Profile

IFMR Trust is a private trust whose mission is to ensure that every individual and every enterprise in India has complete access to financial services.

This mission can be achieved only through systemic changes in the Indian financial system. Our vision of the financial system comprises three components:

1. Frontline provision of high-quality and adequate financial services

India is a vast and diverse country, with a large rural population. It is unrealistic to expect a few national institutions to have the reach to provide financial services to every individual and every enterprise -- the cost-to-serve would be extremely high, and there would be huge information gaps.

We believe it is necessary to have a number of permanent, local and autonomous entities that will serve as the last mile for financial intermediation.

2. Orderly transfer of risk

However, local entities would typically be thinly capitalised and concentrated regionally. If their level of activity and outreach is determined only by the extent of direct capital on their books, the entities are doomed to slow rates of growth.

We believe scale can be engineered if we combine the local footprint of these entities with the ability of well-capitalised financial institutions to manage risk.

Orderly transfer of risk between local entities and larger financial institutions and markets would address information asymmetry as well as the moral hazards inherent in this multi-tier design.

3. Holding of risk by well-capitalised diversified entities

If local providers of financial services hold all the risks locally, clients will be greatly exposed to local and regional shocks, such as natural disasters and crop failure. They will not get the security and liquidity of savings and insurance that can be offered by large, diversified entities.

A stable and inclusive financial system should therefore have mechanisms that facilitate the warehousing of risk by well-capitalised and diversified entities that have the ability to manage risk efficiently.

Working with several partners, we seek to advocate changes in the Indian financial system that would enable development of the above three components.

Our advocacy effort is strengthened by research to enhance our understanding of the Indian financial system, as well as operations in areas where, despite repeated attempts, the Indian financial system has failed to evolve effective models, and the need for demonstrated success is high.

Consistent with the vision outlined above, we are directly incubating three operating models, through three ventures:

• Through IFMR Holdings we are developing working prototypes of localised, high-quality entities to provide financial services in remote parts of rural India. These entities are called Kshetriya Gramin Financial Services (KGFS) companies.
• Through IFMR Advisory Services we are launching a private equity fund, the Network Enterprises Fund, to eliminate systemic risk and make small rural enterprises 'financeable' by local banks/financial institutions.
• Through IFMR Capital we are creating a financial intermediary that will ensure orderly transfer of risk between the originators and aggregators of risk.

IFMR Trust Advocacy Unit (ITAU) spearheads our advocacy efforts, which are strengthened by experiences from the other three ventures.

We bring to our efforts expertise in the design, delivery and scaling of financial services and a deep understanding of mainstream markets. Many of our efforts are guided by practical insights gained from action-research conducted at specialised centres of our affiliate, Institute Financial Management and Research (IFMR), Chennai.

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