated in a Learning Game and then nominated daughters or daughters-in-law and their best friends to participate in the game by themselves. In a second mechanism—Inexperienced Women Referrals—members did not participate in the session themselves, but nominated daughters or daughters-in-law and their best friends to participate in the games by themselves. These two approaches aimed to explore girls learning on their own, as well as the extent to which mothers, having experienced the education first, encouraged or discouraged adolescent participation. A third delivery mechanism—Joint Adolescent and Women Sessions—encouraged SHG members to invite daughters or daughters-in-law and their best friends to participate in the Learning Game alongside them at their meetings. Freedom from Hunger also explored an intervention approach that involved only the SHG members. This intervention—Women Only—invited SHG members to participate in the games and then asked the women to share the information with their daughters or daughters-in-laws. The primary advantage of the “Women Only” concept was its scalability through the SHG platform and Reach model.

5.2 Pilot Study Results Focus-group discussions were conducted with girls, SHG members and animators to compare their experiences across four main areas: 1) participation, 2) attendance, 3) sharing of information and knowledge, and 4) appreciation of content. Additionally, animators tracked attendance and managed a register to collect basic characteristics of participants (marriage, education, children, livelihood, etc.). Based on the results of the monitoring data and qualitative assessment, the Learning Games was designed to be delivered through joint adolescent and women groups. The joint adolescent and women sessions were selected as the optimal delivery mechanism due to the following results:

Optimizing Microfinance Distribution Channels

5.2.1 Recruitment and Participation Out of the three models that included direct delivery to adolescents, all appeared similarly effective at recruiting girls and mothers. Freedom from Hunger did not find that it was especially important for mothers and mothers-in-law to be directly exposed to the Learning Games prior to the girls receiving the games. The indirect intervention through “Women Only” was determined to be the least effective in retaining participation and interest of SHG members. Participants and animators in joint groups of mothers and daughters particularly valued this model as a unique opportunity to do a fun activity together. Both mothers and daughters voiced strong interest and enjoyment in participating in the sessions together. Participants who were not formed through this delivery mechanism acknowledged this method as the one they would have most preferred to attend. Participation of married adolescents was low across all interventions. Reasons cited for the low participation of married adolescents by mothers included the following: family members did not like them to move out of the house, mothers-in-law did not want to interfere in sons’ households, married adolescents were not interested themselves, and these adolescents were simply “unavailable” or “non-existent.” Freedom from Hunger expects that joint adolescentwomen groups will encourage greater participation of young married women who are not part of the SHGs and are also not considered part of the adolescent girls group.

5.2.2 Inter-Generational Communication Mothers, girls and animators felt the joint sessions would do the most to facilitate conversations between mothers and daughters on financial and health topics. While acknowledging their general hesitancy to discuss sexual and reproductive health topics with mothers, girls felt that joint learning would be more likely to lead to such conversations. Focus-group discussions demonstrated the pertinence of information and knowledge for the mothers as well as the girls.

5.2.3 Sustainability Discussions with animators suggested that cost to the SHPI would be less through the jointsession mechanism. The amount of labor needed from animators increased for delivery to girlsonly groups, as these sessions needed to be arranged outside the normal SHG visits. For the “Experienced Women Referrals,” animator workload also increased significantly as they had to deliver first to mothers and then to girls separately. Inviting girls into existing SHG groups is likely to be more appealing to institutions that presently do not reach this target group. Given Reach India’s focus on sustainability, the joint model would optimize the uptake and scaling of this product within the network. Although Learning Games was designed for mothers and daughters to play together, the product does include adaptations for girls-only groups.

Current Status of Learning Games for Girls

Six Reach India Service Centres across eastern India began delivering Learning Games for Girls in March 2008. Between March and July 2008, nearly 60 small to medium SHPIs were trained on Learning Games for Girls across the states of Bihar, Jharkhand, Orissa, West Bengal, and Assam.

Optimizing Microfinance Distribution Channels

Freedom from Hunger expects to achieve positive outcomes in the lives of 25,000 adolescent girls and young women directly. By leveraging the role of mothers in self-help groups to transfer critical skills and knowledge to daughters, Freedom from Hunger expects to achieve positive outcomes in the lives of many hundreds of thousands of girls and young women indirectly.

Delivery of Learning Games for Girls through Sri Mayapur Vikas Sangha (SMVS)

Alongside the delivery of Learning Games for Girls through the Reach India network, Freedom from Hunger has developed a framework and tools for monitoring success in the broad domains of scale, sustainability and impact. Given Reach Indiaâ&#x20AC;&#x2122;s commitment to delivering non-formal education at low-cost and with a demonstrable impact, the development and implementation of Learning Games for Girls are simultaneously undergoing a community-based randomized control trial evaluation and observation. This is being conducted through a typical Reach India SHPI partner. SMVS is continuing its partnership with Reach India by participating in the evaluation as they incorporate Learning Games for Girls into their current microfinance programming. Phase one of Learning Games implementation at SMVS involves all 23 active animators and 90 of their SHGs. Area covered for implementation includes 32 villages in the Nadia district of West Bengal. The process of implementation is described below.

7.1 Preparation and Training Strategic planning to integrate the Learning Games into the current workload of the field staff included reviewing animator schedules, setting a calendar for implementation, and developing recruitment processes for incorporating adolescent girls into their SHGs. Trainings for animators on the Learning Games were led by the Reach India Bardhaman, West Bengal Service Centre Managers. Along with training on the Learning Games, animators were given guidance on how to encourage adolescents affiliated with their SHGs to participate in the Learning Games.

7.2 Sensitization of Self-Help Groups With technical support from Freedom from Hungerâ&#x20AC;&#x2122;s evaluation partner, International Center for Research on Women (ICRW), a community sensitization protocol was established prior to implementation of the Learning Games. The protocol was created to inform SHG leaders and members about the general content and structure of the Learning Games, as well as the concurrent evaluation activities that would be taking place. Staff from SMVS, Reach India, and the Centre for Micro Finance, another evaluation partner, visited every participating SHG to inform them on the upcoming program and activities.

7.3 Monitoring Quality of Learning Games for Girls In order to maintain the quality of the animatorâ&#x20AC;&#x2122;s delivery of the sessions, a Reach India Service Centre Manager periodically observes the delivery of the Learning Games through the standard follow-up visit, an integral component of the Reach India training service. Freedom from Hunger

Optimizing Microfinance Distribution Channels

and Reach India have developed a cascading training system that includes competency standards for training delivery. A checklist of competency indicators to monitor the performance of Service Centre Managers, who trained the animators, and a separate checklist for animators have been developed as well. This latter checklist is used as an observation tool to monitor and discover how animators should effectively deliver an education session, encourage participation and manage the dynamics of the group. A final score can be derived from the checklist, and Service Centre Managers have a follow-up conversation with the animator to highlight positive feedback and areas for improvement.

Key Challenges and Lessons Learned

Below we detail the key challenges and lessons learned through this pilot study. Reaching Girls Bringing girls together to join the SHG group has been the greatest challenge. While an SHPI may be motivated to work with adolescents, there are particular challenges they may not have previously encountered in their programmatic work with adults. Reaching school-going and nonschool-going adolescent girls poses unique challenges. â&#x20AC;˘

School-Going Girls: While it is expected that poor, rural adolescents targeted through Reach are unlikely to regularly attend school, accommodating school schedules to maintain attendance is a concern for animators. In order to maximise outreach, animators may need to shift their schedules or increase additional meetings to their current workload.

â&#x20AC;˘

Non-School-Going Girls: Parents of non-school-going girls may be more hesitant about girls leaving their homes to meet with other girls/women to play the Learning Games. Fears of trafficking, vulnerability and exposure to outsiders are often reasons why parents prefer their girls to stay within the household until they are married and have moved to another household.

Community Sensitivity to HIV/AIDS and Sexual and Reproductive Health Topics Initial roll-out led to concerns from individuals within the communities regarding the appropriateness of very young girls learning about sexual and reproductive health and HIV/AIDS. In particular, relatives of ten- and eleven-year-old girls questioned the need for their daughters to be learning about condoms or how pregnancy occurs. Introducing sexual and reproductive health education with unmarried adolescents is very different than working with women who have already taken on their reproductive roles. Freedom from Hunger recognizes that introducing such topics to young adolescent girls requires sensitivity, planning, and cautionâ&#x20AC;&#x201D;particularly for SHPIs that are working with girls for the first time. Sensitivity to Using Male Animators in All Learning Games Similar to the previous challenge, delivery of sensitive topics (sexual and reproductive health and HIV/AIDS) by male animators to adolescents can generate discomfort or awkwardness that could reduce the effectiveness of the education. Recognizing this challenge, Freedom from Hunger has developed a policy for Reach India that suggests SHPIs and animators put forth an effort to create a safe environment for effective delivery of sensitive topics in the Learning Games.

Optimizing Microfinance Distribution Channels

Committed Leadership Integrating non-financial services requires strong and consistent leadership from the implementing SHPI. Animators, along with management, need to be convinced of the value of integrated services as well as appreciate the value that non-financial services bring in strengthening financial services. Given the donor-driven environment of SHPIs, as well as their primary focus on growing financial services, maintaining motivation to integrate non-financial services without donor funding can be a challenge. Mothers and Daughters Learning Together Our pilot program and the roll-out of the Learning Games for Girls with SMVS demonstrate that mothers appreciate the opportunity to share in a learning experience with their adolescent daughters. Likewise, girls enjoyed the chance to â&#x20AC;&#x153;playâ&#x20AC;? with their mothers and speak openly and frankly about health and financial topics. For the sustainability and possible expansion of this product, this is a promising finding.

Implementing Health Insurance through Micro-credit: A Case Study of SKS Microfinance, India Theresa Chen, Alison Comfort, and Natalie Bau

Centre for Micro Finance1

This document is an abridged version of the original case study, which may be downloaded from the Centre for Micro Financeâ&#x20AC;&#x2122;s website at http://ifmr.ac.in/cmf/research/iehi/chen_et_al-implementing_health_insurance_through_microcredit.pdf. The authors express much gratitude to the staff of SKS Microfinance Pvt. Ltd., particularly Preethi Akula, K. Vinod Kumar, Raj K. Pathak, and Ruchi Singh, in recognition of their time, energy, and assistance in preparing this document. Additionally, the authors wish to thank Annie Duflo, Aparna Krishnan, and Kalyan Neelamraju, formerly with the Centre for Micro Finance, and Abhijit Banerjee, Esther Duflo, and Richard Hornbeck, with the Abdul Latif Jameel Poverty Action Lab at the Massachusetts Institute of Technology, for their contributions. Finally, the authors wish to recognize the World Bank, South Asia Region, for its feedback and support of this project. This report is an output from an ongoing study to evaluate the impact of providing health insurance combined with micro-credit. This project is being undertaken jointly by the Centre for Micro Finance, Abdul Latif Jameel Poverty Action Lab and SKS Microfinance Pvt. Ltd. For more information on this study, please visit http://ifmr.ac.in/cmf/research/iehi. html

Optimizing Microfinance Distribution Channels

Background and Significance

Health shocks are among the biggest and least predictable forms of uncertainty that a poor family faces (Gruber-Gertler 2002). For households without insurance or access to credit, periods of poor health may sharply lower consumption in the short-term (Townsend 1994) or decrease investments in very productive assets (Rosenzweig and Wolpin 1993). The World Bank 2004 World Development Report describes health shocks as a potential endemic source of poverty: “Illness pushes households into poverty, through lost wages, high spending for catastrophic illnesses, and repeated treatment for other illnesses.” Globally, less than six percent of the extremely poor hold health insurance (Banerjee and Duflo 2006). Within India, a recent survey of Hyderabad “slums” found that none of its urban poor had health insurance (Banerjee and Duflo 2006). Lacking alternative financing mechanisms, 98 percent of households turn to “out-of-pocket” expenditures for health care (Ruchismita, Ahmed, and Rai 2007). The provision of formal health insurance is likely limited by health insurers’ concerns about superfluous or fraudulent claims and an adversely-selected group of clients—concerns often heightened in the developing world. There is very little systematic evidence on how the rural poor might respond to the availability of health insurance. Just as loans were once thought to be infeasible, health insurance has not been seriously considered as means of mitigating financial shocks for the rural poor. This study captures the experience of SKS Microfinance Pvt. Ltd., India’s third-largest microfinance institution, in launching a mandatory catastrophic health insurance policy in the state of Karnataka, India, and expanding that product across other branches. In February 2007, SKS tested the policy at a single branch in northern Karnataka. Over a year later, SKS is in the process of rolling out the product to 600 branches. SKS’s goal was to create a product that was beneficial to all stakeholders involved: to the client, to the insurer, and to SKS. This report documents the steps involved in SKS’ development of the health insurance product from conceptualization to rollout to operational processes and challenges. Additionally, it provides an interesting case study of implementation of a particularly promising mechanism for insuring the rural poor in developing countries. Insights into SKS’s successes and challenges in implementing this product will assist other microfinance institutions with design and rollout of their own insurance products. This report is part of a larger impact evaluation research project currently undertaken in collaboration with the Abdul Latif Jameel Poverty Action Lab and SKS Microfinance. The research aims to evaluate the impact of providing health insurance combined with micro-credit on various household economic, social and health outcomes.

According to MIX Market, a global microfinance information system, SKS was India’s third-largest microfinance institution in 2007, in terms of gross loan portfolio and in terms of number of active borrowers.

Please see Appendix I for a timeline of the development of this product.

Optimizing Microfinance Distribution Channels

Product Description

In 2007, SKS Microfinance introduced “Swayam Shakti,” a health insurance cover for catastrophic illnesses. SKS requires all members taking new loans to enroll in health insurance which provides maternity, hospitalization, and accident benefits. SKS partnered as an agent with a private insurance company to provide the product.

2.1 Benefits and premiums Benefits cover the actual cost of health-related expenses from hospitalization for over 24 hours due to any major health event affecting the household, such as a catastrophic illness, an accident, or the birth of a child. The policy provides coverage for the period of one year. Members and their dependents receive the same benefits. Conditions excluded from coverage included HIV/AIDS, reproductive health, drug- or alcoholinduced conditions, and conditions not requiring hospitalization. While the insurance is mandatory for all clients taking a new loan, the client can choose to cover up to three additional family members, with the premium adjusted accordingly. Depending on the level of coverage, the client pays a premium of 1.9-2.5% of the total sum assured for the insurance policy. The client pays an additional 0.8-1.5% of the total sum assured to SKS as an administrative fee. SKS management chose not to require a co-payment or deductible, believing that such a requirement would decrease the popularity of the product among clients. Premiums are not age-dependent, though all individuals are required to be 70 years of age or under at time of enrollment to be eligible. Thus, members’ parents are typically excluded as dependants.

2.2 Using benefits There are two ways which an insured member can claim benefits. If she or an insured dependent receives treatment at a “network” hospital, she can receive “cashless” benefits, without paying any cash out-of-pocket towards covered expenses. Alternatively, an insured individual could receive treatment at an “out-of-network” hospital, but would have to pay for treatment upfront, submit claims documentation to SKS, and wait for reimbursement in 45-90 days. “Cashless” benefits become effective 15 days after enrollment, while “out-of-network” benefits become effective immediately. When an insured individual seeks treatment at a network facility, the hospital is required to submit a pre-authorization letter to the insurer. The provider is expected to give authorization to the facility quickly, usually occurring within two hours. However, treatment may begin before the authorization is received. In case of emergency, pre-authorization is not required, though the facility is responsible for submitting a request for authorization within 48 hours of the members’ hospital admission. 4

Please see Appendix II for the full listing of covered conditions and benefits.

At the time of this writing, SKS and the insurer have no formal system in place to document pre-existing conditions and partial disability at the time of enrollment. Please see Appendix III for the full listing of conditions excluded from coverage.

Optimizing Microfinance Distribution Channels

Members receive a list of network hospitals at enrollment. They are responsible for presenting their health card or their loan passbook at the time of treatment to receive cashless services. The policy mandates that network hospitals cannot deny treatment to an insured individual, even if a hospital had previously rejected them for lack of ability to pay. SKS and the insurer selected a few hospitals in each district as network hospitals where the insurer directly reimburses the hospital. For treatment at out-of-network hospitals, clients submit their claims forms to SKS loan officers along with all bills and details of treatment. SKS, in turn, submits claims to the insurer. Reimbursements are then sent from the insurer to SKS headquarters, which disburses reimbursement amounts to branch offices. After reimbursements arrive at the branches, loan officers reimburse clients in cash. The insurance reimburses clients on an event-by-event basis, that is, each hospital admission requires separate claims even when related. Pre-authorization is not required at out-of-network hospitals. At the time of this writing, the insurer—not SKS—made determinations of whether claims were approved or rejected. An appeals process is in place where SKS and the insurer meet to discuss cases where they differ on their view of the amount of reimbursement.

Designing The Product

SKS and the insurer conceptualized the insurance product over a period of 5-6 months. The key factors they considered are described below.

3.1 Choosing an appropriate insurance company for partnering SKS selected an insurer based on responsiveness, value of benefits, and cost of package. SKS talked to five private and government insurers. Three insurers made it to the later rounds of consideration. SKS rejected the insurers who were unwilling to implement a “cashless” network system, hesitant to work in the domain of health insurance, or provided too few benefits with too high premiums. SKS estimates that the process of choosing an insurance company partner took about six weeks.

3.2 Choosing appropriate coverage SKS began negotiations with a “wish list” of items it wanted covered, including pre-natal and post-natal care and chronic conditions such as blood pressure; the insurer approached negotiations with a list of items generally excluded from coverage. SKS considered moving some of these items which it deemed important for clients from the “excluded” to the “covered” list. For each health condition, SKS took into account (a) the frequency of its occurrence among SKS clientele and (b) whether providing coverage for it would lead to “moral hazard”—a change in the behavior of an insured party, such as an increase in risky behavior, due to the presence of the insurance. For example, SKS negotiated with the insurer to cover cataracts, believing that coverage for this condition would encourage more usage among clients and their families. However, even though SKS believed its clients would find hysterectomy coverage useful, SKS chose not to cover that condition in the first year because of potential overuse and abuse.

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Adding items to the insurer’s “stock” list of coverage did not increase the price of the premium, because SKS and the insurer had already agreed upon a pricing structure at the time of negotiations. Interestingly, months after the rollout, SKS reported that few clients had sought claims for the conditions that SKS had lobbied to be moved to the “covered” list. SKS conceptualized the product as one that would provide wide breadth of coverage specifically targeted to women. For example, they added maternity coverage to benefit the three-quarters of their clientele between the ages of 18 and 40, as well as their female family members. Additionally, SKS expanded the definition of “family member” to include not just children and siblings, but also daughter-in-laws.

3.3 Pricing the premiums In negotiations with the insurer, SKS sought a premium which was affordable and sustainable. To determine affordability, SKS surveyed clients’ willingness-to-pay. To ensure that the premium was sustainable, SKS came to an informal agreement with the insurer that SKS would enroll at least 10,000 clients. To meet this goal while avoiding adverse selection, SKS made its product mandatory for all clients receiving new loans. SKS believes a lower premium might have been negotiable; however, it would have come at the cost of fewer benefits, threatening the product’s popularity and use. SKS decided that a slightly higher premium was worth ensuring the product’s long-term sustainability. SKS approached the negotiations table with quotes that it had received from other insurers. Additionally, SKS referred to a benchmark from SKS’s internal group health insurance provider, examined the premiums in insurance schemes that other microfinance institutions had used, and evaluated client needs and potential benefits. SKS and the insurer provided no subsidies for the premium.

3.4 Determining eligibility When SKS conceptualized the health insurance product, SKS wanted to make the product mandatory for all its current clients. However, SKS found that existing clients had greater resistance to the product than new clients, causing delay in enrollment. SKS went through several rounds of discussions with clients to determine reasons for resistance. Consequently, SKS modified the product so that it became compulsory only at the time of taking a new loan or renewing an existing loan. SKS chose to make clients eligible to use out-of-network benefits immediately after enrollment. Generally, insurance schemes have a two-week to one-month “cooling period” to allow for enrollment information to travel from the member to the insurance company. SKS, however, chose to put in place immediate eligibility because it increased client confidence with the product: clients felt they were immediately receiving service for the premium which they paid upfront. When a client wants to use her health insurance before enrollment data is transferred to the insurer, the insurer calls SKS to verify enrollment.

“Cashless” benefits at network hospitals became effective 15 days after enrollment.

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3.5 Designing the reimbursement process Though SKS allows reimbursements at out-of-network hospitals and no ‘black list’ of hospitals and providers currently exists, SKS encourages all its clients to seek “cashless” benefits at network hospitals. SKS and the insurer chose a “cashless” reimbursement scheme because it would •

guarantee at least a standard level of treatment for clients within benefit limits;

•

reduce the burden on the client for out-of-pocket expenses at the time of a major health shock;

•

guarantee a price for services which is often lower than what clients could negotiate for themselves;

•

reduce the paperwork burden on clients; and

•

dispose of the wait for reimbursements.

The networked scheme is also beneficial to the insurer, as it reduces the likelihood of fraud. In the absence of pre-negotiated prices, doctors may artificially inflate the price for a service, particularly if she has insurance. However, reimbursement claims at out-of-network hospitals allows clients to use their benefits elsewhere. Clients may prefer out-of-network hospitals because they are located closer to their residences than network hospitals; they have sought treatment there in the past; or other reasons. The trade-off is that servicing out-of-network claims is more expensive and staff-intensive, requires the client to pay upfront for services, results in a wait of 45-90 days for reimbursement, and more vulnerable to fraud and abuse.

3.6 Implementing a Reserve Fund As part of the administrative fee that it charges clients, 5% of every client’s total health insurance payment goes towards a Reserve Fund. A designated SKS management team considers disbursing reimbursements from this fund in two situations: •

SKS will consider reimbursement when the insurer has denied a claim due to SKS error, particularly as the product is still being rolled out. Should a data management error prevent a client from receiving approval for treatment, for example, SKS would consider reimbursement from the Reserve Fund.

•

Under extenuating circumstances, SKS will consider reimbursement from the Reserve Fund when an insured individual requires treatment for a life-threatening condition that is not covered. For example, SKS is considering reimbursement of treatment for a client and her spouse, both of whom were hospitalized at the same time for conditions which are excluded in the first year of coverage.

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The “Pre-pilot”

In February 2007, SKS tested the product in a single branch in northern Karnataka. Using feedback from this “pre-pilot,” SKS modified its product before relaunching it in a formal pilot phase in May 2007. Changes included shifting the trigger for enrollment from membership in SKS to taking a new loan; moving from an installment to an upfront payment of premiums; and asking clients, rather than SKS staff, to nominate network hospitals.

4.1 Trigger for enrollment In the “pre-pilot,” all clients, regardless of when they had taken a loan, were enrolled in the product. Clients met this “mandatory for everyone” policy with some resistance. For the formal pilot, SKS changed the enrollment policy to be mandatory upon taking a new loan. SKS found that this new policy, which is still in place, also eased tracking of insurance coverage, as coverage consistently ended two weeks after a client’s loan repayment schedule.

4.2 Premium cost and payment In the “pre-pilot,” clients paid a premium through weekly installments which were tacked onto their existing loan. In the formal pilot, SKS was able to lower the premium by moving to an upfront payment policy. The rate was lower because (1) SKS no longer had to charge interest; and (2) SKS no longer had to “pad” the rate to ensure that the weekly installments fell into whole numbers. Since the rollout, SKS has required upfront premium payment in nearly all cases. Under this policy, clients paid for the premium from their own savings and before receiving any loan disbursements. After SKS changed its policy of premium payment from weekly installments to upfront payment, it also modified its management information system accordingly. This modification resulted in a gap of two months between the pre-pilot and the formal pilot of the health insurance product.

4.3 Identification of network hospitals For the “pre-pilot,” SKS staff conducted on-site visits and in-depth survey of hospitals to determine whether they should be part of the network. Since the pilot, SKS has depended on SKS clients to nominate hospitals which are close, frequently used, and have a good reputation. In both pilot and the final rollout, the insurer has retained final responsibility for assessing network suitability.

SKS’s management information system was incapable of handling paisa—1/100 of a Rupee. As SKS As a result, SKS increased the premium to an amount that would was neatly divisible by 50, ensuring a weekly installment that was a whole number.

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The Pilot

In May 2007, SKS launched a formal pilot of its product in two districts in northern Karnataka with the goal of enrolling 10,000 clients. By August 2007, though it neared its goal, SKS found that the initial results of the pilot were not strong to indicate whether the product was viable for scale-up across all of SKS’s branches. For example, in August 2007, the product had a claims ratio of 180%. SKS wanted further evidence of the viability of the product, so it extended and expanded the pilot phase across 32 branches with the goal of enrolling 50,000 clients. On December 31, 2007, SKS enrolled its 50,000 client. With a claims ratio of 110%, SKS deemed the product sustainable and decided it was ready for rollout across all of its branches in 15 states.

Preparing for Rollout at the Branch Level

At every branch where it rolls out its product, SKS undertakes marketing and client education; training for SKS loan officers; establishment of management information systems; and identification of network hospitals.

6.1 Marketing the product to clients SKS invested funds, staff, and time into developing materials and processes which would effectively explain the product to its clients, a population with little or no experience with insurance. •

SKS developed a 20-minute video in Kannada, the local language. The insurer funded the video production and the Institute for Financial Management and Research’s Centre for Insurance and Risk Management administered the project. Initially, SKS depended on this video as its primary marketing tool. SKS loan officers screened the video to clients and their husbands at centre meetings. The video met with mixed success. In some situations—for example, at centre meetings where only half the members spoke Kannada—not all clients understood the video. As a result, SKS has since redesigned its marketing efforts to revolve around a presentation and discussion that health associates, loan officers, or other branch staff lead, using the videos only in cases where there is high resistance to the product.

•

Group presentations and discussions, which have replaced the video as SKS’s primary marketing tool, begin fifteen days before enrollment. SKS developed a five-minute script to facilitate these discussions and standardize information shared to members across centres.

•

SKS developed a 16-page guidebook, written in Kannada, which presents all necessary information for the client with simple language and, for the benefit of illiterate clients, simplistic graphics. The last page of the guidebook features contact information for local network hospitals and SKS health associates.

•

SKS loan officers use the submission and disbursement of claims at centre meetings as opportunities to further educate clients about the product.

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6.2 Training SKS staff on product Much of SKS’s staff is as new to the health insurance product as their clients. SKS management developed a multi-pronged approach to bring them up to speed as quickly as possible. •

Prior to rollout, SKS created a mandatory, two-day off-site training workshop for loan officers. Health associates—SKS’s staff devoted to health insurance—deliver the training, which uses a standardized Powerpoint presentation to walk through product basics and loan officer responsibilities in marketing, enrollment, and claims disbursement.

•

SKS distributes a Health Insurance manual to staff, which is a “one-stop shop” to answer all questions that a loan officer may have about the product. Included are answers to “frequently asked questions” that clients may ask during centre meetings.

•

Though designed as a marketing tool for clients, the video is also an instructional tool for staff. Vikram Akula, SKS’s Founder and Chief Executive Officer, is featured in the video, which may provide additional motivation to staff.

6.3 Establishing management information systems To track enrollments and claims, SKS needed to implement new management information systems. For enrollments, SKS worked with in-house developers to create an add-on module to its existing information system. The claims system has not yet been developed, but will be built in as a module to its new overhauled company-wide system. Until then, SKS is tracking claims through Excel spreadsheets.

6.4 Identifying network hospitals Though the insurer maintained final responsibility for determining suitability for networking, SKS staff provided the initial identification of hospitals because its employees knew the pilot area better than the insurer. SKS staff looked for hospitals which had •

At least 12 beds;

•

At least one doctor with an established history of medical service provision to some clients in that particular geographical region;

•

A location preferably close to a bus stand or railway station; and

•

A location within 35 km of the most distant centre in the area. (However, if no hospitals in the region qualified to become a network hospital, that range could be increased.)

•

Additionally, the availability of a fax machine at the hospital was also considered.

Network hospitals tended to be those that were most accessible to clients. Additionally, clients demonstrated preferences for these hospitals when loan officers asked them at centre meetings to identify which hospitals they used. Aside from the network hospitals, SKS and The insurer created a “white list”—a secondary list of hospitals recommended for members if they were unable to go to a network facility—for the geographic area covered by the health insurance product. There was no “black list” of hospitals; however, SKS and The insurer chose not to provide coverage for Unani, a traditional Greco-Arabic form of medicine.

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6.5 Developing a management structure for continual rollout As SKS planned for a quick scale-up of its product, it developed a management structure which allowed for continual rollout while still providing high-quality service to clients. Within every state, the health insurance program has a state manager and 1 health associate for every 3-4 branches. With this structure, SKS plans to cover an additional 50 branches every month until March 2009, when its product will have reached 600 branches.

Servicing Clients

7.1 Enrollment and Identification Cards SKS loan officers are responsible for enrolling clients in the health insurance product when they sign for a new loan. Registration takes place during the weekly repayment meeting, in front of fellow group members. Clients are required to provide the names and a group photograph of household members who will be covered. SKS loan officers then note that the client has enrolled in the health insurance on the loan record sheet and in the client’s book. This information is passed to the branch, which then shares enrollment information with SKS headquarters. SKS, in turn, shares enrollment information with the insurer. In total, it takes about two weeks for a client to appear in the insurer’s systems. During that time, if she needs to use her insurance, she can request that the insurer verify her information with SKS. Clients have made use of their insurance in their initial two weeks of coverage, calling their health associate to facilitate the process. After enrollment, SKS issues health insurance identification cards to clients. SKS initially funded their production, but after October 2007, the insurer agreed to pay for them. However, clients do not need identification cards to receive treatment and may use their passbooks with an attached family or household photograph instead. Initially, clients were unclear that they could use their passbooks instead of the health insurance card and this led to some confusion among clients on how to claims benefits at a network hospital. In recent months, SKS has taken steps to clarify to clients that they may use their passbook for coverage. As enrollment is tied to the signing of a new loan, it takes place throughout the year on an ongoing basis. SKS allows clients to delay acceptance of a further loan—and the accompanying mandatory health insurance—indefinitely. Therefore, a client could wait until she or someone in her family became pregnant, and then enroll in insurance to have coverage for the delivery. To prevent such occurrences, SKS is considering implementing a time limit within which clients must renew their loans and purchase insurance Enrollment data is sent from SKS’s branches to its head office, and then to the insurer. The insurance is a bulk insurance policy in the name of SKS, and is not broken up into individual policies in the clients’ names.

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7.2 Collecting annual premiums At the weekly repayment meetings, SKS loan officers collect the annual premium upfront. The loan officer then records this payment and the client’s health insurance status on the client’s loan record sheet. To this extent, it would be interesting to track renewals of health insurance and loans .

7.3 Hiring additional staff to provide customer service for health insurance SKS uses a “facilitation model”: when an insured individual seeks treatment, SKS staff provide inperson assistance to process the claim. First, an insured individual calls SKS at a designated “helpline” number that is widely publicized during enrollment and listed on the back of the guidebook. Next, a SKS health associate visits the client in person at either the network or out-of-network hospital to assist with claims. SKS and the insurer do not use a third party administrator. For treatment at a network hospital, the health associate helps the hospital process the paperwork. At an out-ofnetwork hospital, the health associate brings a checklist of documents that the client needs to obtain to claim reimbursement. SKS found that the facilitation model helped maintain relations with both hospitals and clients; however, it greatly drives up staffing costs.

7.4 Administering claims and reimbursements At the weekly repayment meetings, SKS loan officers collect claims from and disburse reimbursements to members who received services from an out-of-network hospital. Additionally, SKS loan officers are responsible for explaining to the member why their claims might have been rejected.

Key Challenges Going Forward

SKS’s primary obstacles include minimizing fraud; ensuring a high level of service for “cashless” treatments; working with an insurance company whose infrastructure is struggling to keep pace with SKS’s expansion; and determining the actual cost of the product per client.

8.1 Minimizing Fraud SKS believes minimizing fraud is primarily the responsibility of the insurer. However, SKS believes it has a moral and “cultural” responsibility to minimize fraud. Examples of fraud include document fraud or members being admitted for more than 24 hours to a hospital when they did not require such treatment. SKS’s steps taken to minimize fraud include •

Encouraging the insurer to create its own facilitator position. The insurer has recently dispatched its first such employee.

•

Implementing layers of repetitive document scrutiny. Loan officers check documents upon receipt at centre meetings; health associates check documents at the area level; and SKS

As a part of the larger research project, renewal and drop out rates are tracked regularly to identify and understand dropouts, if any.

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headquarters checks documents again before sending them to the insurer for processing. •

Encouraging an increase in use of network hospitals, which do not require documents and therefore minimizes incidence of document fraud; and

•

Using loan officers as “eyes and ears” on the ground to report incidences of fraud.

SKS is also considering conducting random audits of claims.

8.2 Ensuring high level of service for “cashless” treatment at network hospitals As SKS expands its product, it is finding maintaining a high level of service at network hospitals a challenge. Since network hospitals are locked into a contract, some have had difficulty reaching a profit without large numbers of clients. Additionally, some hospitals lack a fax machine to facilitate authorization, resulting in all transactions conducted by phone.

8.3 Encouraging insurance company infrastructure SKS’s insurance company partner is having some difficulty rolling out its infrastructure at the same pace as SKS’s planned expansion. The insurer, new to rural environments, has had to adapt its business practices accordingly. Additionally, in some areas, it must open new offices.

8.4 Uncertainty about Cost Due to large indirect costs (office infrastructure, staff time, administration, etc.), determining the exact cost of the health insurance product is very difficult. As a result, right now SKS is unsure whether it is profiting, breaking even, or losing money on the health insurance product. However, with the limited information that it has, SKS views the current price structure as appropriate and sustainable. SKS estimates that direct costs (guidebooks, management information system, etc.) are about USD $2.00-$2.13 per insured client. SKS estimates that the remaining $1.63-$1.75 of the administrative fee would go towards SKS’s indirect costs. Generally, for the costs it can measure, SKS’s actual costs do not vary greatly from its estimates. Where SKS did vary from its costs were in staffing and marketing. Though SKS had estimated high staffing costs, it still found staffing costs higher than expected, as the pilot and initial rollout phases both required extensive travel. Marketing costs, however, were lower than expected. SKS found that the video, which SKS had planned to use as its primary marketing tool, received a mixed response. SKS moved to a cheaper communication and discussion group strategy, which was more effective as a marketing tool.

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Current Status

9.1 Client Use and Satisfaction with the Product As of late January 2008, about 210,000 SKS clients in 79 branches across Karnataka and the neighboring state of Andhra Pradesh had enrolled in the health insurance product. About 80% of clients had chosen to enroll in Plan 4, which provides coverage to the member and three additional family members. Overall, clients raised a total of 1,143 claims in the last 12 months. At the time of this writing, SKS had settled about 60% of all claims with an average payout of USD $78.75. One-third of settled claims took place at out-of-network hospitals.

The heaviest users of the product—more than two-fifths of all with settled claims—were women between 16-30 years. However, the patients with the highest settled claims were males between 16-30 years, with an average payout of $152.45. SKS’s goal was to achieve a claims ratio of less than 100% within one year of operation. It achieved this goal in February 2008. In focus groups, the primary concern of clients has been the wait for reimbursements—up to three months with bottlenecks at both SKS and the insurer. SKS management is aware of this concern.

9.2 Expansion At the time of this writing, SKS has expanded the product throughout Karnataka and part of the neighboring state of Andhra Pradesh and is beginning expansion in Orissa. SKS plans to bring the product to all of its branches in fifteen states across India by March 2009, rolling it out in fifty branches every month. SKS has chosen areas of expansion according to •

Proximity to branches already covered by insurance, thereby reducing travel, translation, and other administrative costs.

•

Strength of clientele base.

•

Hospital presence. As SKS wants to encourage use of network hospitals, it is attempting to launch the product in areas where an appropriate hospital can be found.

•

Insurer presence. SKS is rolling out the product in Orissa because The insurer has an office in West Bengal which can service the area.

10. Lessons Learned SKS has been able to expand its health insurance product because it designed a product and processes appropriate to the needs of its clientele.

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•

SKS intentionally designed the product to meet the needs of its clients. SKS felt strongly that some aspec the product should “speak” to the client—in SKS’s case, the maternity benefit.

•

SKS changed its enrollment policy after clients did not react favorably in the pilot to mandatory enrollmen for all clients, regardless of when they took a loan. Under its new policy enrollment is mandatory only u taking a new loan—SKS has increased client satisfaction.

•

SKS shifted from an installment to an upfront premium collection policy to lower the price of premium for its clients.

•

SKS took steps to ensure that clients, many of whom had little or no experience with insurance, h a strong understanding of the product. Initially, SKS invested in a video for client education marketing. When the video met with mixed success, SKS moved to a group discussion strate Finally, SKS developed a guidebook with simplistic graphics and language to communicate all necessary information in a format that was comprehensible to clients.

•

SKS invested in the “facilitation model,” which closely navigated clients through usage of benefits.

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Appendix I: Timeline Of Events Feb 2007

SKS launches “pre-pilot” test of health insurance product in a single branch in northern Karnataka

May 2007

SKS launches pilot of product, with certain key changes from “pre-pilot,” in two districts in northern Karnataka with goal of reaching 10,000 clients

Aug 2007

SKS decides to extend pilot phase to 32 branches and 50,000 clients

Sep 2007

SKS enrolls 10,000th client

Dec 2007

SKS enrolls 50,000th client; SKS decides to expand product across all branches

Jan 2008

SKS begins rollout of product in Andhra Pradesh and southern Karnataka

Mar 2008 SKS begins rollout of product in Orissa Sep 2008

SKS begins rollout of product in Maharastra

Mar 2009

SKS completes rollout of product across 600 branches in 15 states (projected)

Appendix II: Conditions Covered By Sks Health Insurance Product Maternity •

Coverage is provided for one delivery every year for up to USD $62.50.

•

The member can only use this if the delivery takes place in a hospital/nursing home. Deliveries at home or clinics are not covered.

•

The newborn child is automatically covered for the policy term without additional premium. To ensure coverage, the member must report the date of birth and name of the newborn within 90 days of birth.

Hospitalization •

•

Coverage is provided for •

inpatient treatment of more than 24 hours for illness, disease, injury and accidents; and

•

specified day procedures: dialysis, lithotripsy (kidney stone removal), chemotherapy, cancer-related radiotherapy, eye surgery, coronary angiography, cardiac catheterization, and coronary angioplasty.

Covered costs include room and boarding charges; surgeon, anesthesiologist, medical practitioner and consultant specialist fees; medical consumables and medicines; diagnostic tests, ventilator, ICU and related charges; and nursing expenses.

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Accidents •

Coverage is provided for

•

death within a period of twelve months from the date of bodily injury, where the injury is the main cause of death; and

•

total and irrecoverable disability resulting from injury within twelve months of its occurrence.

•

Benefits are provided for accidents including

•

Accidental death

•

Loss of hands, feet, or sight

•

Loss of hearing of both ears

•

Loss of speech

•

Hemiplegia (paralysis of one side of the body), paraplegia (paralysis of two limbs), or quadriplegia (paralysis of all four limbs)

Appendix III: Conditions Excluded By Sks Health Insurance Product Conditions excluded from coverage included •

Conditions not requiring hospitalization,

•

Conditions treated at home, and

•

Conditions where the client is hospitalized due to

•

Congenital external diseases

•

Fertility, sub fertility or assisted conception operation or sterilization procedure

•

Drug and alcohol-induced illness

•

HIV/AIDS

•

Vaccination

•

Sexually transmitted diseases

•

War or nuclear invasion

•

Experimental and unproven treatment

•

Ambulance and non medical expenses

•

Cosmetic surgery

•

Dental treatment

•

Suicide/self-injury

•

Pre-post hospitalization

•

Disabilities

•

Occupational accidents like participating in a circus, car racing, parachute gliding or military activity or accidents arising out of them

•

Injury or death due to child birth or pregnancy.

Appendix IV: References Cited Banerjee, Abhijit V. and Esther Duflo (2006). “The Economic Lives of the Poor.” P. 16. Downloaded from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=942062 on May 21, 2008. Gertler, Paul and Jonathan Gruber (2002). “Insuring Consumption against Illness.” American Economic Review, Vol. 92, pp. 51-70. Rosenzweig, Mark and Kenneth Wolpin (1993). “Credit Market Constraints, Consumption Smoothing and the Accumulation of Durable Production Assets in Low-Income Countries: Investments in Bullocks in India.” Journal of Political Economy, Vol. 101, pp. 223-244. Ruchismita, Rupalee, Imtiaz Ahmed, and Suyash Rai (2007). Centre for Insurance and Risk Management at the Institute for Financial Management and Research. “Delivering Micro Health Insurance Through the National Rural Health Mission: A Strategy Paper.” p. 2. Downloaded from http://www.ifmr.ac.in/cirm_011107/pdf/nrhmDoc.pdf on February 14, 2008. Townsend, Robert (1994). “Risk and Insurance in Village India.” Econometrica, Vol. 62, No. 3, pp. 539-592. World Bank (2004). World Development Report 2004: Making Services Work For Poor People.

Fighting Malaria with Microfinance: A Case Study on BISWA Microfinance Utilizing Microcredit Contracts to Increase the Use of Insecticide Treated Bednets Dan Kopf1

Centre for Micro Finance

The author would like to thank BISWA Chairman Khirod Chandra Malick, Dr. Dipti Patnaik, Ms. Sunita Padhi, Ashish Sahoo and everyone else at BISWA for their support and willingness to share their experiences. The author would also like to thank Lakshmi Krishnan, Benita Sara Mathew, Alessandro Tarozzi, Aprajit Mahajan, Brian Blackburn and Joanne Yoong for their insights and ability to see the big picture. The author would also like to express his gratititude to Sudhansu Behera, Deepak Nayak, Saumya Biswal, Rakesh Kumar, Chinmoy Roy, Santosh Sahoo, Pradeep Sahoo and Rajesh Kumar for their passionate and dedicated work on this project. Thanks also to Michael Chasnow, Theresa Chen, Emmerich Davies, Alexander Kobishyn and Minakshi Ramji for their thoughtful feedback.

Optimizing Microfinance Distribution Channels

The Rationale for Fighting Malaria with Microfinance

The logic is simple: the rural poor are generally those who suffer most from the devastating health and economic effects of contracting malaria. Microfinance Institutions (MFIs) serve the rural poor and have developed efficient distribution channels to deliver finance to their clients. MFIs may hence be able to use the same distribution channels to promote the use and sale of insecticide treated bednets (ITNs), a product which has proven to be a powerful defense against malaria and other vector-borne diseases. The reality is quite complex: MFIs are organizations with limited resources specialized in the marketing and administration of financial products. The sale of ITNs is a bold venture into unfamiliar territory. Not only are ITNs a non-financial product, but ITNs are a product for which consumers may need to be educated to understand the benefits. This case study will highlight BISWAâ&#x20AC;&#x2122;s pilot project in which they offered self-help group (SHG) members across 50 villages the opportunity to purchase ITNs through cash or credit contracts. The paper will focus on the process of developing the product and the most important challenges faced during implementation. In addition to the pilot project, BISWA agreed to participate in a rigorous impact evaluation. The Centre for Microfinance and researchers from Stanford University and Duke University are conducting the evaluation for which there will not be results until 2009. Therefore case study will not make assertions about the impact of the project, but rather discuss operational and logistical issues.

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Malaria and Insecticide-treated nets (Itns) Background: Orissa, India and Worldwide

Malaria is one of the world’s oldest and most persistent killers. Transmitted by Anopheles mosquitoes, human malaria is caused by protozoa of the genus Plasmodium. In 2002, one third of the human population was estimated to live in areas exposed to the most severe form of malaria, caused by P. falciparum or brain malaria, as it is locally known (Snow et al. 2005). Recent estimates of incidence range between 300 and 660 million existing cases, with 80 million cases in India alone (Snow et al. 2005, Korenromp 2005). The parasite causes more than one million deaths, most of them children, every year. Chronic effects can be particularly dire for young children, ranging from anemia to permanent neurological and developmental impairment. The Human Development Report for Orissa cites malaria as the “number one public health problem” in the state (Government of Orissa 2004). The state Department of Health and Family Welfare reported 417,000 cases of malaria in 2003 (of which 83% were P. falciparum). In the early summer of 2007, Centre for Micro Finance researchers blood-tested 2,625 individuals for current parasitemia using Rapid Diagnostic Tests in the five districts of Orissa where the pilot evaluation program would take place. Twelve percent of tests indicated current infection, with brain malaria accounting for more than 90% of the recorded cases. Multiple studies have demonstrated that insecticide-treated nets (ITNs) are extremely effective in reducing malaria, particularly among women and children. They are an essential component of public health interventions targeting malaria worldwide and their use is promoted by both the World Health Organization and the Center for Disease Control. Yet ITN ownership remains very low in many malaria-prone areas. Estimates for all areas at risk in India indicate only 20% coverage (Korenromp 2005). There are a variety of possible reasons for the lack of ITN ownership. One possibility is that poor households may simply not be willing to pay for ITNs or only be willing to pay well below market rates (Guyatt et al. 2002). Other possible contributors to low ownership and usage rates of ITNs include lack of knowledge about malaria transmission and of ITNs’ benefits, the belief that ITNs are uncomfortable, dangerous and/or an unworthy nuisance, and the inability of poor households to borrow to purchase nets These issues, together with the documented efficacy of ITNs have led some scholars and policy

Current parasitemia is defined by whether the antigens produced due to the presence of the malaria parasite are found present in the blood stream of an individual. Seemingly healthy individuals may be parasitemic, but even these seemingly healthy individuals are capable of transmitting the parasite into the blood stream of a mosquito, and from that mosquito to other individuals. Thus, the level of parasitemia is extremely important to understand when working on malaria control measures.

In Kenya, Beach et al. (1993) found that village-wide use of ITNs led to a 40-50% reduction of falciparum malaria incidence in children under 6 and to a 63% reduction of malaria-associated fevers. In Malkangiri District (Orissa), an area similar to where the BISWA pilot program took place, ITNs reduced anopheline vectors up to 99% and caused a 57% decline in malaria prevalence among U15 (Sahu et al. 2003). In Sundargarh District a significant decrease in anopheline density and 59% decrease in malaria incidence was seen in persons sleeping in villages supplied with ITNs (Yadav et al. 2000).

http://www.cdc.gov/malaria/control_prevention/vector_control.htm ITNspospaperfinal.pdf

and

http://www.who.int/malaria/docs/itn/

Optimizing Microfinance Distribution Channels

makers to call for large-scale free provision of ITNs and net retreatment (see Curtis et al. 2003 and Sachs 2005, among others). However, the feasibility of such large-scale public interventions in poor countries is often financially and logistically constrained (Sachs and Malaney 2002, Narasimhan and Attaran 2003, Sachs 2005). In policy circles, there is an ongoing debate between those who believe that the most effective path to malaria reduction is through large-scale government programs which freely distribute bednets and those who believe that using market mechanisms and subsidizing nets will be the most effective way forward. Government schemes dominate the ITN distribution programs currently being implemented in Orissa. India’s National Vector Borne Diseases Control Programme (NVBDCP) receives World Bank assistance for fighting malaria through local government health workers. The targeted provision of free/highly subsidized ITNs to vulnerable households is an essential part of the NVBDCP’s campaign. In 2007, according to the Orissa Directorate of Health Services, approximately 878,000 nets were distributed in Orissa in 2008 either for free or at highly subsidized prices (at least 50% of the net cost is borne by the government). Untreated nets are also available in local markets. These nets are not subsidized and accurate numbers on sales are not available.

Background on Biswa’s Interest in Malaria Control

Established in 1994, BISWA (Bharat Integrated Social Welfare Agency) is a nongovernmental organization (NGO) based in Orissa focused on socio-economic development and livelihood creation. Through promoting and lending to Self Help Groups (SHGs) , BISWA uses microfinance as the central tool to achieve their mission. As of March 2008, BISWA had formed nearly 30,000 SHGs with over 450,000 members, primarily in the state of Orissa. It is also active in promoting small business entrepreneurship, encouraging market linkages and improving the environment. As an Orissa-based group, the health and economic burden of malaria on BISWA members has long been clear to the organization’s leadership. BISWA’s chairman Khirod Chandra Malick has long felt that the debilitating consequences of malaria have been detrimental to the development of both BISWA’s clients and the people of Western Orissa. In late 2005, Mr. Malick was approached by a group of researchers from the Centre for Micro

See http://www.orissa.gov.in/health_portal/Programme/NVBDCP/main.html

SHGs are generally made up of 10-20 women (and sometimes men) that have been organized by local NGOs or government agencies for mobilizing local resources. The Indian government has strongly promoted the formation of SHGs over the last several decades as powerful tool for social and economic empowerment. SHGs often function as credit and savings associations and are given small loans as working capital by state banks or MFIs. These loans are made to the SHG as an entity, and no individual is liable.

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Finance, as well as Duke and Stanford Universities, with the idea of conducting research on the use of BISWAâ&#x20AC;&#x2122;s microfinance network to increase ITN coverage. The seed of the idea came from discussions between the researchers, BISWA management, and, Amulya Mohanty of BISWAâ&#x20AC;&#x2122;s funding partner, CARE CASHE. For BISWA, the idea of increasing the use of ITNs and improving the health of their members was an appealing prospect. An added benefit was the potential increase in credit-absorption capacity and repayment ability of SHG members due to increased ITN ownership. These improvements would stem from reduced vulnerability to the debilitating economic effects of malaria, such as the need to spend money on treatment and the decrease in productivity from poor health. The pilot program, which BISWA and the researchers quickly agreed to, would offer members the opportunity to purchase insecticide treated nets and would be implemented in 50 villages across 5 malaria-endemic districts of Western Orissa. As a part of this pilot program, BISWA agreed to participate in an impact evaluation because of

the understanding that it was important to judge not only the programs operational and financial viability, but also whether it was having a strong positive impact on clients. Thus, all parties agreed to conduct a randomized evaluation comparing the benefits of the following three interventions: 1)

Educating SHG members about the benefits of ITN usage.

Educating SHG members about the benefits of ITN usage and then giving these members enough free ITNs for everyone in their household to use.

Educating SHG members about the benefits of ITN usage and then offering these members the opportunity to purchase ITNs on micro-credit contracts.

As will be further discussed, the impact evaluation influenced the way the pilot program was rolled out. To conduct a rigorous impact evaluation with broad policy implications, BISWA allowed for the pilot program to be implemented across a large area in randomly chosen villages. As mentioned earlier, the results from the impact evaluation will be available in 2009.

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Product Description

BISWA’s objective with its Microcredit Contracts Program, rolled out in September of 2007, was to offer BISWA SHG members the chance to purchase high quality, multifilament, polyester ITNs. In each village, a BISWA community organizer along with at least one Centre for Micro Finance staff member conducted an information campaign on malaria and gave the SHG members details on the distinct purchasing contracts into which they could enter. Group members were limited in the number of nets they could purchase by the number of nets that the other members of that SHG thought that the individual was repaying. Because the SHG is the entity with liability for the loan, not individual members, each member of the group has to approve of every transaction with an MFI or bank. The SHG members were given the following choices: 1)

Members could purchase the nets on one-year credit contracts or in cash on the day of the offer. If nets were purchased on credit, then members were charged BISWA’s customary 20% yearly interest (reducing balance).

Members could purchase single nets or double nets. Double nets have a 60% larger width but are 25 % more expensive.

Because the nets sold need to be retreated with insecticide every 6 months to maintain full efficacy, members could purchase the nets with an additional two future retreatments (to be completed 6 months and 12 months after the sale), or to only have the nets treated at the time of the sale.

ITN Contracts SHG Member Options Contract

Single (Rs.)

Double (Rs.)

Cash without retreatment

173

223

Cash with 2 Retreatments

203

249

Credit without retreatment

192 (16 per month)

228 (19 per month)

Credit with 2 Retreatments

252 (21 per month)

276 (23 per month)

If members chose not to purchase the nets with retreatment, they would still be given the opportunity to purchase the retreatment with cash after 6 and 12 month. In this instance, they would have to pay 15 rupees for treatment of single nets and 18 rupees for double nets. These choices were given to the members as a way to increase consumer choice, but also for research purposes, as a way to understand consumer preference in regards to ITNs purchase.

BISWA chooses to call their field workers “community organizers” rather than loan officers, as most MFIs do, because their community organizers are expected to act as advocates for their members in ways that go beyond the simple disbursement and collection of loans.

The script for this Information campaign is in Annex II

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Designing The Product

In this section, we review the most crucial of the decisions BISWA and the researchers faced in designing the product.

5.1 Making Net Purchases Mandatory versus Voluntary BISWA management felt that the program would be most successful if it was mandatory for members to purchase the nets. BISWA could have dictated that no SHG member could avail a loan without purchasing a certain number of nets. This would have been similar to the way that many MFIs, including BISWA, offer health insurance. In the case of health insurance, the product is made mandatory primarily in an effort to achieve scale and avoid adverse selection. The argument for making bed net purchase mandatory is similar to that of health insurance, but there are also some differences. First, making net purchase mandatory would have simplified program implementation and reduced BISWA’s costs. Second, mandatory purchase would have almost certainly led to increased sales (assuming very few people would choose to end their membership in BISWA due to this purchase). Third, it would have also lessened the wasted expense of marketing nets to people who would eventually elect not to purchase the product. Finally, mandatory net purchase ensures that all those who benefit from a public good also pay for it. When one member of the community uses a net, it not only improves their health outcomes, but also those of their neighbors in the village. This is because the use of insecticide reduces the number of mosquitoes in the village. It could be argued then that by allowing certain community members to not purchase nets, they may be “unfairly” reaping the benefits. The arguments against making purchase mandatory are quite simple. First, it would have eliminated individual choice. People who prefer to not use nets or already own enough nets would have been forced into spending money in a way that is not to their benefit. Second, it could have deterred existing clients and potential new clients for BISWA. SHGs members may have felt angry about being required to make this purchase and may not have wanted to continue as clients. Third, it would have eliminated the opportunity to study consumer preference. As the pilot program was also part of a larger research project, making purchase mandatory would have removed the opportunity to garner some interesting and conceivably useful data. In the end, BISWA chose not to make purchase mandatory even though, in the short term, it was less economically beneficial for the organization. BISWA management believed that the combination of the benefits of consumer choice, not alienating clients with a forced purchased and the value of the research outweighed the benefits of the mandatory approach. For all these same reasons, BISWA also did not make payment for the additional net retreatments after 6 and 12 months mandatory.

Both prices on credit assume the member will pay in equal monthly installments. BISWA’s interest rate is reducing, so if members choose to pay the loan amount off early, then the amount of interest paid will be reduced.

If members were allowed to choose whether to purchase insurance, economic theory indicates this will result in a sicker population taking up the product because those who are sick will exhibit hire demand.

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5.2 Source, Price and Kind of ITNs BISWA and the researchers chose to purchase “untreated nets” rather than nets that had been “pretreated” by the manufacturer. Untreated nets need to be treated with insecticide every six months to retain their highest effectiveness. While pretreated, long-lasting insecticide treated nets (LLINs) are available in the international market, BISWA and the researchers chose not to use these nets because they were not available in the Indian market. Since the pilot program commenced however, a number of ITN retailers in India have begun to sell LLINs and market price has come down significantly. It is likely that any future sale of nets through micro-credit will involve LLINs. BISWA purchased 2,500 nets from BIOTech International, a Delhi based distributor, who offered a competitive price on high quality nets. BIOTech also agreed to donate 7,500 free nets to the research project, which were distributed for free in the 50 villages serving as comparisons to the MF villages, as part of the impact evaluation. Though a great deal more expensive than those available at local markets—sometimes as much a triple the price—the chosen nets had much higher quality. BISWA and the researchers believed that clients would be pleased by both air circulation inside the net and net durability, and that this would lead to higher customer satisfaction. BISWA and the researchers chose to use Bayer CropScience’s deltamethrin insecticide for treating the nets. Deltamethrin insecticide was chosen because of its high efficacy, low likelihood of causing of side effects, and its ability to maintain value after repeated washings (World Health Organization 2005).

5.3 Pricing: Subsidized or Full Sustainability One of the more controversial aspects of the pilot program was that the pricing of the nets was set up to be fully sustainable. Many ITN programs advocate subsidizing the cost of the nets to increase uptake. The concern is that few customers will purchase ITNs without a subsidy - either because they do not consider nets to be worth their market value or they do not have enough income to purchase a net at full cost. For this pilot project, BISWA and researchers were interested in testing whether, by using the innovative technique of credit contracts, the program could reach full sustainability. With full sustainability, there would be greater chance for scale-up of the program. BISWA and other MFIs in malaria-endemic regions would be eager to make a profit while simultaneously improving the health outcomes of their customers. To attain sustainability, the pricing of the ITN included not only the cost of the net and insecticide, but also staff labour and extra travel. In addition, if customers chose to purchase the net on credit, BISWA chose to use their customary 20% interest rate. When nets were purchased with retreatments after 6 and 12 months, the travel, additional labour, and insecticide costs were added:

BISWA calculates the interest payment on the actual amount outstanding every month.

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The following tables give the details on the component costs of the nets: Nets Purchased without Retreatment Single nets

Double nets

Cost of net

148.00

196.00

Initial transport cost

10.00

Labour

5.00

Insecticide (1 treatment)

9.69

12.43

Total Cost

173.00

223.00

EMI (12 months)

16.00

21.00

Single nets

Double nets

Cost

148.00

196.00

Transport

10.00

Travel (insecticide)

1.00

Labour

15.00

Insecticide (3 treatments)

29.07

37.29

Total Cost

203

259

EMI (12 months)

19.00

24.00

Nets Purchased with Retreatment

5.4 Area and Size of Pilot Program Population The location of the pilot and the number of clients involved were greatly affected by the project being an impact evaluation. To rigorously statistically compare those that the pilot affected to the other two treatments (those who were only given an information campaign and those who were given free nets), certain parameters had be satisfied. First, the number of villages in which SHG members were offered nets had to be near 50 to ensure a sample large enough to provide statistically meaningful results. Second, the villages which were offered the pilot program had to be randomly selected. Thus, 150 villages across malaria-endemic Western Orissa were chosen to be part of the impact evaluation; with 50 villages randomly selected for selling nets, and 12

The number of villages in which members were given free nets was also 50 as was the number of villages that were only given the information campaign.

Randomly selecting the villages which were offered nets on microfinance means that the microfinance for nets villages should not be in any way systematically different from those in the other two treatments

BISWA no longer uses community organizers to process loans. They now choose to have the community organizers act as advocates of the SHG. Community organizers communicate the needs of the SHG with â&#x20AC;&#x153;area coordinatorsâ&#x20AC;? who conduct all financial transactions.

Optimizing Microfinance Distribution Channels

50 villages each for the other two treatments. Third, the area in which the pilot program was conducted was made as large and varied as possible, to engage the intervention in as many environments as possible. This way, any conclusions would be less likely to simply be a result of the uniqueness of a single setting. While impact evaluation standards bring rigor and inferential leverage, hinging the pilotâ&#x20AC;&#x2122;s location on the needs of an impact evaluation may have had some drawbacks. Without these considerations, BISWA could have chosen the area where the program would have been most likely to succeed. For example, they might have chosen to pilot somewhere where they had a health camp, more experienced managers and staff, or where members had expressed problems with malaria. Of course, any statistical conclusions would have been less meaningful, but the flexibility and ability of management to learn operational lessons could have been enhanced had the pilot been run in a smaller area.

5.5 Collecting Repayment At the inception of the project, BISWA used community organizers (COs) to disburse and collect loans from the SHGs. Although COs visit their SHGs on a monthly basis for collection of loans, they do not always end up collecting an installment. This is because BISWA includes a limited amount of flexibility in repayment of loans, which is fairly unique for the microfinance sector. Specifically, they allow SHGs to vary the size of repayments from one month to the next. For example, an SHG may choose not to make any payment in one month, and in the next month, repay three times its regular monthly installment. The BISWA management believes that their clients enjoy this flexibility and prefer paying in lump sums in times when they have their highest incomes, such as after the harvest. For the ITN loan, BISWA initially decided to change their loan collection process. Rather than accepting lump sums, the researchers and management intended to collect the repayment for the net loan in small equal monthly installments. BISWA and the researchers believed that the amount was so small that it would be simple for clients to pay it every month and that there was no need to introduce flexibility.

5.6 Educating Prospective Customers BISWA and the researchers recognized that one of the most difficult aspects of selling ITNs to SHG members would be a dearth of demand due to the lack of knowledge about malaria and the benefits of ITNs. Therefore along with selling the nets, there would need to be an intensive information campaign that attempted to educate the members on why they should want to buy a net and why they would want it to be treated with insecticide. Proper use of the net would also have to be demonstrated. To develop this information campaign, the researchers worked with Dr. Dipti Patnaik of BISWA, a specialist in preventative medicine. The script for the information campaign developed can be found at the back of this booklet in Annex II. Along with this presentation, the SHG members were shown posters which visually clarified how to use the ITN. The members were also given example nets to observe their size and feel. When nets were purchased, the nets were dipped in insecticide in front of the members so that they could observe the process. 15

A surplus of nets were to be brought to the village in case of high demand.

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One member of CMFâ&#x20AC;&#x2122;s research field team and a SHG CO presented the information campaign to SHG clients. A month prior to the rollout of the pilot, the COs were given a one-day training on malaria. BISWA and the researchers believed that it was possible that training the CO on the benefits of the net would make them better at promoting net purchase and use.

5.7 Length of Time Given for Purchasing Decision BISWA and the researchers decided that because a net purchase might represent a substantial investment, members should have time to discuss the purchasing decision with their families. It was thought that this might increase take up because some members may have felt that it was not their place to make this decision without their husband or wifeâ&#x20AC;&#x2122;s approval. BISWA and the researchers together decided that they would give the information campaign and explain the offer and return two days later to take orders as well as distribute and treat the nets.

The Pilot

In September 2007, BISWA launched the pilot program for selling ITNs through microcredit contracts. The offer was made to SHG members in 47 villages across 5 districts. As planned, in each village at least one CMF field staff member and one BISWA community organizer conducted an information campaign to groups of SHG members (a maximum of 40 people could be in one group). Following the information campaign the offer was given to the members and orders were taken two days later. The program was completed in late October. The implementation of the pilot did not encounter major logistical complications. In 85% of cases, either the targeted SHG member or another member of their household was present at the information campaign, as well as an unknown number of people from households without a

Nets Sold

District Level Analysis Nets Sold During September-October 2007

Number of Biswa Members in SHGs Offered Nets

Nets sold as a Percentage of Members Offered

All Districts

891

1919

46.4%

Sambalpur

153

203

75.4%

Phulbani

121.3%

Kendujhar

227

273

83.2%

Balangir

190

758

25.1%

Bargarh

264

638

41.4%

Districts

Three of the villages had to be left out of the pilot program because the self help groups in these villages were no longer operational.

This number is calculated from data collected on a sample of the pilot population, made up of 10-15 households per village.

The number of SHG members offered nets is not equal in each district as the number of villages chosen was proportional to the population size of the district.

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BISWA member. The simple observations of the research team indicate there were varying levels of attentiveness during the information campaign. In some SHGs, all of the members showed great interest and asked many questions, but in others the members seemed bored and confused. The pilot led to the purchase of 891 nets. The table below demonstrates that the success of the program, in terms of selling nets, varied across the five districts. This paper will not speculate on the possible causes of differences between the outcomes in each district. The intention is simply to reveal that it is not homogeneous. BISWA and the researchers found the take up to be lower than expected and BISWA had ordered over 1,000 more nets than they actually sold. Considering this net surplus, the researchers suggested to BISWA that they return to these same villages and offer the nets again. The logic behind this was that more people would buy nets after observing the effectiveness of other community members. BISWA agreed to this return visit, and during November 2007, one BISWA community organizer and one BISWA staff member returned to each village to “re-offer” the nets. An abbreviated version of the information campaign was given along with a repeated explanation of the different products. One major difference of the “re-offer” from the original offer was that members were not given any time to think over their purchasing decision. They had to decide whether they wanted to purchase the nets during the meeting. The following table shows how many nets were sold in the original offer, the “re-offer,” the total number of nets sold and how many SHG members were targeted for sale.

Nets Sold

District Level Analysis Nets Sold During September-October 2007

Number of Biswa Members in SHGs Offered Nets

Nets sold as a Percentage of Members Offered

All Districts

891

1919

46.4%

Sambalpur

153

203

75.4%

Phulbani

121.3%

Kendujhar

227

273

83.2%

Balangir

190

758

25.1%

Bargarh

264

638

41.4%

Districts

BISWA and the researchers found the take up to be lower than expected and BISWA had ordered over 1,000 more nets than they actually sold. Considering this net surplus, the researchers suggested to BISWA that they return to these same villages and offer the nets again. The logic behind this was that more people would buy nets after observing the effectiveness of other community members. Three of the villages had to be left out of the pilot program because the self help groups in these villages were no longer operational. This number is calculated from data collected on a sample of the pilot population, made up of 10-15 households per village. The number of SHG members offered nets is not equal in each district as the number of villages chosen was proportional to the population size of the district.

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BISWA agreed to this return visit, and during November 2007, one BISWA community organizer and one BISWA staff member returned to each village to “re-offer” the nets. An abbreviated version of the information campaign was given along with a repeated explanation of the different products. One major difference of the “re-offer” from the original offer was that members were not given any time to think over their purchasing decision. They had to decide whether they wanted to purchase the nets during the meeting. The following table shows how many nets were sold in the original offer, the “re-offer,” the total number of nets sold and how many SHG members were targeted for sale.

Nets Sold

District Level Analysis

Nets Sold During Original Offer

Nets Sold During Re-Offer in November

Total November Nets Sold

# of Biswa Members in SHGs Offered Nets

Total Nets Sold as Percentage of Members Offered

All

891

237

1128

1919

58.8%

Sambalpur

153

222

203

109.4%

Phulbani

140.4%

Kendujhar

227

310

273

113.6%

Balangir

190

253

758

33.4%

Bargarh

264

277

638

43.4%

Districts

Take up increased by an additional 25%, but the increase was not as substantial as the researchers and BISWA had hoped. Considering the travel, labour and management time involved, it would be difficult to consider the “re-offer” an operational success.

Consumer Preference

As explained in the product description section, beyond simply making the decision of whether or not to buy a net, SHG members were forced to make a variety of other choices: At 97%, customers overwhelmingly chose to purchase the nets on credit contracts. One can only assume from this result that the ability to defer payment and/or pay for the net over a one year period was much more attractive to clients than paying in cash. We might also assume, though this is more speculation, that some of those who purchased on credit did not have enough liquid savings on hand to purchase the net(s), but believed they would have enough income over the year to pay.

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A slim majority of the clients that purchased nets preferred to spend extra money at the time of the offer to buy the retreatment, instead of paying for retreatment in cash when the BISWA COs and CMF field staff returned after 6 and 12 months. SHG members preferred double nets to single nets on a ratio of 4:3.

The Retreatments

In March-April 2008, six months after the original ITNs on microcredit offer, at least one BISWA CO and at least one CMF field worker returned to each village. They retreated the nets of those who had purchased it in advance, and offered the opportunity for retreatment to those who did not purchase the retreatment option (15 rupees for each single net and 18 rupees for each double net to be paid in cash). During this period, BISWA was able to treat nearly 80% of those members who purchased nets with retreatment. The primary causes for the missing 20% were that some members were not at home when BISWA and CMF field staff visited the village and because some members had gifted the net to someone living outside the village. These members will be reimbursed for the money they spent on the retreatment. Thirty percent of the members who did not choose to purchase treatment at the time of the original offer chose to purchase the retreatment with cash. Percentage of Nets Purchased with Retreatment Retreated in March 2008

78%

Percentage of Nets Purchased without Retreatment Retreated in March 2008

30%

In September 2008, 12 months after the original offer, BISWA and CMF field staff returned to once again retreat the nets. Data is not yet available on how many of each kind of net was retreated.

Optimizing Microfinance Distribution Channels

Key Challenges Going Forward and Lessons Learned

At the time of writing, it is unclear whether BISWA intends to scale up the program. As is generally true in the implementation of a pilot program, a number of unexpected challenges and difficulties arose. This section will describe a number of the difficulties going forward and how it might be possible to mitigate these challenges in the future. Perhaps the key lesson which runs throughout this section is the importance to researchers of understanding and working within the operational structure of the microfinance institution.

9.1 Staff Motivation and Incentives BISWA trains community organizers to promote SHG formation and to manage the distribution and collection of cash loans. As such, the ITN loan represents a new responsibility with an added workload. While many COs were excited and eager to participate in the program, others felt that it was a burden on top of the large amount of responsibility they already had (both at work and at home). Additionally, the COs were given the added responsibility without any incentives, besides knowing the product would improve health outcomes for their client. At the time of the loan offer, community organizers were paid based on the number of SHGs they were managing, and not based on the size or quality of their portfolio. So in fact, CO may have felt a disincentive for pushing ITN purchase, as collecting the net loan would cause more work without any extra pay. During the loan offer, many of the COs were quite active in explaining and promoting the nets, but many others barely participated and left the Centre for Micro Finance field staff to shoulder the burden alone (even though the CMF field staff were not hired for this purpose).

9.1.1 Future Considerations and Lessons Learned While the BISWA COs were given a one day training on ITNs and the BISWA nets offer, it is possible that increasing the length and quality of the training would have improved CO motivation and their ability to promote the product. Additionally, if COs are to be heavily involved in promoting the product, there should be some incentive for their work. However, a monetary incentive based on number of sales might tempt BISWA COs to pressure or force members into buying nets. Perhaps a monetary incentive based on knowledge or excellence in participation could be given to participating COs. On the opposite end, it may also be reasonable not to have COs involved in the net program beyond administration of the loan and instead let an outside agency, such as a health NGO, take up promotion. It is indeed presumptuous to expect COs to easily take on additional work when they already have a great deal of responsibility and work in maintaining their SHGs.

BISWA has changed their incentive structure, and now limits the number of SHGs that a CO can manage to increase the quality of service. The most important incentive offered is the opportunity for promotion.

Optimizing Microfinance Distribution Channels

9.2 Collection of Repayment for the ITN Loan One of the main issues of the pilot still left to be resolved is the repayment of the ITN loan. Collecting repayment presented a number of unforeseen challenges. As mentioned in the “Designing the Product” section, BISWA and the researchers decided to use an EMI system for collecting the repayment of the nets. It was intended that the COs for each SHG would collect small monthly installments for the net. Because of the small size of the loan, it was expected that these monthly installments would be simple to collect. In reality, using an EMI system was confusing and awkward for the COs. Both the COs and the SHG members were unaccustomed to credit contracts that required monthly repayments with no flexibility. Several months into the one year period for repayment, it became clear the COs were not actually collecting the loan on a monthly basis. Sometimes members chose to repay the amount of the loan earlier than required and more common were SHGs skipping payment during one month. When non-EMI payments occurred, the COs were confused about how to calculate the remaining interest and how much to collect in the future. After considering the problem, BISWA and the researchers agreed that the simplest way to solve the problem was to give up on using the EMI system and inform COs that they could collect the ITN loan in the same manner that they would collect a regular BISWA cash loan.

9.2.1 Future Considerations and Lessons Learned It seems clear in retrospect that introducing a new method of loan collection introduced unnecessary complexity to the pilot program. When using microfinance distribution channel for nets or to sell any other non-financial product it is important to maintain as much consistency as possible with processes already used by the MFI.

9.3 Reasonability of Independent, Small Loans Throughout the implementation of the pilot program, many of the BISWA and CMF staff involved in the project suggested that the price for the net was too small for the operational effort of maintaining the loan. Loan maintenance includes filling out and registering the loan documents with the district office, inputting the information on the loan application into BISWA’s management information system (MIS), depositing every payment made by the SHG, and inputting these deposits into the MIS. Some of the SHGs included in the pilot do not have a cash loan and several COs stated that it is inefficient to visit these SHGs on a monthly basis to collect less than 100 rupees. Local BISWA management also has to spend valuable time monitoring these loans.

9.3.1 Future Considerations and Lesson Learned: In the case study on the implementation of health insurance by SKS Microfinance also included in this packet, the authors describe how SKS came to the decision to bundle their health insurance product along with a cash loan and have the premium paid upfront. This decision stemmed from SKS’s pilot, where they found that disseminating the health insurance product separately from the loan and having clients pay the premium

The important information on the loan document includes the names of all the members of the SHG, the date on which the loan was initiated, the amount of the loan and the term of the loan.

Optimizing Microfinance Distribution Channels

in installments was inefficient. Although the SKS health insurance product was mandatory, the BISWA ITN loan faced some of the same problems. Although this has not been tested, it seems worth testing whether selling ITNs at the same time that the cash loan is distributed might be more efficient. In this case, either the net would be paid for upfront out of the cash loan or the amount of the cash loan would be increased by the cost of the net. This is another example of where the program might benefit from being better integrated within BISWAâ&#x20AC;&#x2122;s current framework.

Appendix 1: Timeline of Events September 2005

After discussions with a team of researchers, BISWA decides to research the viability and impact of using their microfinance network to sell insecticide treated bednets (ITNs) to improve malaria outcomes.

Aug 2007

BISWA community organizers (COs) are trained on malaria and the ITN product they are to promote and sell

Sep-Oct 2007

BISWA offers SHG members across 50 villages the opportunity to purchase ITNs for cash or on credit.

Nov 2007

BISWA offers another opportunity to the SHG members to purchase ITNs for cash or on credit after observing the nets purchased by their neighbors.

March 2008

Due to the reduced efficacy of insecticide after 6 months, BISWA staff and members of the research team return to the 50 villages to offer retreatment of nets to those BISWA members who had earlier purchased nets

Sept-Oct 2008

After another 6 months, BISWA staff and members of the research team return to the 50 villages to offer retreatment of nets to those BISWA members who had earlier purchased nets

Appendix 2: Information campaign (to be translated into Oriya or local dialects) Namaste. We are part of a research team based in India and the US that with the permission of the Health Department of Orissa is working with BISWA to learn more about and improve the health situation in your village. We would like to tell you today about how mosquitoes can make people sick, especially from malaria, and ways that you can stop this.

Optimizing Microfinance Distribution Channels

Malaria Malaria is a very deadly disease. It can make a person very sick, and cause them to have fevers, body aches, and chills. Usually, malaria can be treated with medicines, but in some extreme cases, it can damage the brain (“brain malaria”) or cause someone to die. Many people die from malaria every year in India, especially in Orissa. Malaria can make everybody sick, and it is very important for everyone in the village to know about this disease. It is especially important for young children and pregnant women, because malaria is especially dangerous to them. These are the people most likely to get sick and die from malaria. Malaria may precipitate miscarriage, abortion, or still birth and may complicate pregnancy by causing severe anemia and low-birth weight infants, and in severe cases, death of the baby or mother.

Mosquitoes Mosquito bites give people malaria. Malaria is not spread by bad food, bad air, getting wet in the rain, or bad water. Even if someone in a house is sick with malaria, other people in the same house don’t get it by touching, breathing, or sharing food or water with that sick person. What spreads malaria is a mosquito bite. If a person has malaria and is bitten by a mosquito, that mosquito can then be infected with malaria, and if this mosquito later bites someone else, it can give malaria to them. Other diseases, like filariasis [Batho], which can cause permanent swelling of the legs, are also spread by mosquitoes in the same way. Because of this, it is very important to avoid mosquito bites. It is important to try to wear long sleeve-shirts, long pants, and to cover the skin as often as you can. You can also use mosquito repellants, or burn mosquito coils to keep mosquitoes away. All of these things help prevent mosquito bites, and thus help prevent malaria and other mosquito-borne diseases. Now we would like to tell you about another even more important way to avoid getting bitten by mosquitoes and prevent malaria.

Bednets and ITNs One of the best ways to prevent malaria is by sleeping under a bednet/mosquito net. Most of the mosquitoes that give malaria bite during the evening or at night. Therefore, it is important for everyone to sleep under a net every night. This way, mosquitoes can’t reach you, and can’t bite you. Sleeping under a net at all times means mosquitoes cannot give you malaria, and if you have malaria you will not give this to someone else. Bednets work even better when they are treated with an insecticide (in Oriya the translation will literally be “medicine that kills/paralyzes mosquitoes”). This chemical not only keeps mosquitoes away, but also kills them or makes them sick if they touch the net. This kind of net is called an insecticide-treated bednet (ITN). Even though they kill mosquitoes, these insecticide-treated nets are very safe for people. It is important to wash/dip the net in insecticide every 6 months, or there will not be enough chemicals to keep killing the mosquitoes. Using these kinds of nets means there will be less mosquitoes around, and therefore less malaria.

Optimizing Microfinance Distribution Channels

Benefits of ITNs In many places, using ITNs has made a big improvement in the health of a village. This is felt by everybody, but especially by the children less than 5 years of age and pregnant women. Less people get sick, and less people die from malaria when ITNs are used in a village. It is most important for children under 5 years and pregnant women to sleep under an ITN every night, but we think it is very important for everyone in the village to sleep under an ITN every night, so that your women and children will lead healthier, longer lives. Of course, another benefit of sleeping under a net is that you will be able to sleep more peacefully, without worrying about mosquito bites and their annoying buzzing sound!!

Proper ITN use (can be demonstrated) You should hang the ITNs so that they cover an entire bed or sleeping space. It is important not to leave uncovered the areas where people sleep. Once a person is in the bed or inside the mosquito net, it is also important to tuck the net under the mattress, bed, or mat so that mosquitoes can’t get into the sleeping area. During the day when the net is not in use, throw the net up over the bed or the sleeping area so it is out of the way and won’t get damaged. If any holes form, it is important to sew them up so mosquitoes can’t get though. Remember that mosquitoes want to bite you, and if you leave areas of your bed unprotected, or if your bednet has holes, the mosquito will find a way to enter and bite you!

Proper bednet treatment with insecticide (can be demonstrated) We will dip the nets into the insecticide for you; we will be following instructions on the treatment package. The insecticide solution is mixed with a measured amount of water in a large pan or bowl. The net is dipped into the solution until it is all soaked up. The net is then dried in the shade on the ground. It is important not to allow ITNs to be left in the sun, because this stops the chemical from working and they should not be hanged on a rope for drying, because the chemicals will drip away. Once the chemical is on the net and dry, it has almost no harmful effects, but it is important to be careful when mixing and treating the nets. The person mixing the solution and soaking the nets should wear gloves and also protect their eyes. Never drink or eat water or food with this chemical on it. The chemical may also hurt fish and should not be poured in or used near any water supply, lake, river, ocean, or stream

ITN Offer BISWA and the researchers have arranged for ITNs to be made available to all BISWA SHGs formed before December 01, 2006 in your village. You can buy these ITNs by taking a loan from BISWA or by paying cash. We strongly urge you to purchase enough ITNs to cover all sleeping spaces in your house and help lower the risk of malaria. It is particularly important for pregnant women and children under the age of 5 to sleep under ITNs. The nets need to be retreated every six months in order to remain effective against mosquitoes. Also, remember that it is not compulsory for you to purchase any nets from BISWA and if you do not wish to buy nets this will not affect your relationship with BISWA.

Optimizing Microfinance Distribution Channels

If you decide to purchase the nets for a loan from BISWA, we have two offers for you: 1)

In the first offer, you can buy a single net from BISWA by taking a loan for Rs 173 and Rs 223 for a double net. The interest rate for this loan is 20% an annum and you can repay the loan in 12 small monthly installments of Rs 16 (for a single net) and Rs 21 (for a double net). The installments include both principal and interest. If you wish to opt for this offer, we will treat the nets before giving them to you. However, after 6 months and again in 12 months when we return to the village to retreat the nets, you will have to pay BISWA approximately Rs 15 for every single net and Rs 18 for every double net that you wish to have treated.

The second loan is a bit larger but will cover the cost of ITN plus two retreatments – one after 6 months and another after 12 months. You can buy a single net from BISWA by taking a loan for Rs 203 and Rs 249 for a double net. The interest rate for this loan is 20% an annum and you can repay the loan in 12 small monthly installments of Rs 19 (for a single net) and Rs 23 (for a double net). The installments include both principal and interest. Because this second type of loan covers both the price of the net and the price of the next two retreatments (one after 6 months and one after 12 months), if you opt for this, you will not have to pay any more money for the retreatments that will take place every six months for one year from now. After 6 months and again after 12 months, we will return to the village and retreat the nets for you.

Of course, if you wish, you can also purchase these nets for cash by paying Rs 173 for every single net and Rs 223 for every double net.

Appendix 3: References Cited Curtis, C., C. Maxwell, M. Lemnge, W. L. Kilama, R. W. Steketee, W. A. Hawley, Y. Bergevin, C. C. Campbell, J. Sachs, A. Teklehaimanot, S. Ochola, H. Guyatt, and R. W. Snow (2003). Scalingup coverage with insecticide-treated nets against malaria in Africa: who should pay? The Lancet Infectious Diseases 3(5), 304–7. Government of Orissa (2004). Human Development Report 2004: Orissa. Government of Orissa. Guyatt, H. L., S. A. Ochola, and R. W. Snow (2002). Too poor to pay: charging for insecticidetreated bednets in highland Kenya. Tropical Medicine & International Health 7(10), 846–50. Korenromp, E. (2005). Malaria incidence estimates at country level for the year 2004. Proposed estimates and draft report. Technical report, Roll Back Malaria, World Health Organization, Geneva, Switzerland. Narasimhan, V. and A. Attaran (2003). Roll Back Malaria? the scarcity of international aid for malaria control. Malaria Journal 2. http://www.malariajournal.com/content/2/1/8. Sachs, J. and P. Malaney (2002). The Economic and Social Cost of Malaria. Nature 415, 680–685. Sachs, J. D. (2005). Achieving the Millennium Development Goals. The case of malaria. New England Journal of Medicine 352(2), 115–117.

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Safety of Pyrethroids for Public Health Use. Technical report, World Health Organization, 2005. Sahu, S. S., P. Jambulingam, T. Vijayakumar, S. Subramanian, and M. Kalyanasundaram (2003). Impact of alphacypermethrin treated bed nets on malaria in villages of Malkangiri district, Orissa, India. Acta Tropica 89(1), 55–66. Snow, R. W., C. A. Guerra, A. M. Noor, H. Y. Myint, and S. I. Hay (2005). The global distribution of clinical episodes of Plasmodium falciparum malaria. 434, 214–217. Yadav, R. S., R. R. Sampath, and V. P. Sharma (2000). Deltamethrin treated bednets for control of malaria transmitted by Anopheles culicifacies (Diptera: Culicidae) in India. Journal of Medical Entomology 38(5), 613–622.