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ICICIBankandMicroFinanceinIndia*

ByMalcolmHarper
ASIA
INDIA
ICICI
November2005

*Thiscasestudyresearch,thankstofundingfromtheFordFoundation,isaworkingdocumentandpartofa
multicountryreviewofsuccessfulinnovationsinimprovingaccesstofinancialservicesforpoorpopulationsin
ruralareasthroughlinkagesbetweentheformalfinancialsectorandinformalfinancialinstitutions.Theglobal
review,coordinatedbytheRuralFinanceGroupoftheFoodandAgricultureOrganization(FAO)oftheUnited
Nations, examines 13 cases in Africa, Asia and Latin America. Results from multicountry study will be
publishedinaforthcomingbookinearly2007.

Content

Introduction

1.
2.
3.
4.

MicrofinanceinIndia
MicrofinanceInstitutionsinIndia
BanksandmicrofinanceinIndia
ICICIBank
4.1 TheoriginsoftheBank
4.2 ICICIBankandMicrofinance

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4.3 ICICIBanksDeliveryModels
ICICIsRiskReductionMechanisms
TheICICIBankdeliveryprocess
5. ICICIBankandBasixFinance
5.1 BasixFinance
5.2 TheICICIBankEquityinvestments
5.3 ICICIsportfoliopurchase
6. TheCARECASHEfacilitation
7. PragathiSevaSamithi,Warangal(PSS)
7.1.ThePSSMACSandtheirSHGsICICIBankloans
TheJeevanajyothiMACS
ThePragathiMACS,Deekshakuntla
TheSpandanaMACS
TheOrugalluMACS.
7.2 ThefinancialimpactoftheICICIloansonfinalborrowers
8. BharatIntegratedSocialWelfareAgency(BISWA),Sambalpur,Orissa
8.1BISWA
8.2 BISWAssourcesoffunds
8.3 ThefinancialimpactoftheICICIBankloans
8.4 Remainingchallenges
8.5 StoriesfromatwoSHGs

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TheLaxmidunguriGosthiSHGinDurgapalliVillage
TheBhalubahalSHG
9.ICICIBankandCashpor
10.SomeOutstandingIssues

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Bibliography

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ICICIBankandMicroFinanceinIndia

Introduction
ThispaperdescribestheactivitiesofICICIBank,Indiassecondlargestcommercialbank.It
introducesmicrofinanceandbankinginIndiaanddescribeshowbanksinIndiaarecurrently
engaging in microfinance, followed by an introduction to ICICI Bank and a general
descriptionoftheBanksmicrofinancepolicies andpractices.Threeofthemanymicro
financeinstitutionswithwhichtheBankisengagedaredescribed,andtheimpactonthe
borrowersaddressed.Thesampleinstitutionsare:
1 BasixFinanceisoneofIndiaslargermicrofinanceinstitutions.ICICIBankhasmadea
small equity investmentinoneoftheBasixgroupsoperatingcompanies,andhasalso
purchasedapartofitsmicrofinancecroploanportfolio
2 PragathiSevaSamithi (PSS)isaquitesmalllocallybasedNGOinAndhraPradesh,
whichisinvolvedinmicrofinanceaswellasawholerangeofothersocialwelfare
activities,andhaspromotedanumberoffederationsofselfhelpgroups.ICICIBankhas
2
lent$100,000 toitsselfhelpgroupcustomers
3 BISWA is alargernongovernmentorganisationinOrissa,thepooreststateinIndia,
which is engaged in education, vocational training, health care and other welfare
activities,aswellasmicrofinancethroughselfhelpgroups,andhastakenbulkloans
fromanumberofcommercialbanks.ICICIBankhaslent$250,000totheirclientself
helpgroups.
ThethreecasesareselectedbecauseBasixisaleadingMFIinIndia,andwasthefirsttodo
businesswiththeBank.ItremainstheonlyMFIinwhichtheBankhastakenequity.PSSand
BISWAarerespectivelythesmallestandthelargestofthelesswellknownsecondtierMFIs,
whichhavebeenlinkedwithICICIwithfacilitationfromCARE.
Themaponthenextpageshowsthelocationofthethreeinstitutions,andthatofICICI
Banksheadoffice.
1.MicrofinanceinIndia
India has a relatively welldeveloped financial sector. There are 27 governmentowned
banks,operatingnationwide;morethan20majorprivatebanks,andseveralthousandpublic
sectorandcooperativebanks,inurbanandruralareas.Therearesome66,000commercial
bankbranches,andover100,000branchesofotherbankinginstitutions.With16,000people
1

Severalinformants,rangingfromselfhelpgroupmembersandotherfinalborrowers,toseniorbankexecutivesassistedmeingathering
thisinformation.Thewomenclientsgavetheirvaluabletimeandinformationfreely,andarethanked.Whiletheymightneverreadthis
paper,Ihopethattheirgenerositywillinduecourseberepaidthroughbetterfinancialservices,tothemselvesandothersinIndiaand
internationally.IneedtoalsothankallthestaffofICICIBank,ABNAMROBank,GrameenFoundation,BasixFinance,theBellwether
Fund,PragathiSevaSamithy,BISWA,SpandanaandJeevanjyothiMACS,theSaraswati,Pragathi,OrugalluandLaxmidunguriSHGsfor
alltheirhelp.JiteshPandaofShrishtiFoundationcollectedandpresentedtheinformationfromOrissa.
2
IndianrupeesareconvertedtoUS$atanapproximaterateofRs50=$1.00

perbankbranch,Indiaiswellbankedbycomparisonwithmostothercountriesatalow
level of economic development. There are also several thousand nonbank financial
institutions,whosemainactivityissavingsmobilisation.Someofthese,suchasSaharaand
Peerless, have nationwide networks of branches and agents, and tens of millions of
customers,whileothersoperatelocally.

Thefinancialsystem isregulatedandsupervised bytheReserveBankofIndia,andthe


financialandotherrequirementsfornewbankinglicencesareextremelyhigh.Thisprevents
mostmicrofinanceinstitutionsfromtakingdeposits.
Thereisalsoalargeinformalfinancialmarket,includingvillagemoneylendersandtraders,
localchitfundsandenormousnumbersofextralegalsavingscollectorsandlenders.The
poorestpeopleareparticularlydependentontheseinformalsuppliers,with36percentofall
ruralcreditneeds,and78percentoftheneedsofthepoorestruralpeople,beingmetby
informalsuppliers.(www.basixindia.com).
Indiacamelatetothenewparadigminmicrofinance.Thisisunfortunate;sinceIndias400
milliondesperatelypoorpeopleneedaccesstomicrofinance.TheadvantageisthatIndiacan
nowbenefitfromtheexperienceofothercountries.Thegovernmentspendmanyyearstrying
to alleviate poverty with massive programmes of directed credit. These programmes had
limited success, and were often hijacked by the less poor and were used as a patronage
mechanismbypoliticiansandbureaucrats.Theydidhoweveroccupytheinstitutionalspace
whichmightotherwisehavebeenfilledbymicrofinanceproviders.
Whiletheseprogrammeshelpedsomepeople,theyalsoleftlongtermscarsonthecountrys
financial system. The cheap soft loans, often combined with subsidies, were distributed
throughtheenormousnetworkofsome150,000bankbranches,includingruralcooperative
banks(Harperetal,2005).Recoverieswerepoor,oftenbelow30percent,anddefaultwas
3
furtherencouragedbylocalandevennationalloanwaivers .
Someindependentinstitutionspersistedintheirsearchformoreeffectivewaysofbringing
financial services to the unbanked. In 1976 the Selfemployed Womens Association
(SEWA)openedacooperativebankforurbanragpickersandotherwomeninAhmedabad.
Thisgrewsuccessfully,butwasnotreplicated,andthehardcoreofpovertywasintherural
areas,where70percentofIndiasoveronebillionpeoplelive.
In spite of the close proximity of Bangladesh, and the similar conditions of abject rural
poverty,theGrameenBankmethodologydidnotspreadsignificantlyinIndiauntiltheendof
th
the20 century.TherigorousapproachtheGrameenBankusedwasperhapstoofarremoved
fromthelowinterestratesandsoftpoliciesofthegovernmentsponsoredprogrammes.
TheMysorerehabilitationanddevelopmentassociation(MYRADA)startedinthelate1980s
toexperimentwiththeformationofwhatlaterbecameknownasselfhelpgroups(SHGs),
basedontraditionalSouthernIndiansavingsandcreditgroups,andonearlierexperiencein
ThailandandIndonesia.SHGsareeffectivelymicrobanks,withbetweentenand20women
formingagroup,ontheirowninitiative,orwiththehelpofanNGOorotherselfhelpgroup
promoter.Eachmembersavesaregularsmallamount,usuallybetweentenand50centsa
week. They are encouraged to deposit their savings in a savings account with a nearby
commercialorcooperativebank,andtheReserveBankofIndia(RBI),thecountryscentral
bank,hassince1994allowedunregisteredgroupstoopensavingsaccountsandtoborrow
3

Themostdramaticandmostdamagingcasewasin1990,whentheGovernmentofIndiadeclaredthatallfarmloansinruralareas
under$200whichhadbeenoutstandingforthreeyearsormoreneednotberepaidatall.Thisbenefited32millionfarmers,andcostthe
Governmentalmosttwobilliondollars,butthemainbeneficiarieswerethebetterofffarmerswhoownedland,notthepoorerlandless
labourers(Shylendraetal1994)

frombanks.Afterafewmonthsthegroupmakesloanstoitsmembersfromtheircommon
savingsfund.
If the SHG need to supplement their savings fund, they can borrow from a bank. The
membersarefreetosetwhateverinterestratetheylikeontheirloans,andtheyusuallyaddon
asubstantialmarginoverwhattheypaythebank,inordertobuildtheirowngroupequity.
Intheearly1990s,buildingonMYRADAsexperience,theNationalBankforAgriculture
andRuralDevelopment(NABARD),thegovernmentsinstrumentforfinancialdeepeningin
ruralIndia,startedtoencouragethebankstoacceptSHGsascustomers,forsavingsandfor
loans.NABARDrefinancesbanksloanstoSHGsat5.5percent.Thissubsidyisstillbelow
someinstitutionscostoffunds.ThebankshavegenerallylenttoSHGsat12percent,andthe
resultingspreadof6.5percenthas usuallybeenconsideredadequatetocovertransaction
costs.
NABARDalsopromoteandfinancecapacitybuildingforbanksandNGOs,topromoteSHGs
andinthatwaylinkthemtobanks.Byearly2004atotalof110000bankstaff,21000NGO
staff,25000Governmentofficialsand430000SHGofficersandmembershadbeentrained.
NABARDalsoprovidesfourmilliondollarsinSHGpromotiongrantstoNGOsandbanks;
thesegrantsaredisbursedonaperformancebasis,dependingonthenumbersofSHGswhich
havereachedcertaindefinedstagesintheirdevelopment(NABARD,2004).
Asaresultofthismassiveprogrammeoftrainingandothersupport,SHGshavebecomethe
dominantdeliverychannelformicrofinanceinIndia.Bytheendof2004,almost1.5million
SHGs,withperhaps20millionmembers,weresaidtohaveborrowedfrombanks,andmore
savingsaccountswereopened,inordertoqualifyforloans.Thenumbersmightbeover
stated,sincemanygroupsreconstituteafteraperiodofinactivity,causingdoublecounting.
Nevertheless,itisestimatedthatasmanyas20percentofIndiasonehundredmillion
poorhouseholdscouldhavesomeaccesstoformalfinancialservices.
ThesmallnumberofGrameenreplicatorshasalsogrownveryrapidly,particularlyinrecent
years,althoughtheiroutreachisstillmuchlowerthanSHG.Theoutstandingportfolioof
SHARE,thelargestinstitutionusingtheGrameenmethod,grewfrom55000clientsin2001
to 600 000+ clients in 2005. Some 64 percent of all microfinance clients in India are
membersofSHGs,24percentareborrowingfromGrameenreplicators,andthebalanceis
takingsmallindividualloans(Sharma,2005).
2.MicrofinanceInstitutionsinIndia
Specialisedmicrofinanceinstitutions,orMFIs,haveplayedarelativelysmallpartinthe
evolutionofmicrofinanceinIndia,withinstitutionssuchasMYRADAandSEWAbeingthe
pioneers.Sincethelate1990sbanklinkagestoSHGsisthedominantmethodology,withas
muchas80percentofthemarketfallingintothatcategory.ThereareseverallargeMFIs,
occupyingvariousniches,andtheycontinuetoevolveandgrowinspiteofthefastexpanding
SHG linkagemovement.InsomestatestheSHG linkages areusedbygovernments as a
vehicleforthedistributionofsubsidiesandotherpoliticallymotivatedlargesse.This
5

contributedtooutreach,particularlyintheSouthernStateofAndhraPradesh,buthasnot
improvedthequalityorsustainabilityofthegroups.
NGOshavealwaysplayedthedominantroleinpromotingasopposedtofinancingSHGs,but
anumberofNGOshavethemselvesbecomeinvolvedinfinancialintermediation.Theyhave
donethisforanumberofreasons:
1 The NABARD programme is focused on financing SHGs in rural areas. There is no
comparableprogrammeforthegrowingnumberofpoorpeopleinthecities,andsome
MFIsarefillingthisgap.
2 ThereisarelativelysmallbutveryfastgrowinggroupofGrameenreplicatorsinIndia,
which operate in areas of extreme poverty, or in urban areas, where SHGs are less
prevalent. NABARD does not refinance Grameentype loans, or urban loans, and
NABARDsponsoredtrainingrelatesentirelytotheSHGmethodology.
3 Indiaiswellbankedinrelationtoitslowlevelofdevelopment,butsomeofthepoorer
ruralareasarenotwellserved,andmanylocalbranchmanagersarestillnotconvincedof
themeritsofSHGsascustomers.SHGsprefertoborrowfromanNGOwhosestaffthey
know,ratherthanwithasociallydistantbankerwhomaystillnotbewillingevento
allowthemtoopenasavingsaccount.
4 NGOsarealwaysinsearchofsustainability,andforincomesourcesthatdonotdepend
ondonorgoodwill.Microfinanceisseenasawayofdoingthis.
SomeinstitutionshavemovedfromconventionalNGOwelfareactivitiestomicrofinance,
and others started as MFIs. The RBI forbids unlicensed institutions from taking demand
deposits, but some MFIs have found ways round this, such as by forming nominally
independentsavingscooperativeswhichtakemembersdepositsandthenlendthemtothe
nonbankfinancecompanyforonlending.
Thismethodoffinancingisquiterecent,andhasonlybeenadoptedbyasmallnumberofthe
larger MFIs which have the necessary organisational sophistication. Most MFIs have
traditionally depended on donor grants for onlending funds and for their operational
expenses,butdonorsarecomingtoexpectthemtoraisefinancefromcommercialoratleast
semicommercialsources.Asampleof90IndianMFIswhichhadbeenratedbyMCril,the
countrysleadingmicrofinanceratingagency,werebylate2003raising35percentoftheir
fundsfrominstitutionaldebt,asopposedto31percentfromgrants(MCrilMicrofinance
Review,2004).March2005dataforthe62mainIndianmicrofinanceinstitutionscompiled
bySaDhan,theinstitutionsrepresentativebody,showedthattheyhadtogetherborrowed
$52millionfromcommercialsources,whiletheiroutstandingportfoliostotalled$71million;
theyreliedondonorsandequityforthebalanceoftheirfunds.
ThemajorsourceofsemicommercialfundsisthemicrocreditfundoftheSmallIndustries
DevelopmentBankofIndia(SIDBI).In2004thefundhadaportfolioof20milliondollars,
lenttoaboutfiftyofthelargerMFIs.SIDBIalsoprovidesgenerouscapacitybuildingsupport
6

to its partner MFIs, as part of a $25 million grant from the British Department for
InternationalDevelopment.
TheSIDBIfundisnotconstrainedbyanyshortageoffinance,butmostMFIsareanxiousnot
to be overreliant on one source, particularly since SIDBI is a governmentowned
developmentbank.ThemissionstatementofBasix,oneofthemajorMFIsandaborrower
fromSIDBI,containsthephrase..tobeabletoaccessmainstreamcapital...Likemany
MFIs,inIndiaandelsewhere,Basixwantstodemonstrateinitsbalancesheetaswellasits
operationsthatmicrofinancecanbeaviablebusinessproposition,andaccessingcommercial
bankloansisanimportantwayofdoingthis.SIDBIloansrequiremoreformalities than
commercialbanks,suchasspecialboardresolutionsanddirectorsseats.Therearethusmany
reasonswhySIDBIhasnotachievedthehighshareofbulklendingtoMFIswhichhasbeen
achievedbyPKSFinBangladeshorsimilarfundselsewhere.
Interest rates are falling quite dramatically in India in recent years; the Reserve Banks
indicativebankratewas11percentinJanuary1998and6percentbythebeginningof2005.
ThisinfluencedMFIsandbanksshiftawayfromdevelopmenttocommercialsourcesof
finance for microfinance activities. NABARDs 5.5 percent refinance, and SIDBIs bulk
loansat11percent,wereattractivewhenmarketinterestrateswerearound12to14percentor
evenmore.However,nowSIDBIsreducedrateof9percentisnotcompetitivewiththe
commercialbankoffertoMFIsofbulkloansat8percentorevenlessandmanybankshave
stoppedtakingNABARDrefinance.Themarginalcostoffundsislittleabove5percent,and
bylendingtheirownsurplusbalancestoSHGstheycanavoidthehassleofapplyingand
accountingforNABARDrefinance.
3.BanksandmicrofinanceinIndia
BankshavethemajorshareoftheIndianmicrofinancemarketthroughtheirdirectbranch
basedbusinesswithselfhelpgroups.
The following table shows the SHG lending performance up to March 2004 of the five
leadingnationalisedbanks,andoftheothermaincategoriesofbanks.
PublicSectorBanks
StateBankofIndia
CanaraBank
AndhraBank
IndianBank
IndianOverseasBank
Otherpublicsectorbanks
PrivateBanks
RegionalRuralBanks
CooperativeBanks

Source:NABARD2004,op.cit

Branch/outlet
numbers
9033
2424
1227
1377
1427
53583
7590
15,000
106,000

Amountlent
toSHGs
$137mn.
$19mn.
$73mn.
$49mn.
$22mn.
$104mn.
$47mn.
$255mn.
$74mn

Number
SHGs
131,700
24,700
81,600
47,200
31,500
200,000
21,700
405,000
134,600

of

AccordingtotheMCrilsampleof90MFIstheyhadlentabout$165milliontoalmosttwo
million people, orone fifth of the banks lending toaround one tenth of the numbers of
borrowers.ThisisbecausemanyoftheMFIsmakerelativelylargeloanstoindividuals,as
opposedtoloanstoSHGsorthroughGrameengroups.Therearealsoafewverysubstantial
GrameenreplicatorsamongtheMFIs,withseveralhundredthousandborrowerseach,and
their members tend to borrow small annual loans, unlike SHG members who may only
borrowonce,orevennotatall,andwhoseSHGsmayrepaythebanksoveraslongasthree
years.
The31majorprivatebanksinIndiahaveverylimitedbranchnetworksandservemainly
salariedindividualsandcorporateclients.ICICIBank,forinstance,Indiassecondlargest
bankintermsofitsassets,hasonly470branches,ofwhichonly88areoutsidethemain
cities.Theprivatebankshavelessthan5percentofthedirectSHGmarket,andonlyone
smallprivatebank,theKrishnaBharathiSamruddhiLocalAreaBank(KBSLAB),partofthe
Basixgroup,specialisesinmicrofinance.
Allbanks,includingprivatebanks,havetoreserve40percentoftheiradvancesforwhatis
calledtheprioritysector,whichisbroadlydefinedasruralareas,smallindustries,exporting
firmsandhousing,andwithinthis18percentmustbereservedforagriculture.Analternative
way of meeting this target is to lend the equivalent amounts to governmentcontrolled
institutionssuchasNABARDortoSIDBIatunremunerativeinterestratesof6percentor
less,whichthenpassthefundsontoprioritysectorborrowersortostategovernmentswhich
investtheminruralinfrastructureorforotherqualifyingpurposes.Thereis,however,very
strong pressure on all Indian banks to do a substantial amount of direct priority sector
business,andnottobuythemselvesoutoftheirobligationswithindirectinvestments.The
RBIcanevencuttheinterestpaidonNABARDorSIDBIbondsifitisperceivedthatabank
isusingthemtobuyitswayoutofitsprioritysectorobligations.
Thereisthusastrongincentiveforbankstofindwaysofachievingtheirprioritysector
targets,whichapplyirrespectiveofwhetherthebankhasorhasnotabranchnetwork
throughwhichitcandeliverqualifyingloansdirectly.Thebankingcommunityarecoming
toappreciatethatmicrofinanceloanportfolioshavemanyadvantages:
1 Ontime recoveries of over 95 percent are normal. This is particularly remarkable to
Indianbankerswhohavebecomeaccustomedtodefaultsofwellover50percentunder
governmentsponsoredprogrammes.
2 Theyarerelativelyinsensitivetoprice;microfinancecustomersvalueaccessabovecost,
andMFIsaresimilarlywillingtopaythecostofconvenientandaccessiblefunds.
3 Microfinance is fashionable and private banks, particularly those which are foreign
owned,areanxioustoshowgovernmentsandthegeneralpublicthattheyaresocially
responsible.Microfinancelendingcanbebothprofitableandgoodforimagebuilding.
4 Itistobehopedthatsomemicrofinancecustomerswillonedaybecomemainstream
bankingclients.

Anumberofcommercialbanks,intheprivateandthepublicsectors,havethereforestartedto
makebulkloanstoMFIs,andtomakelongertermequityinvestmentsinwhatmayeventually
beamajordistributionchannelforallkindsoffinancialproducts.
SomeofthenationalisedbankshavealsostartedtosupplementtheirdirectbranchbasedSHG
businesswithbulkloanstoMFIs.Theymaydothisisareaswheretheirownbranchnetwork
isweak,orwhereparticularMFIshaveaverystrongpresence.InMarch2004theStateBank
ofIndiahadlentalmost$20millioninbulkloanstoMFIs(Harper,Singh,op.cit.).Somefeel
thatMFIsarethemostefficientwayofenteringthemicrofinancemarket,sincetheyhavea
specialisedoutreachandorganisationalculture,whileothersfeelthatSHGisabetterroute.
ThetruetransactioncostsofdealingdirectwithSHGsisdebatablesincemanybranchstaffis
underemployedsothatthemarginalcostoftheirtimeisverylow.Itisgenerallyagreed,
however,thattheinitialcostofpromotinganSHGcannoteasilybeabsorbedbyabank.
The newer private banks, however, do not have the option of choosing whether to deal
directlyorindirectlywithmicrofinancecustomers.Withouttheirownbranchnetworks,they
havetodealthroughMFIs.In1998,GlobalTrustBank,anewandveryaggressivelymanaged
privatecommercialbank,lent$800000toBasixFinance;thiswasthefirstloanbyaprivate
commercialbanktoanMFI,andwasalsothefirstloantoaforprofitmicrofinancecompany,
ratherthantoanNGO.TheinterestratewasbelowtheBanksprimerate,at10.5percent,
sinceNABARDhadagreedtorefinanceitat6.5percent.Themoneywasnotnecessarily
destinedforSHGs,andNABARDwaiveditsnormalrequirementsthatrefinancedfundswere
onlytobelenttoSHGs;theinterestcapontheonlendingratebytheMFIwasalsowaived.
Sincethattime,anumberofotherIndianandforeigncommercialbankshavelentsubstantial
sums to MFIs. ABNAMRO, a multinational bank based in the Netherlands, is a good
exampleofhowamoreprogressiveforeignbankhasbecomeinvolvedinmicrofinance.
ABNAMRO Bank had previously experimented with direct microfinance in Brazil, and
opened four specialised microfinance branches for this purpose. The results were
disappointing,achievingonlyamilliondollarsofbusinessinfouryears,partlybecauseofthe
publicsgeneralandoftenwellfoundedmistrustofbanksinBrazil.InIndiatheyaretryinga
different,indirectapproach.TheyappointedadedicatedVicePresidentformicrofinance,
andshehasrecruitedtwoassistantswhohavesomeearlierknowledgeandexperienceof
microfinance.ThisgroupseeksoutsuitableMFIsandmakesbulkloanstothem,atinterest
ratesbetween9and12percent.Theloansaresecuredonlyagainsttheunderlyingportfolios,
and the MFIs are required only to submit a simple monthly return of the repayment
performance. By early 2005 ABNAMRO had a microfinance portfolio approaching $5
milliontosixMFIs,withafurthertwomilliondollarsundernegotiationwithfourinstitutions.
ThisbusinessisnowpartoftheBankssocialcorporateresponsibilitydepartment,butitis
plannedtomoveitintomainstreambankinginthenearfuture.Itisestimatedthatthemicro
financeportfoliowillreach12milliondollarsbytheendof2005,andthatitmayeventually
stabiliseataround30milliondollars.ThisshouldbeseeninthecontextofABNAMROs
totalIndiabusinessofsometwobilliondollars.
9

4.ICICIBank
4.1TheoriginsoftheBank
ICICIBankisIndia'slargestprivatebank,anditssecondlargestbankofanykind.Itwas
establishedin1994,andbyearly2005itsassetsexceededUS$26billion.Ithas470branch
offices,mainlyinurbanareasandlargerdistricttowns,andnearly2000ATMs,andhas15
000 employees. By contrast State Bank of India, the largest Indian bank, was originally
formedin1806,andhas9033branchesandover200000employees.SBIsassetsamountto
some70billiondollars.
Between 1994 and 2001 ICICI Bank was a subsidiary of ICICI Limited, a public sector
developmentfinanceinstitutionwhichwaspromotedbytheWorldBankandtheGovernment
ofIndiain1955toprovidemediumandlongtermcredittoprivateIndianfirms.In1998
ICICILimitedreduceditsshareholdingintheBankto48percentthroughapublicoffering,
andin2002,ICICILimitedanditsothersubsidiarieswereabsorbedintoICICIBankthrough
areversemerger.ICICIBankhassubsidiariesintheUnitedKingdomandCanada,branches
inSingaporeandBahrainandrepresentativeofficesinseveralotherterritories.TheBank's
shares arelistedontheMumbaiStockExchangeandontheNew YorkStockExchange
(NYSE);itwasthefirstnonJapaneseAsiancompanytobelistedinNewYork.
ICICIBankaimstobealeaderineveryfieldofbankinginIndia,whetheritiscorporate
banking,foreigntransactions,housing,insuranceorconventionalservicesforthesalaried
middleclass.Theyfollowahighlycentralisedmodelofdecisionmaking,wherebyalllending
decisionsaremadeatheadofficeinMumbai,usingcreditscoringtechniques.Thebranch
officesactascashhandlingcentres,andthesmallerruraldistricttownofficeshaveonlytwo
orthreestaff.TheBankhasrecruitedalargeforceofindependentagents,orfranchisees,who
originateloanbusinessfromtheirrespectiveterritories,andwithspecialisedcustomerssuch
asvehicleandhomeappliancedealersandhomebuilders,andpassthemthroughthebranches
toheadofficeforimmediatedecisions.
TheBanktakestheviewthatmostofitscompetitors,withtheirlargefullservicebranch
networks,arestrongatdepositmobilisation,andweakatmakingloans.Theaverageratioof
depositstoadvancesfortheIndianpublicsectorbanksin2003was2.1to1;theequivalent
figureforICICIBankwas0.68to1(IBABulletin,2003).TheBanksbusinessmodelforces
ittorelyheavilyoninterbankloansaswellasotherlongertermsourcesoffinanceforsome
45percentofitsresources.Thesebearhigherinterestratesthanshorttermdeposits,although
thetransactioncostsofmobilisingsuchfinancearemuchlower,andtheBankistherefore
determinedtoturnarounditsassetsasquicklyaspossible.Theythereforepackageandsellon
theirassetstootherfinancialinstitutionswheneverpossible,andtheyhavedesignedavariety
ofapproachestoreducingtherisksinherentinthesepackagesofloansinordertomaximise
thepricetheycangetforthem(Giddy,2004).
1
0

4.2.ICICIBankandMicrofinance
ICICIBankenteredthemicrofinancemarketin2002.Amongthereasonsforenteringthe
marketisitsgoaltoleadineveryfieldofIndianbanking.Otherincludes:
1 ThereversemergermeantthatICICILimitedsportfoliowas aggregatedwiththatof
ICICIBankforthepurposesofcalculatingtheBanksprioritysectorlendingquota.This
createdurgentneedforadditionalqualifyingassets,sincethereturnsoncompensating
penaltyloanstoinstitutionssuchasNABARDandSIDBIwerelikelytobelowerthan
ICICIBanksaveragecostoffunds.
2 ICICIBankhadpurchasedtheprivatelyownedBankofMadura,inSouthernIndia,inthe
year2001.TheBankofMadurahadasubstantialportfolioofloansto600SHGs,and
ICICIBankhadsomehowtointegratetheseaccountsintoitsbusinessmodel.
3 TheBankofMadurasexperienceshowedthatmicrofinanceloanswereofhighquality,
andthatthemarketwouldpayrelativelyhighinterestratesforgoodqualityservice.ICICI
Banks management believe that their model of offering services through specialised
intermediaries, such as car loans through vehicle dealers, housing finance through
builders, or microcredit through microfinance institutions, can offer better quality
servicethanbankscanthroughtheirmultipurposebranchnetworks.
4 ICICI Banks management believe that their micro finance clients will migrate into
mainstreambanking,andmicrofinanceisaformofcustomerdevelopment.
5 The Bank is highly visible, and has a obvious branch presence in the richer parts of
Mumbai,DelhiandmicrofinanceoffersawaytodemonstratetheBankscommitmentto
socialaswellaseconomicandfinancialgoals.
ICICIBankstarteditsmicrofinanceactivitiesunderitsSocialInitiativesGroup(SIG).This
Groupishalfwaybetweenthecorporateresponsibilityareaandtheforprofitbusiness.The
SIGisresponsibleforstrategicsectorwidedevelopments,anditsuccesshasalreadyledto
competitionfromotherbanks,learningfromthepioneeringworkofSIG.
Thebulkofthemicrofinanceactivityhasnowbeentransferredtomainstreambusiness.The
fivemembermicrofinanceteamislocatedintheruralandmicrobankingandagribusiness
group,withinthewholesalebankingdivision.Theyhavealsosetupaspecialisedcentrefor
practicalactiondirectedresearchinmicrofinance,whichislocatedinChennai,inanexisting
stafftrainingcentreoftheBank.
Asaprivatesectorbank,ICICIBankfeelsthatitshouldfocusonimprovingindividuals
capacitytoaccessformalfinancialservices,ratherthanworkingatthecommunitylevel.The
BankthereforeendeavourstodealdirectwithindividualsorwiththeirSHGswhentheyare
organisedinthisway.TheysometimesworkthroughcommunitySHGfederationsorsimilar
bodies, but the emphasis is on developing individual customer relationships whenever
possible.
1
1

Byearly2005ICICIhadaportfolioofabout$66millionthrough27partnerMFIs,andloans
through a further 11 institutions were under negotiation. Indian microfinance has grown
rapidlybutinequitably;BiharandUttarPradesh,whicharehometo37percentofIndias
poorestpeople,onlyhave9percentoftheoveronemillionSHGs(NABARD2004,ibid.)
ICICIBankisattemptingtoreversethistrend,andanumberofitspartnerMFIs,including
Cashpor,oneofthelargest,arelocatedinthepoorerNorthernStates.
TheBankaimstoincreaseitsmicrofinanceportfolioto$4billiondollars,workingthrough
200MFIs.Therearesome1600MFIsinIndia,butonlyaboutadozenofthesearepresently
ofsufficientsizeorstrengthtobesuitablepartnersforICICIBank.TheBankistryingto
developtheircapacity,throughpracticaltraining,andalsothroughaprogrammeofmentoring
wherebyseniorstaffoftheBank,notfromthemicrofinanceteam,makeregularvisitsto
assistMFIstoimprovetheirsystemsandtoadoptsomeelementsofabankingculture.This
programmeisthoughttobeofgreatbenefitnotonlytotheMFIsbutalsotothementors,who
maypreviouslyhavehadlittleornoexposuretotherealitiesofpovertyintheirowncountry.
TheBankisalsocollaboratingwiththeCARECASHEprojecttodevelopsecondtierMFIs
(seesection6).
ICICIBankispackagingandsellingonitsmicrofinanceloans,toforinstanceUTIBank,one
ofthelargerprivatebanks.InthiswayICICIcanenhancethequalityandpriceofthese
assets.Itmayeventuallybepossibletocreateaninternationalsecondarymarketinmicro
financedebt,suchasalreadyexistsformanyothersecuritisedassets,buttheprioritysector
eligibilityoftheBanksloanstoMFIsmeansthattheyarepresentlymoreattractivetoIndian
banks.
4.3.ICICIBanksDeliveryModels
ThefollowingtablesummarizestheperformanceofthemaincomponentsofICICIBanks
microfinanceportfoliofrom2002to2004.
Particulars

DirectAdvancesto
SHGs
Advances
under
PartnershipwithMFIs
Securitized
MicrofinancePortfolio
AdvancestoMFIsfor
onlending
Total

March31,2002

March31,2003

March31,2004

Borrowers

Borrowers

Amount
o/s
$13.96
mn.
$0.12
mn.

Borrowers

Amount
o/s
$3.41
mn.

$1.12
mn.
$4.53
mn.

$1.04
mn.
$15.12
mn.

21,900

21,900

65,080
867

65,947

0
197,257
16,666

213,923

Amount
o/s
0
$38.56
mn.
$2.22
mn.
$0.43
mn.
$41.21
mn.

Theinitialmodel,inheritedfromtheBankofMadura,wastolenddirecttoSHGswithoutany
formoffinancialormanagementintermediation,inthesamewayasSBIandtheotherbanks
withlargebranchnetworks.Thisapproachhasnotbeencontinued,evenintheoldBankof

1
2

Maduraarea,wherethemethodhasbeenabandonedinfavourofavariantofthepartnership
approachwhichisdescribedbelow.
Thepartnershipapproachaccountsforover90percentoftheBanksmicrofinanceportfolio
andisexpectedtoremainthedominantmode.TheBankcarefullyselectspartnerMFIswhich
havesubstantialoutreachandhighqualitymicrofinanceportfolios.Theselectionprocessis
basedmoreonthequalityoftheportfolio,andoftheMFIsmonitoringsystems,ratherthan
onthefinancialstrengthoftheMFIitself,sincetheBanklendstotheMFIscustomers,and
nottotheMFIitself.
TheloansarenegotiatedanddisbursedtotheSHGsorindividuals,bystaffoftheMFIor
other intermediary partner, acting as agents of ICICI Bank. The partner MFIs, and on
occasion their partner SHG federations, cooperative societies or other institutions, are
remuneratedfororiginatingandmaintainingtheaccounts,andforrecoveringtheloans.They
maybepaidaflatfeeperSHG,asisthecasewithDhanFoundation,alargemultistateMFI
basedinTamilNadu.Alternatively,andmorecommonly,themanagingintermediariesare
paidapercentageoftheloaninterest.
These fees are paid in addition to ICICI Banks interest charges, so that the SHGs or
individualsactuallypayintotalsimilarratestothosetheywouldpayiftheywereborrowing
fromtheMFI.TheirloanagreementsstateICICIBanksinterestrates,notthetotalincluding
the fees. Three officers of each SHG and every individual borrower from a Grameen
replicatorsignloanagreementswithICICIBank,notwiththeMFI.Theagreementshaveto
beaccompaniedbyphotographsofthesignatories,andproofofresidence,suchasavotersor
a ration card, although this individual identification may in special cases be waived and
replaced by group attestation from the local village leader. This process ensures that the
borrowersunderstandthattheyarecustomersoftheBank,andnotoftheMFI.
The previous Chairman of the Bank of Madura set up a Foundation under the name
MicrocreditFoundationofIndiatotakeoverthemanagementofSHGaccountsinthesame
wayasotherpartnerMFIsmanageaccountsforICICIBank.WhentheBankofMadurawas
taken over by ICICI Bank in 2001, it was lending to 600 SHGs. At the time of the
Foundationsestablishmenthisfigurehadgrownto4333groupsandbylate2004over8000
SHGswasborrowingfromtheBankunderthepartnershiparrangement.
AnalternativeapproachwastomakedirectbulkloanstoMFIs,similartothemethodadopted
byABNAMROBank.ICICIBankmadeover$2.5millionofsuchadvancesin2002and
2003.Similarly,theBankhasalsopurchasedpackagesoftheexistingassetsofMFIs,ona
branch or other basis, and in some cases they have set up ontap portfolio purchase
arrangements, whereby the Bank purchases receivables on an ongoing basis. These
approachesareconvenientfortheMFI,sincetheyprovideacontinuoussourceoffundswhich
isautomaticallyinlinewithrequirements.
BulklendingandportfoliopurchasewithMFIshavemorerecentlybeendeemphasised,since
theBankisveryanxioustobuildaconsumerfranchiseattheleveloftheindividualborrower,
oratleastherSHG.LoanstoMFIs,particularlythelargeroneswithwhichtheBankprefers
todeal,arefelttobetooremoteforthispurpose,andthefinancialconditionofmostMFIs,
1
3

exceptforthefewlargestones,isnotsuchastoinspireconfidence.ICICIBankbelievesthat
therisksinvolvedindirectloanstoSHGsaremuchless.
ICICIBankhasadoptedthisapparentlyrathercomplexpartnershipmethod,ratherthan
lendingdirecttoMFIsorotherintermediaries,foranumberofreasons:
1 MostIndianMFIs,apartfromthelargestinstitutionssuchasBasix,SHARE,Cashporand
afewothers,undertakeawiderangeofsocialwelfareactivitiesaswellasmicrofinance,
andaredependentongrantsfortheirsurvival.ICICIfeelsthatthequalityoftheindividual
or SHGs loans, when aggregated, is much higher than the quality of debt from the
intervening MFIs, and sufficiently high to justify quite low rates of interest. If the
interveningMFIsorotherinstitutionsareinsolvent,theBankstillretainsownershipofthe
loans.
2 ICICIBankwishestodevelopadatabasewhichisrepresentativeofIndiaspopulationas
awhole.ThedirectlendingapproachgivestheBankuniquecustomernumbersanddata
forfutureanalysisandmarketdevelopment,andforfurthersalestothesamecustomers.
ThesemightincludelifeinsurancefromICICIPrudential,andgeneralinsurancefrom
ICICILombard.
3 TheBanktriestoensurethattheclientsareawarethattheyareborrowingfromICICI,
eveniftheyneverseeanyonefromtheBankitself.TheBankisconfidentthatiftheyare
satisfied,thesecustomerswillbecomeloyalindividualmainstreamcustomerswhenthey
andtheBankarereadyforthisstageoftheirrelationship.
4 TheprioritysectorrequirementsareenforcedmorestrictlyonprivateIndianbanksthan
onpublicsectororforeignbanks.Theremaybesomedoubtastothequalificationof
loanstoanMFI,whichmaybeurbanbased,butthereisnodoubtaboutadirectloantoan
SHG,oraGrameenreplicatorscustomer.Thisis particularlyimportantwhenmicro
financeloansaresecuritisedandsoldontootherIndianinstitutions.A$320,000package
of loans from SHARE, Indias largest Grameen replicator, has already been sold to
Development Commercial Bank, an urban bank which is in need of priority sector
portfolio.
ICICIsRiskReductionMechanisms
ICICIBankreducesitsrisk,andalsoensuresthecommitmentoftheinterveningMFIs,by
takingfirstlossguaranteesfromtheMFIs,whichvaryinamountaccordingtotheperceived
qualityoftheportfolio.Therearevariouswaysinwhichthiscanbedone,andtheBank
choosestheapproachdependingonhowlongtheyhaveworkedwiththeMFI,andonthe
MFIsownpreferences.
1 TheMFIsopensafixeddepositfortherequiredamount,whichvariesaccordingtothe
Banksperceptionofthequalityoftheloans,andhasthusfarbeenbetween8percentand
15percentoftheamountsinvolved.Thisdepositcannotbewithdrawnuntiltheloanshave
beenrepaid,andcanbedrawndownbyICICIBanktocoveranylosses.
1
4

1 TheMFIisgivenanoverdraftlimitwithICICIBank,uptotherequiredamount,andthe
BankcanrequiretheMFItoexercisethis,andcancoveranylossesfromtheresulting
credit.
2 ThefeeswhicharepaidbytheclientstotheintermediaryMFIsarelockedinaseparate
accountwiththeBankuntilthedebtsarefullycleared.
3 AthirdpartycandepositthenecessaryguaranteeonbehalfoftheMFI.TheGrameen
FoundationoftheUSAhasdonethisforICICIBankloansthroughCashporandSHARE,
IndiaslargestGrameenreplicators.
SuchguaranteescanbeusedtoenhancethequalityofsecuritisedloanswhichtheBankmay
choosetosellontootherinstitutions,andthustoimprovethepriceobtainedbytheBank.
Alternatively,theloansandtheassociatedMFIsobligationsmayberetainedbyICICIBank
shoulditbedecidednottopackageorsellontheassetsarisingfromloanstoaparticular
groupofclients.
TheGrameenFoundationisintheprocessofsettingupGrameenCapitalIndia.Eventually,it
isplannedthatGrameenCapitalwillbeableitselftobuyportfoliosfromMFIs,tomanagethe
riskthroughvariousformsofcreditenhancementandthentosellthemontobanks.Itis
anticipatedthatthiswillsubstantiallybroadenthemarket,sincethebanks,unlikeICICIBank
atthepresenttime,willnotneedthemselvestoidentifyorassesstheMFIsandtheirclients.
TheICICIBankdeliveryprocess
ICICIBanksappraisalprocessisverysimple,sinceitfocusesnotontheinterveningMFIs
butontheactualborrowers,whethertheyareSHGsorindividuals.Amemberofthemicro
financeteamspendsperhapsonlyoneoratthemosttwodaysassessingaMFIsportfolio.
AfterabriefinspectionoftheMFIsloanaccountingandmonitoringsystems,theyvisita
randomsampleofcustomers,tocheckthevalidityoftheheadofficerecordsandthequality
ofthegroupsownrecords.
TheBankisquiteclearthattheirintentionisnottoratethestrengthoftheMFIsown
balancesheet,butitscapacitytofacilitatetherelationshipsbetweentheBankandSHGs
orotheractualborrowerstowhomtheBankwilllend.TheyratetheMFIsmanagement
capacity,thequalityofitsMISanddatareportingsystems,thecompetenceofitsfieldstaff
andthequalityofthetrainingitprovidestoitsSHGsanditsownstaff.
AftertheloanshavebeendisbursedbytheMFIstaff(whodrawthenecessaryfundsfromthe
nearestICICIBankbranch),theaccountsaremonitoredfortheBankbylocallyrecruited
contract staff and auditors. They follow apreset procedure to verify the monthly returns
whicharesubmittedbytheMFIs.Onefulltimemonitorisappointedforeverypartnerwhose
portfolioexceedsonemilliondollars.Thesemonitorsarepaidonlyabout$100amonth,but
reliableandreasonablywelleducatedpeoplecanbehiredinIndiaforthisamount.Theyare
rigorouslytrainedtofollowtherequiredproceduresandtoobserveobviousdangersignals.
TheBankisawarethatifanMFIcollapsedtheywouldhavesomedifficultiesinrecovering
alltheirdues,inspiteoftheseprecautions.Themonitoringprocedureswouldgivethemearly

15

warningofanyseriousproblems,andthatthefirstlossguaranteesprovidegoodprotectionin
thefirstinstance.Also,asalastresorttheycanselltheremainingbalanceofanyremaining
portfolio to another MFI, or could subcontract the collection to an appropriate agency.
Fortunately,thishasnotyethappenedanditisinfactveryrareforanNGOorMFIinIndia
actuallytoceasetoexist.Theymaywithdrawfromcertainactivities,forlackofsupport,but
itislikelythattheSHGfacilitationtaskwouldcontinuetobeundertaken,sincetheBankis
payingforittobedone.
ICICIBankpartnershipapproachdoesnotprovideitsMFIpartnerscustomerswithsafeand
accessiblesavingsfacilities;itssmallbranchnetworkdoesnotprovidemorethanaverysmall
minorityofitsmicrofinancecustomerswithaccessiblesavingsservices.TheRBIregulations
forbidthewidespreaduseofcollectionagents,andtheBankisexperimentingwithamoney
marketmutualfundproductwhichissupervisedbytheStockExchangeRegulatorandisnot
thereforesubjecttothesamerestrictions.Thisproductmightallowweeklyorevendaily
depositsandwithdrawals,ofaslowasfiftyrupees,butitisstillbeingdeveloped.
TheBankisalsoexperimentingwithavarietyoftechnologybasedapproachestofinancial
productdistribution,suchassmartcardsandlocalkiosks,buttheircosteffectivenessremains
tobeproven.Inadditiontoofferingmainstreaminsuranceproductsfromitstwoaffiliated
insurancecompanies,theICICIgroupisalsoengagedwiththeBasixgroup,oneofitsearliest
MFIpartners,inthedevelopmentofmicroinsuranceproductstocovercropandlivestock
losses. This includes a unique rainfall insurance product, which is described later in this
paper.TheBankalsoassiststhemostdisadvantagedwithlivelihoodassistance.Theyare
therefore workingin a few locations with their large scale agrobusiness clients, suchas
millersorfarminputsuppliers,todevelopmutuallyprofitablewaysofbringingpoorerpeople
intotheformalmarketplace.Thusfar,thesenonfinancialinitiativeshavenotproceeded
beyondtheexperimentalstage,andnopossibilitieshaveemergedforcombiningthemwith
theBanksmicrofinancepartners.
Inearly2005ICICIBanksmicrofinanceportfolioamountedtonomorethanathirdofone
percentoftheBankstotalassets,butitisgrowingfasterthanmostotherareas,andisrather
moreprofitablethantheaveragefortheBanksbusinesssectors.Thereisnoneedforthestaff
who work in microfinance, or for management who support them, to justify the micro
financeportfoliobyreferencetoitssocialorpublicrelationsbenefits,ortoviewitasan
investmentinfutureclientdevelopment.Thespreadonmicrofinanceadvancesisashigh,
andthetransactioncostsareaslow,asinothersectionsoftheBankswork,becausethecosts
havebeeneffectivelyoutsourcedtospecialistinstitutions.Thisisfundamentallyconsistent
withtheBanksapproachtoanyotherbusinesssector,suchashousingorvehiclefinance,and
managementarenowconfidentthatmicrofinancehasbeensecurelymainstreamedwithinthe
Bank.

1
6

5.ICICIBankandBasixFinance
5.1BasixFinance
BasixFinanceisanewgenerationfinanceandlivelihoodpromotioninstitution.Basixwas
establishedin1996andbyearly2005,theyhad85,000poorborrowers.Theheadofficeisin
HyderabadinAndhraPradesh,butitsactivitiesarespreadover44districtsandeightstatesof
India.ThemainconcentrationofBasixbusinessisinAndhraPradeshandKarnatakainthe
SouthandintheadjacentStateofOrissaintheEast,butBasixisworkingtoextendtheir
workinpoorerstatessuchasChattisgarhandJharkand.
TheaverageloanfromthetwolendinginstitutionsintheBasixgroupis$170.Halftheloans
areforfarmingandtheotherhalfforawiderangeofnonfarmactivities,andabout30
percentofthecustomersarewomen.Thetwooperatingcompaniesmadeacombinedprofitof
about$150,000intheyearendingMarch2004..
Basixmissionistopromotealargenumberofsustainablelivelihoods,includingtherural
poorandwomen,throughtheprovisionoffinancialservicesandtechnicalassistance.Basix
aimstoearnacompetitiverateofreturnforitsinvestors,toenablethemtoaccessmainstream
capitalandhumanresources.
Inpursuitofthismission,Basixhassetupafourcompanystructure,asshownbelow:
BASIXLtd
(HoldingCompany)

BhartiyaSamruddhi
Finance,Ltd
(NBFC)

KrishnaBhima
SamruddhiLocalArea
BankLtd(KBSLAB)
(LicensedBank)

IndianGrameen
Services(IGS)
(NonProfitCompany)

1 BhartiyaSamruddhiInvestmentsandConsultingServicesLtd(BASICSLtd)isthegroup
holdingcompany,throughwhichequityanddebtinvestmentsaremadeinthefollowing
threegroupcompanies,whichweresetupwhenBasixitselfwasstartedin1996orshortly
thereafter.
2 Bhartiya Samruddhi Finance Ltd (Samruddhi) is an RBI registered nonbank finance
company (NBFC), owned by a number of Indian and foreign financial institutions,
includingasmallequityshareholdingfromICICIBank.Samruddhiisengagedinthe
provision of microloans, and also retails insurance products and provides technical
assistanceservicestosomeofitsborrowers.Asasmallandrelativelyrecentlyformed
NBFC,Samruddhiisnotpermittedtomobilisesavings,andhasthereforetakenbulkloans
frommanyIndianandforeignsources,includingICICIBank.
1
7

1 KrishnaBhimaSamruddhiLocalAreaBankLtd(KBSLAB)isanRBIlicensedbank
which provides microloans and savings services in three districts, and also retails
insuranceandprovideslivelihoodservices.KBSLABislicensedundertheLocalArea
Bankregulationswhichwereintroducedin1996bytheRBItoallowsmallerbankstoset
up and operate in restricted local areas. Only five such banks have been licensed,
however,becauseofresistancefromtheestablishedbanksandtheirstafftradeunions,and
KBSLABistheonlysuchbankwhichspecializesinmicrofinance.Basixwouldlikethe
activitiesofSamruddhialsotobeundertakenunderthebankingregulations,sincethis
allowsforsavingsmobilization,butthereseemstobenoimmediateprospectofthisbeing
possible.KBSLABispresentlynegotiatingaloanfromICICIBank,sinceitscustomers
savingsbalancesarenotyetenoughtocoveritslending.Theratioofsavingstoloansis
howeverincreasing,anditshouldinafewyearsbeunnecessaryforKBSLABtotake
loansfromotherfinancialinstitutions.
2 Indian Grameen Services (IGS) is a notforprofit company engaged in research,
developmentandtrainingrelatedtolivelihoods.IGShasalsosetuptheIndianSchoolof
LivelihoodPromotion,tolearnfromandsharetheBasixgroupsexperienceinlivelihood
developmenttootherinstitutionsinIndia.IGSreceivesitsincomefromfees,fromthe
returnsonitscorpusfundsandfromgrantswhichitreceivesfromtimetotime.ICICI
Bankmadeagrantof$56000toIGSin2003,forfurtherstudyofpossibleITapplications
tomicrofinance.
Thetwooperatingcompanieshadacombinedportfolioofover$11dollarsatthebeginningof
2005.Only$2.4millionofthisamountwasraisedfromcustomersavingsandfromsecurity
deposits,sincethelargeroperatingcompanyhasnobankinglicense,andthismeansthatbulk
loanandonoccasionequityfundshavetobeobtainedfromavarietyofothersourcestocover
thebalanceofcustomersrequirements.
Attheendof2004,companiesintheBasixgroupwereobtainingfinancefromSIDBI,UTI
BankandHDFCBankinIndia,andfromCanadianCIDA,viatheDesjardinsFoundation,
Cordaid of the Netherlands, the Ford Foundation, Swiss Development Cooperation, and
ShorebankoftheUnitedStates.Additionally,theequityshareholdersincludedICICIand
HDFCBanks,theInternationalFinanceCorporation(IFC),Hivos oftheNetherlands and
Shorebank.
Basixisalsoinvolvedindistributinginsuranceproducts,bothasacompulsoryadjuncttoits
loansandasstandaloneproducts.Basixhassoldinsurancetoabout100,000people,butdoes
notitselfactasaninsurer.Itworkscloselywithvariouscompaniesonlife,health,livestock
andcropinsurance.
One of Basix partners is ICICI Lombard, with whom Basix has for some time been
developingandtestingauniquecropinsuranceproduct,basedonlocalrainfallfigures.
BasixisperceivedasapioneerinIndianmicrofinance,andhasbeenresponsibleformany
innovationsandpolicyandregulatorychangeswhichhavebeentakenupnationwide.Unlike
othersingleproductinstitutions,suchastheGrameenreplicators,Basixworksthroughawide
rangeofintermediaries,andBasixalsotakestheviewthatgeneratingemploymentin

18

disadvantaged rural areas is as useful as providing finance for selfemployment. Basix


thereforeincludesmanynonpoorpeopleasitscustomers,sincetheirbusinessescreatejobs
forothers.
Basix realise that loans alone cannot enable most people, particularly the poorest, to lift
themselvesoutofpoverty.Theyalsoneedassistancewiththeirlivelihoods,andtheystrong
localinstitutions.Basixhasatriadofinterventions,theothertwocomponentsofthetriad
arelivelihoodspromotion,andinstitutionaldevelopmentforotherlivelihoodpromotionor
financialserviceinstitutionswhichcansupportBasixclients.
Inmanywaysthesetwofunctions,andparticularlylivelihoodspromotion,aremoredifficult
thantheprovisionoffinancialservices.Somequitedramaticsuccesseshavebeenachievedin
dairy,vegetableandforestproducts,groundnutandcottoncultivation,butsuchinitiativesdo
notreachthemajorityofBasixcustomers.Basixhascometoacceptthatthegrowthofits
financialbusinessmaybeconstrainedbytheneedtopreventtheothertwocomponentsfrom
laggingtoofarbehind.Thismayonoccasiondisappointfinancialpartners,aswellassome
seniorstaff,butmanagementfeelthatthisisapriceworthpayingforthemaintenanceofthe
groupsmission.
5.2.TheICICIBankEquityinvestment
ThecapitalizationoftheBasixgroupwentthroughanumberofstages.
1 In 1996, when Basix was set up, it was funded by the Ford Foundation and Swiss
Development Cooperation, using preferred shares with deferred interest and in
anticipationofapublicofferingasameansofrecoveringtheirmoneybytheyear2014.
TheFordFoundationrequiredthatsomeIndianmoneyshouldbeinvestedinadditionto
thepromotersequityofa$55000,anditwasstipulatedthat70percentofthegroups
equity should be from Indian sources by 2008. There were some initial delays in
authorizingthefundsfromtheUSAandSwitzerland,andtheRatanTataTrustfund,an
IndiangrantmakingbodypromotedbytheTataindustrialgroup,enabledBasixtostart
operationsinJune1996withareturnablegrantof$200000.
2 In2000Samruddhi,thegroupsNBFCwastobecapitalized,andthesameissueofthe
needforlocalshareholdersarose.TheIFCandShorebankwerebothwillingtoinvest,but
nonbankfinancecompanieswereinbadodorinIndiabecauseofanumberofmajor
embezzlementcases.BasixhadtopersuadetheRBItoallowupto50percentforeign
investmentinanNBFC,andtopersuadethetwoprospectiveequityinvestors,ICICIBank
andHDFCBank,toovercometheirreluctancetoinvestinasmallandnewinstitutionin
whatwasgenerallyanunfamiliarandsuspectfield.
3 ThisinvolvedmanyvisitstoMumbaibyBasixseniormanagers,andBasixmobilisedtop
levelsupportinIFCandtheWorldBanktofinallyconvinceICICIBanktosendoneofits
seniormanagersonatwodayfactfindingvisittoBasixinHyderabad.
4 Thereportwasfavourable,butICICIBankstilldemandedthatSamruddhiscapital
1
9

adequacyshouldbeenhancedto40percenttocovertheperceivedhighlevelofrisk.After
further lengthy negotiations ICICI Bank agreed to reduce the capital adequacy
requirementto20percent,andtoinvest$200000,for5percentofthecompanysequity.
HDFCinvested$100000fora2.5percentshareholding,andotherforeigninvestorstook
atotalofabout46percent,withIFChaving23percent.Thebalancecontinuedtobeheld
byBasixLimited,theholdingcompany.
1 ICICIBanksinvestmentwasmadeundertheSocialInvestmentGroup,notunderthe
ICICIGroupsquitelargeventurecapitaldivision.Managementoftheinvestmentwas
transferredin2003tothemicrofinancesectionoftheBank,butICICIBankhasnotmade
any further equity investments in MFIs since. It is felt that the recently developed
partnershipapproach,asdescribedabove,makesitunnecessaryfortheBanktoconcern
itselfdirectlywiththefinancialstrengthofitspartners,sinceitsloansaretoSHGsand
individualcustomers.
TheBanksinvestmentonlyincreasedSamruddhisfundsbysome3percent,butitwasan
essentialpartofthewholepackagewhichallowedtheNBFCtobeproperlycapitalized.No
dividendswereimmediatelypayabletoshareholders,andthemoneywasessentiallyfreeof
costintheshorttomediumterm,andthetotalequityinvestmentwasinstrumentalinreducing
thecompanyscostsoffundstobelow11percent,oneofthelowestforallIndianMFIsatthat
time.ThiswasinspiteofthefactthatthequalityofBasixloanportfoliowassomewhat
lowerthanthatofitscompetitors,becauseofBasixcontinuinginsistencethatcroploansand
onfarmlendingwereanessentialpartofanycredibleruralfinancialinstitutionsactivities.
Thefundsweresoonprofitablyabsorbedinprofitableloans,andwerenotparkedinany
longtermhighyieldingsecurities.
ICICIBanksandtheothershareholdersinvestmentsinSamruddhiwereseenasamajor
movetowardsthemainstreamingofmicrofinanceinIndia.Thetransactionrequiredall
parties to learn a great deal, and they have all made use of this learning in subsequent
transactions with other Indian MFIs.The investment alsohad an immediate andpositive
impactonthecreditratingsofBasix.
Thenewshareholdingrequiredlittleadditionalreportingorotheradministrativetasksapart
fromroutinequarterlyreturnssuchaswerealreadybeingproduced.Basixtransferreditsmain
routinebankingrelationshiptoICICIBankinHyderabad,andallBasixemployeessalaries
arepaidintotheirownaccountswiththeBank.Thisinvolvesnohardshipforanyparties,
sinceICICIBankisgenerallyconsideredoneofthemostefficientpersonalandcorporate
banking providers in the city. Basix has inevitably been compelled to maintain the large
numberofdifferentbankaccountsitoperatesthroughoutitsareaofoperations,sinceICICI
Bankdoesnothavearuralbranchnetworkoutsidethemaindistrictheadquarterstowns.
TheevolutionoftheequityshareholdingsinSamruddhisinceitsestablishmentin1996is
summarisedbelow:
2
0

Year
1996
1997
1998
1999
2001

2003
2004
2005

Investor
Individualpromoters
Basixholdingcompany
Basixholdingcompany
Individualpromoters
Individualpromoters
Basixholdingcompany
Basixholdingcompany
Basixholdingcompany
IFC(WorldBank)
Shorebank(Chicago)
Hivos(Netherlands)
ICICIBank
HDFCBank(India)
Basixholdingcompany
Basixholdingcompany
Basixholdingcompany

Amount
$140
$80000
$156500
$1700
$600
$623500
$20000
$1130100
$940000
$470000
$470000
$200000
$100000
$20000
$40000
$140000

Theholdingcompanysshareholdingisnow49.49percentofthetotalequity.Theindividual
promotersaremembersoftheholdingcompanyboard,andwhenthiscompanyssharesin
Samruddhiareaddedtotheirsharesthiseffectivelyretainsmajoritycontrol.
5.3.ICICIsportfoliopurchase
In2003,twoyearsaftertheBanksequityinvestment,ICICIBankpurchasedsome3700short
termcroploansfromSamruddhiforatotalofonemilliondollars.Thepackagewasmadeup
fromthetotalcroploanportfoliosofelevendifferentbranches,andSamruddhiplaced15
percentoftheamountinalockedescrowaccountasafirstlossguaranteeforICICIBank,
whichcouldonlybewithdrawnwhenallthecroploanswererepaid,netofanydefaults.
ThisdealservedBasixsinterestsinanumberofways:
1 Samruddhi was in need of additional funds for onlending, and this deal increased
Samruddhisfundswith15percent.Oncetheprecedenthadbeenset,itwouldalsohave
beenrelativelyeasyforSamruddhitosellonfurtherpackagesofloans,asandwhenthe
needforfundsarose.
2 Crop loans were the worst performing part of the Basix groups portfolio. This deal
removedthemajorityofthisweakcomponentfromtheNBFCsbooksatonestroke.
3 Samruddhipaid8.75percentforthefacility,whichwasbelowtheaveragecostoffundsat
thetime.ThecheapestalternativewouldhavebeentoborrowfromSIDBIat11percent,
andtheICICIBankpurchaseenabledSamruddhitopayoffearlierbulkloansfromSIDBI,
andfromICICIitself,whichwerecosting11percent.PreviousloansfromSIDBIhadalso
involvedprotractedandcostlyformalities,specialboardresolutionsandotherhassles.
4 Thefarmerspaid24percentinterestontheoriginalloans,andthe15percentwhichwas
paidintotheescrowaccountrepresentedthemarginbetweentheinterestratewhichICICI
2
1

was receiving and the amount which was being paid by the borrowers. Previous
experiencesuggestedthattherewouldbesome2percentofdefaults,whichwouldbe
drawnfromthefirstlossguaranteeaccount,butthenetbalancewasstillremunerativeto
Samruddhi.
1 AsaresultoftheearlierequityinvestmentbyICICIBank,bothpartieskneweachother
well,andthedealcouldbefinalisedwiththeminimumofformalities.
ThedealalsoservedICICIBanksinterests.TheBankneededtobeabletodemonstratetothe
authoritiesthatitsloanstoorthroughMFIsgenuinelyqualifiedasprioritysectorloansto
smallfarmers.Thisdealprovidedthebankwith3700individualaccounts,completewiththe
namesandlocationsofeachborrower.Itwasbelievedthattherecouldbenoquestionasto
theeligibilityofthispackageandthattheloanpackagecouldeasilybesecuritizedandsoldon
byICICIBanktoanyinterestedfinancialinstitution,togetherwiththecreditenhancement
providedbythefirstlossguarantee.
This securitizationdealwasbelievedtobethefirstofitskindinAsia,andpossiblyinthe
world.TheprinciplewasofcoursefamiliartoICICIBank,sincesuchdealsareanessential
partoftheirdaytodaybusinessmodel.Themicrofinancecontextwashoweverunfamiliarto
manyoftheirstaff,aswassecuritizationassuchtosomeontheBasixside.
Bothsideshadsomeminorbutirritatingproblemswiththeprovisionandabsorptionofthe
requireddetaileddata,whichhadnotonlytoidentifyeveryfarmerbutalsotoshowevery
individualloanscheduleandeveryrepayment,onamonthlybasis.Theactualpreparationof
thereturnswasallcomputerizedfromavailabledataonSamruddhisexistingmanagement
information system, but it did involve some extra administrative and programming time,
particularlysinceeachloanaccounthadtobetakenfromthedifferentbranchrecordsand
consolidatedwithalltheothersinthecompletepackage.
ICICIandotherbankshavelearnedfromthisexperienceandhavemadesimilararrangements
withotherMFIs,suchasa$2millionportfoliopurchase,finalisedthreemonthsafterthe
BasixdealwithSHARE,IndiaslargestandmostrapidlygrowingGrameenreplicator.On
Basixside,therehasbeennoneedtorepeatthearrangement,becausetheamountofcrop
lending is not increasing, and Samruddhi has received more equity finance which has
temporarilyalleviatedtheneedformorefunds.
Basixhasmaintainedthepercentageofitsloanswhichareforagriculturalpurposesataround
50percent,althoughmuchofthisisforlivestockandthecroploancomponenthasbeen
reduced.Thisispartlybecauseofthehighrisksofcroplending,butalsobecausefemale
borrowerstendtoinvestinmilkanimalsratherthancrops,andbecauseBasixbelievesthatit
isdesirabletoencouragediversificationofrurallivelihoods.
6.TheCARECASHEfacilitation
ICICIBankandotherinstitutionsworkingwithandthroughMFIsareconstraintbythelack
ofstrong,matureMFIs.ThebestonesalreadyhavelargeamountsoffundsfromICICIand
otherbanks,andfromSIDBI.Someofthem,suchasBasix,areidentifyinglessexpensive
2
2

sourcesoffunds,andthereareanumberofpotentialequityinvestors,i.e.GreyGhostand
Bellwetherfunds,furtherreducingtheimmediateneedfordebtfinance.
TheselargerandmoreinnovativeMFIsalsohavesavingsfacilities,whichareobviouslymore
convenient,beingavailablefromthesameinstitutionswhichprovideloans.SHARE,Indias
largestandmostrapidlygrowingGrameenreplicationpromotesnominallymemberowned
cooperative structures to meet this need, which operate through the same offices as the
lendingNBFC.BasixLocalAreaBank(LAB)licensealsoenablestheircustomerstosave,at
leastinthethreedistrictswhereKBSLABislicensedtooperate.
Thesesavingsfacilitiesalsoprovidestheinstitutionwithanewandpotentiallylessexpensive
sourceoffunds foronlending,andKBSLABisapproachingthepointwhereits savings
liabilitieswillequalorexceeditsloanassets.Itisprobablethatasregulationsareliberalised
and MFIs become more sophisticated, there will be more such innovations, thus further
reducingMFIsneedforbulkfunding.
GiventheshortageofstrongMFIs,andthevastsizeofthemarket,thereisobviouslyaneed
todevelopthecapacityofthelargenumberofsmallerMFIswhichalreadyexist.SIDBIhas
beentryingforsomeyearstobuildtheircapacity,withthehelpofa$25milliongrantfrom
theBritishGovernment,withsomelimitedsuccess.Itisobviouslydifficultforalargeformal
bankinginstitutiontobecomedirectlyinvolvedinallthediversetraining,mentoringand
consultancy activities which this involves, and there is also a serious shortage of locally
relevantandeffectivecapacitybuildingcapacity.
ICICIBank,inkeepingwithitspolicyofoutsourcingnotonlyparticularfunctions,butalso
theirmanagement,haschoseninsteadtoworkwithCARE,alargeinternationaldevelopment
agency,throughCAREsCASHE(CreditandSavingsforHouseholdEnterprise)project,a
Britishaidfundedmicrofinancepromotionprogrammewhichhassince1999beenworking
to develop microfinance activity in the three states of West Bengal, Orissa and Andhra
Pradesh.MadhyaPradeshhasalsorecentlybeenaddedtoitsareaofoperations.
CASHEaimstodevelopthecapacityofthemiddlerangeMFIswithinitsarea,andworks
primarilywith25socalledtieronepartners.Theseinstitutionswerepreviouslyunableto
access bulk finance from banks on their own, but their management were committed to
expanding their microfinance activities. Duplication has also been avoided whenever
possible;thetieronepartnerstogethercoversasubstantialpartoftheirrespectivestates,
including the more disadvantaged areas. CASHE has provided direct support toall these
partners,includingPragathiandBISWA,whoseinteractionswithICICIBankaredescribed
laterinthispaper.
CAREalsosupportssomeoftheoperatingcostsofitspartnerMFIs,onadecliningbasis.This
hasbeenparticularlyimportantintheStateofAndhraPradesh,wheremanyofCASHEs
partnerMFIsworkthroughMutuallyAidedCooperativeSocieties(MACS)whichhavebeen
registeredundertherelativelynewMACSActoftheStateofAndhraPradesh.Thisallows
cooperatives to be free from the state interference, and other assistant agencies, have
promotedMACSasfederationsofSHGs.Otherstatesarenowintroducingsimilaracts,but
AndhraPradeshhasbeenthepioneer.
2
3

CASHEalsohasarevolvingloanfundfromwhichitprovidesbulkloanstoitspartnerMFIs.
ThisfundwasinitiallynotincludedintheCAREproposaltoDFID,sincetheaimwasto
assistMFIsandSHGstoborrowfromlocalIndiansources,buttheBritishaidagencyhad
insistedthatsuchafundshouldbeincluded,mainlybecausethetotalcostoftheproject
without such a fund, some seven million dollars, was said to be too small to be worth
processing.
ByOctober2004some$1.5millionofthisfundhadbeendisbursed,andaboutonemillion
dollarswasoutstanding.Moresignificantly,theMFIshadborrowedabouttwomilliondollars
frombanks,andthe18000SHGswhichthepartnershadpromotedhadborrowedatotalof
somefourmilliondollarsfrombanks.
Therevolvingloanfundhasalmostcertainlycrowdedoutsomelocalfunds,butCASHE
managementhaveeagerlywelcomedtheopportunityofworkingwithICICIBanktoenable
thecustomersoftheirpartnerMFIstoaccessreallocalmoney.
CASHEscollaborationwithICICIBankstartedinearly2004whenICICIBankstaffwas
lookingforwaysofidentifyingandworkingwithpartnerMFIsbeyondthestrongest1215
institutionswithwhichtheyandotherbankswerealreadyengaged.TheyaskedtheCASHE
staffforideas,andthesynergywasimmediatelyobvious.
ICICIBankandCASHEhavenowevolvedamutuallysatisfactoryworkingrelationship.The
stagesareasfollows:
1 CASHEhasbeenworkingwithitspartnersforsometime,andhassatisfactorilylentto
andrecoveredfromthem,foruptofourorfiveyears.WhenCASHEissatisfiedthatan
MFIanditsclientsarereadytograduatetoafullfledgedbankingrelationship,itis
recommendedtotheBank.CASHEinnowayguaranteestheeventualloans,andhasno
financialinterestinthetransactions.
2 TheBankstaffthencarriesouttheirquitesimpleandrapidappraisalofthepartnerMFIs
systems, and visit and appraise a sample of whatever intermediaries the MFI works
through,suchasSHGfederations,orSHGsthemselves,andtheirindividualmembers.
3 IftheMFIisapproved,andnonehavebeenturneddownthusfar,theBankandtheMFI
signamemorandumofunderstandingwiththeBank,
4 Afteradelayofuptotwoweeks,theloanisapproved,andthemoneyispassedfromthe
nearestICICIbranchtotheMFI.TheloanisnottotheMFI,however,butismerelyheld
intrustandpassedonbytheMFItotheactualborrowergroupsorindividuals.
5 Themoneyisdisbursedtotheactualborrowers,bytheMFI,andtheborrowers,whether
theyaregroupsorindividuals,signdetailedagreements,withICICIBank.
As is clear fromthe above,CASHE has nolegal responsibility andplays nopart inthe
procedureafterrecommendingaparticularpartnerMFItotheBank.
By early 2005 five arrangements of this kind had been finalised under the collaboration
between CASHE and ICICI Bank, and a total of $1.5 million had been disbursed. This
amountedtolessthat2.5percentoftheBankstotalmicrofinanceportfolio,butthisquite
smallamounthadbeenlentthroughalmostaquarteroftheMFIswithwhichtheBankwas
2
4

dealing.WhiletheseMFIsandtheircustomersareabsorbingmuchlessthanthelargerMFIs
theBankanticipatesthatthesesmallerrelationshipswillinduecoursegrowtorivalthetop
levelMFIs.
TheclientspayafeetotheMFI,aswellastoanySHGfederationorotherintermediary
whichmaybeassistinginthefacilitationoftheirloansfromICICIBank.Thisischargedasa
supplement on the interest rate charged by ICICI Bank. The MFIs are responsible for
collectingtherepayments,andtheydeducttheirfeesbeforecreditingtherepaymentsand
interestchargestoICICIBanksaccount.
CASHEitselfcoversitsinitialcapacitybuildingcostsfromitsDFIDgrant,sothattheBank
bearsnoneofthiscost.Byearly2005,thiscostworkedouttoapproximately$1.50perclient
reached,whichwasnotfelttobeanexcessivefigure.TheCASHEprojectishoweverdueto
finishin2008,andCAREandICICIBankhavestartedtoevolveanewapproachtoMFI
capacitybuildinginMadhyaPradesh,wheretheBankwillcoverthecosts,asaninvestment
incustomerdevelopment.
CARE is also working with other banks which have followed ICICI Banks pioneering
example,andaimstobuilditsfacilitateddisbursementstoandthroughMFIsfromthepresent
figureof$1.5milliontoacumulativetotalof$400millionby2010.
7.PragathiSevaSamithi,Warangal(PSS)
PSSwasregisteredunderthe1860SocietiesActin1991,andislocatedinWarangalDistrict
inAndhraPradesh.ItsnamemeansServicesforProgressOrganisation.PSSisoneofthe
smallerofthefiveMFIswhoseSHGcustomershavereceivedloansfromICICIBanksince
2002,withfacilitationfromCARE.Theyhaveborrowedatotalof$100000fromtheBank,
which has been distributed direct to individual SHGs under the ICICI Bank partnership
model.PSSitselfand19ofthe22mutuallyaidedcooperativesocieties,orMACS,which
PSShaspromotedtoaggregatetheneedsofitsSHGsince1998,havefacilitatedtheICICI
BankloanstotheSHGs.
Warangalisabout100kilometrestotheEastofHyderabad,withapopulationofjustover
three million, and three quarters ofthem earn their livelihoods from farming and related
activities.Althoughitusedtoberelativelywelloff,theareahasrecentlysufferedheavily
fromdrought.Cottonisthemostpopularcropinthearea,andthistoohasledtoproblems,
bothbecauseofdroughtandbecauseofthehighcostofseeds,fertiliserandpesticides.The
returnsfromcottoncanbeveryhighwhenconditionsareright,butthelossescanalsobe
proportionatelyhigh.Over1000cottonfarmershavecommittedsuicideinWarangalsince
1998, because of the load of debts they accumulated through buying everincreasing
quantitiesofherbicidesandpesticides.
PSScoversthepoorestpartsoftheDistrict,anditsworkcoversawiderangeofwelfareand
related activities, including disability, child labour, street children, nutrition, HIV/AIDS,
sexualhealth,watersheddevelopment,andthepromotionoforganicfarming.PSShasbeen
heavilyinvolvedinSHGpromotionandmicrofinanceforsomesevenyears,andusesSHGs
2
5

asanentryandsupportstrategyformanyofitsotheractivities.PSShasmobilisedtheMACS
asameansofmutualsupportfortheSHGs,andasachannelthoughwhichtheSHGscan
accessfunds.PSShasalsopromotedover200SHGsspecificallyforpeoplewithdisabilities,
andthesewillinduecoursebefederatedintoaMAC.
PSShasanannualbudgetofaround$240000,andemploys99fulltimeworkers,140part
timestaffandalmost200volunteers.TheNGOisfundedfromanumberofgovernment
programmes,andabout80percentofitsfundingisfromforeignagenciessuchasOxfam,
ActionaidandSwissDevelopmentCooperation.
PSS has promoted over 1250 SHGs, organized into 22 MACS, with altogether 20 000
members.Attheendof2004,theSHGmembersowedabout$750000totheirSHGs,andthe
SHGsthemselvesowedabout$200000tovariousbanks.ThebalanceoftheSHGsfunds
werefromtheirownsavings,theiraccumulatedearningsandtheirloansfromPSS,whichhad
hadtochangeitsbylawsinordertobeabletoborrowfromCASHEandonlendtothe
MACS.ThemainsourceoffundsforPSSwastheCASHErevolvingloanfund,forwhich
theywerepayinginterestattherateofeightpercent.PSShadborrowedatotalof$80000
fromthissource(Microscan,2004).
Inordertocoverpartofitsrisk,ICICIBankhasrequiredPSStodeposit15percentofthe
loanstotheSHGs,asafirstlossguarantee.ThisdepositearnstheBanksnormalrateof5.5
percentinterest,buttheaccountcannotbecloseduntilalltheSHGloanshavebeenrepaid.
Anydefaultscanberecoveredfromthedeposit,beforeitisreturned.Therehasasyetbeenno
needtoexercisethisright,butPSSarewellawareofthepossibility.
AsaresultofICICIBankssatisfactoryexperiencewithPSS,theStateBankofIndia,the
largestbankinthecountry,andCorporationBank,arebecominginterestedinlendingtoPSS
affiliatedMACS,andpossiblytoPSSitself.Theyarefindingthatmanybranchmanagersare
reluctanttodealdirectwithSHGs,becausetheirmembersabsorptioncapacity,aretoosmall
tobeeconomic.
7.1ThePSSMACSandtheirSHGsICICIBankloans
TheJeevanajyothiMACS
TheJeevanajyothiMACSisoneofthe19MACSwhosememberSHGshavereceivedloans
fromICICIBank.Itwasregisteredin2002,andithadevolvedfromanearliermultipurpose
cooperative which was promoted by PSS in 2002, initially to introduce integrated pest
managementtechniquestofarmers.Ithas76memberSHGs,and722members.Theyareall
womenandmanyarefromthesocalledscheduledcastesandtribeswhohavebeenalways
inIndiabeenbothsociallyandeconomicallymarginalized.
ThefinancialsituationoftheJeevanajyothiMACSattheendof2004:
2
6

Assets/UseofMoney
Loans
outstanding $17500
withmemberSHGs
Fixeddeposits
$760
Cashatbank
$1460
$19720

Liabilities/SourcesofMoney
Memberssavings
$7590
LoansfromPSS
Accumulatedsurplus
Total

$10500
$1630
$19720

The salary of the managers of the MACS are subsidised by the CASHE project, on a
decliningbasisoverfouryears,from100to25percentofthetotalannualcostof$720.The
managerssupplementtheirearningsbykeepingtherecordsofmemberSHGs,atamonthly
chargeof60centspergroup.
TwomemberSHGsoftheJeevanajyothiMACShavetakenloanstoatotalvalueof$1700
fromICICIBank.TheyrealisethattheseloansaremoreexpensivethanloanstoSHGsfrom
the nearest branch of the Kakatiya Rural Bank, which won a prize for being the most
successfulregionalruralbank.TheSHGmembersneverthelessprefertoborrowfromtheir
MACS,orfromICICIBank,because:
1 WhentheSHGsborrowedfromtheKakatiyaBank,allthemembersofthegrouphadto
gotothebranch,costingthem$6inbusfares,inadditiontosixtycentseachinlost
wages.Afterthat,thetwoofficershadtomaketwofurthervisitstothebranch,which
costthegroupatotalofaround$2foreachtrip,includingasmallallowanceforlunch,
sincetheyhadtowaitalongtimetobeservedatthebank.
2 LoansfromtheKakatiyabankwereinsufficienttoenablethewomentobuybuffalos,
which cost around $100 each, or to make any other significant investment. They
appreciatedthatthesmallamountsavailablefromthebankhadtoanextentrelieved
themoftheneedtotakeemergencyloansfromthelocalmoneylenderataneffectiverate
ofabout10percentamonth,buttheyneededmoremoneytomakeasignificantimpact
ontheirhouseholdincomes.
3 WomenfromotherMACSaskedthemanagerofthenearestbranchoftheStateBankof
Hyderabad,anothernationalizedbank,forloans,buthesaidthatitwasimpossiblesince
hehadreceivednoinstructionsfromhisregionalofficetomakesuchloans(hehadalso
warnedthemagainstthedangersoftakingloansfrommorethanonesource).
4 TheloansfromICICIBank,inthesamewayasdirectloansfromtheirMACS,were
moreexpensivethanfromtheKakatiyaBank,butpartoftheextracostwenttosupport
theMACS,whichwastheirowninstitution.
ThewomenbelievethatitwouldbeevenbettertoborrowdirectfromtheirMACS,rather
thanfromICICIBank,sincesuchloansasareavailablefromtheMACScost18percent,as
opposedtotheeffectiveratetheypayforICICIBankloansof24percent,andtheywish
furthertodeveloptheirowninstitution.Theyappreciate,however,thatitisdifficultforthe
MACStoaccessmorefunds,andtheyaresatisfiedwiththemoreexpensiveloansfornow.
Theyhaveusedtheirloansforavarietyofpurposes,includingthepurchaseofgoatsand
sheep,forsumsassmallastwentytothirtydollars.
2
7

ThePragathiMACS,Deekshakuntla
Allthemembersofthe53SHGswhohaveformedthePragathiMACSinDeekshakuntlaare
fromthescheduledoruntouchablecastes,and10ofthesegroupshavereceivedloanstotalling
$4000fromICICIBank.ThefinancialsituationofthisMACS:
Assets/UseofMoney
Loans
outstanding $18900
withmemberSHGs
Fixeddeposits
$2800
Total

$21700

Liabilities/SourcesofMoney
Memberssavings
$7120
Membersshares
Accumulatedsurplus
LoansfromPSS
Total

$85
$4505
$10000
$21700

ThetenSHGswhichreceivedloansfromICICIBankwereselectedbecausemanyoftheir
membershadnotbeenabletoborrowbefore,sincethefundstheyhadbeenabletoobtain
fromtheirMACS,orthelocalbanks,wereinsufficient.Theyreceivedloansofbetween$880
and$200;andwhilemanyhadaskedforlargersums,orverysmallamountstheMACS
manager,inconsultationwithPSS,decidedthatthedistributionshouldbemoreequitablethan
theirrequests.
SixmembersoftheChaityanyaSHGsharedthe$600whichtheirgroupreceived.Noneof
themhadtakenloansfromtheSHGbefore.Theyusedtheirloansasfollows:
1 Mrs.Ilamaborrowed$100toinstalladrinkingwatertankforherhouse.Sheplannedto
repaytheloanintenmonthsfromthemoneysheearnedfromherdairyanimal,andshe
hopedbothtoimproveherfamilyshealthandtosavethetimeandlabourtheypresently
spentfetchingwaterfromthevillagepump.
2 Mrs.Srimatitook$100toaddtotheinventoryofhersmallgroceryshop,hopingthatthe
newstockwouldincreaseherdailyprofitfromfourtofivedollars.
3 Mrs.Bathulaborrowed$100tobuytwogoodqualitygoats,whichsheplannedtofatten
andsellafterayearfor$140.
4 Mrs. Venkatamba and Mrs. Boma Gani both borrowed to buy buffalos for milk
production.Mrs.Venkatambaadded$60fromherownsavingstothe$100shetookfrom
theSHG,andboughtabuffalowhich,shehoped,wouldearnherabout80centsaday
frommilk.Mrs.BomaGaniborrowed$90andboughtaratherlowerqualitybuffalo,but
hopedthatitwouldproducemilkworth60centsaday.
5 Mrs.Trikovelaspenther$100loantobuycorrugatedironsheetstoreplacethegrassroof
ofherfamilysmudwalledhouse.Sheplannedtorepaytheloanwiththeearningsfrom
hervegetablevendingbusiness,buttherewasalsoafinancialsavinginthatthenewroof
wouldmakeitnolongernecessarytoreplacethegrassroofeveryyearorso,atthecostof
sometwentydollars.
AllthesewomenareclearthattheyowethesesumstotheirSHG,butsomearenotsure
whethertheSHGitselfhasborrowedfromtheirMACSorfromICICIBank.Thosewhothink
thattheloansarefromtheMACSbelievethattheMACShaveborrowedfromICICIBank.
Thisconfusionisunderstandable,sincethegroupwasborrowingfromtheMACSuntilit
receivedthisloanfromICICIBank;theMACShadborrowedfromPSS,whichinturnhad
2
8

borrowedfromtheCASHEfund.Thewomenknowthattheyareresponsibleforcoveringany
defaultsbytheirfellowSHGmembers,andthattheotherSHGsintheMACScannothelp
themifthewholeSHGisunabletopay.
TheSpandanaMACS
Twelveofthe42SHGsintheSpandanaMACShavereceivedloansfromICICIBank.The
financialpositionofthisMACS,attheendof2004wasasfollows:
Assets/UseofMoney
Loans
outstanding
withmemberSHGs
Fixeddeposits
Expenditure2004
Cashatbank

Liabilities/SourcesofMoney
Memberssavings
$6500

$33400
$2820
$1000
$100

Interestreceived2004
Otherincome2004
Profitfor2002/2003
LoansfromPSSetc.
Total

$37320

$3120
$110
$1090
$26500
$37320

ThetwelveSHGshaveborrowedatotalof$18000fromICICIBank.TheSpandanaMACS
is the secondsmallestofthe MACS whichhave beenpromotedbyPSS,in terms ofits
numberofmembers,butalthoughtheyarebynomeanswealthythemembersaregenerally
ratherbetteroffthanmostoftheSHGmembersintheotherMACS.Theyhavethusbeenable
toborrowlargersumsthantheothers,andhaveborrowedsomethreetimesmorethanthe
averageSHG.
ThetwelvebeneficiarySHGswereselectedbecausetheyhadnotbeenabletoborrowfrom
theCASHEloanwhichPSShadborrowedandhadinturnonlenttotheMACSandthusto
theirSHGs.TheSaraswatiSHGwastypical;theyborrowedatotalof$2600fromICICI
Bank,whichwassharedbythirteenofthefifteenmembers.Theyusedtheloansforawide
varietyofactivities,asshownbelow:
SaraswatiSHG,statedpurposesforICICIloans
Buffalopurchase,formilk
Dowryfordaughtersmarriage
Trading,infish+beedi(localhandrolledcigarette)leaves
Houserepair,buildingtoilet
Buyinganembroiderymachine
Stockinghusbandspaan(betelnut)shop

5members.
2members
2members
2members
1member
1member

ThefinancialpositionoftheSaraswatiSHGinearly2005wasapproximatelyasfollows:
Assets/UseofMoney
Loansoutstandingwithmembers
Cashatbank
SavingsdepositwithMACS

$3150
$50
$750
$3950

Liabilities/SourcesofMoney
Memberssavings
LoanfromICICIBank
BalanceofloanfromKakatiyabank
Total

$750
$2600
$600
$3950

TheSHGhadearlierpaidoutitsaccumulatedsurplustoitsmembersasa14percentdividend
onmemberssavings;theythoughtthatthiswasthemostequitablewayofdealingwiththe
2
9

factthatsomemembershadtakenmoreloansthanothers.Thesefiguresshowthattheloan
fromICICIBankhasalmosttrebledtheamountofmoneyavailabletothemembersofthe
SaraswatiSHG.Theloanhasbeensimilarlyimportanttotheother18SHGswhoborrowed
fromICICIBank.
TheiroriginalloanfromtheKakatiyaBankwasnowalmostpaidoff,andtheyhadcompletely
cleared the balance of an earlier loan for $1000 from a branch of the State Bank of
Hyderabad,notthesameonewhosemanagerhadrefusedtolendtoanotherSHG.Theseloans
were at 12 percent, and still lower rates were being discussed, and were thus much less
expensivethantheICICIBankloan,whicheffectivelycostmuchmore.
Themembershadbeenassured,however,thatICICIBankwouldlendthemlargersumsinthe
future,andtheyfeltthatthecostofthemoneywaslessimportantthangettingthemoneyin
thequantitiestheyneeded,andwhentheyneededit.TheBankhasalsostatedthatnewloans
can be considered after 50 percent of the first loans have been repaid; this is a major
improvementonotherbanksloanstoSHGs,whichareusuallyforathreeyearterm,withno
possibilityofafreshloanuntilthefirsthasbeenrepaidinfull.
ThemembersoftheSHGareawarethattheirloanisactuallyfromICICIBank,althoughthey
haveneverseenastaffmemberorbranchoftheBank.Theyhavechosentoaddamarginof6
percentfortheirSHG,makinganeffectivetotalcostof24percent,sincetheyhaveapractice
ofregularlydistributingtheSHGssurplustothemembersasaformofcompensationtothe
memberswhochosenottotakeloans.Theyarealsohappytopaythe6percentmarginwhich
isaddedbytheMACS,becausetheMACSisbenefiting.Itistheirowninstitution,andthey
wantittogrow.TheICICIBankrateof9.75percentiswrittenintheagreementwhichtheir
officershavesigned,buttheyknowthattheadditionalmarginissharedbytheMACSand
PSS,inpaymentfortheirservices.
TheOrugalluMACS
The Orugallu MACS is different from the others which PSS have promoted, in that the
membersofitsconstituentSHGsliveintheurbanslumsofWarangaltown,notinsmall
villagesandhamletsinthecountryside.Warangalisamediumsizedtownwithapopulation
ofabout250,000people.AsisusualinIndiantownsofanysize,asubstantialproportionof
itspeopleliveinslumsinappallingsqualor.RelativelyfewofthepoorinIndiascitieshave
beenreachedbymicrofinance,partlybecausethereisstillalingeringandmistakenbelief
thaturbanpeoplearericherthenthoseinruralareas,andbecauseNABARD,themainSHG
promotion agency, is concerned only with rural development. There is no equivalent
institutiontosupportmicrofinancefortheurbanpoor.
Thereare62SHGs,with802members,allfromthescheduledcastes,intheOrugalluMACS,
andthreeoftheSHGshavetakenloansfromICICIBank,foratotalof$2000.Thirteenof
theirmembershavetakenloansfromtheBanksfunds,forthefollowingpurposes:
3
0

Akhle,JagruthiandSreelaxmiSHGs,statedpurposesforICICIloans
Bullockcartandbullockfortransportbusiness
4members.
Housingrepairandimprovements
2members
Increaseinventoryofgroceryshop
2members
Setupcycleandautorickshawrepairshop
2members
Schoolfees
1member
Setuptradeinsarees
1member
Chillietrading
1member

Theloans variedbetween$400and$100.TheseSHGshavenotbeenablepreviouslyto
borrowfromanybanks,althoughthereareseveralbankbranchesnotsofarfromtheslums
wherethememberslive.ThisisbecausethebanksgenerallyconfinetheirSHGloanstorural
areas,whichqualifyforprioritysectorstatusandcanberefinancedbyNABARD.
Thereturnstotradingandsimilaractivitiesareusuallyhigherinurbanthaninruralareas.The
bullockcartownersreckontoearnaround$50amonthfromaninvestmentof$200andthe
chillitraderhopestoearn$2adayfromher$200investment.Mostofthebusinessesare
actuallyrunbythehusbandsoftheSHGmembers,buttheirwivesclaimthattheiraccessto
thenecessarycapitalhassubstantiallyimprovedtheirstatusintheirfamilies.
7.2ThefinancialimpactoftheICICIloansonfinalborrowers
TheICICIBankloansdidincreasetheamountsofmoneyavailabletotheSHGsinWarangal
andthustotheirmembers.Theamountslent,therepaymentschedulesandthepossibilityof
furtherloans,meanthattheSHGsarefinallyabletolendtheirmembersenoughtoinvestin
microbusiness ventures, on and off the land, which have the potential substantially to
increasetheirincomes.
Thishasnotcomewithoutsomecost,however.Itisdifficulttocompareinterestrates,orthe
costoffundswhenaggregatedwiththeservicefeeswhicharepayabletotheMACSandto
PSSontheICICIBankloans,sinceinterestratesinIndiaarefalling.However,itisusefulto
comparethethreedifferentroutesthroughwhichloansarereachingSHGs:
1 LocalbankbranchestoSHGs12percent,butreducinginWarangalandelsewherein
Indiato9percentorpossiblyevenless.
2 CASHErevolvingloanfundtoPSStoMACStoSHGs8percenttoPSS,10percentto
MACS,18percenttoSHGs.
3 ICICI Bank toSHGs, withfees to MACS andPSS 9.85percent plus 0.15 percent
processingfeeequals10percenttoPSS,plus2percentfeeequals12percenttoMACS,
plus6percentfeeequals18percenttoSHG.
PSSispresentlydiscussingwiththeMACSthepossibilityofreducingtheirfacilitationfees.
Thiswillnotbeeasy,sincetheMACSarefragilememberownedinstitutionsandbeartheir
ownadministrativecostsastheCASHEsubsidiesrundown.PSSitselfmayalsobeableto
make some reduction in its fees, although they do have to bear the substantial cost of
supervisingtheSHGs,collectingtherepaymentsandremittingthemtoICICIBank,and
3
1

preparingdetailedmonthlyreportsontheperformanceofeachSHG.Thefirstlossguarantee
fundisalsoaburdenforPSS,sinceityieldsonly5.5percentandtheorganisationhaslittle
sparecashresourcesandisunderconstantpressuretoincreaseitsactivities.
ICICI Bank may in the future lend to the MACS, perhaps at 12 percent plus a small
managementfeetoPSS,ratherthandirecttotheSHGs,althoughthiswouldonlybepossible
after several cycles of satisfactory recovery from the SHGs, and if the MACS were
themselvesfirmlyandprofitablyestablished.
8.BharatIntegratedSocialWelfareAgency(BISWA),Sambalpur,Orissa.
8.1BISWA
BISWAisaNGOregisteredundertheSocietiesAct.ThewordBharatmeansnational,but
theinstitutionhasthusfarconfineditsactivitiestoOrissa,thepooreststateinIndiabymost
measures,andtotheneighboringstateofChattisgarh.BISWAwasestablishedin1995byK
CMallick,whohadspenttheprevioustwentyyearsinvariousmanagementpositionswith
StateBankofIndia.Microfinanceisoneofthemainactivitiesoftheorganization,andthey
alsoworkinotherwelfareactivities,suchasvocationaltraining,therehabilitationofleprosy
patients,solidwastemanagement,education,healthandfamilycounseling.Thewordbiswa
alsomeansuniverseinHindiandinOriya,thelocallanguageofOrissa.
BISWAhaspromotedover4000SHGs,with64000mainlywomenmembers,inalmost
2000villagesin22differentdistrictsofOrissa,moreparticularlyinthewesternpartofthe
state.Some98percentofitsSHGsareinpoorruralareas,butinsomeurbanareas,suchas
SambalpurtownwhereBISWAsheadofficeislocated,theyhavealsopromotedSHGsof
womenintheurbanslums.
Western Orissa includes the KBK area, the three districts of Kalahandi, Bolangir and
Koraput,whicharenotoriousforthepovertyoftheirmainlytribalpopulationandthewell
publicizedstarvationdeathsthatseemtooccureveryfewyears.Sambalpurisjustnorthof
thisarea,butisalsoverypoor.Thedistrictisfamousforitshandwovencloth,whichis
consideredbysomeauthoritiestobethemostbeautifulhandwovenmaterialintheworld.
Little of the revenue earned from this trickles down to the weavers and their families,
however.
8.2BISWAssourcesoffunds
ICICIBankhaslentatotalof$250000toSHGspromotedbyBISWA,andthroughthemto
4351finalborrowersBeforethisloanbecameavailable,BISWAhaditselftakenfinancefrom
anumberofdifferentorganizations,foronlendingtoitsSHGs.Theoutstandingbalances,
interestratesandtermsofthesefundswereasfollows,inJanuary2005:
3
2

Institution

Amount
outstanding
$24000

Interest

Term

Instalments

8.75%

Quarterly

$12650

8.75%

$10250

8%

RastriyaMahilaKhosh(RMK), $94680
thecentralgovernmentwomens
fund
Friends of Womens
World $3340
Banking (an MFI
network,
affiliatedtoSEWABank)

8%

36
months
36
months
24
months
36
months
36
months

Quarterly

StateBankofIndia
TheBalasoreGramyaBank(the
localregionalruralbank)
CARECASHEproject

12%

Quarterly
Halfyearly
Quarterly

TheseloanshadenabledBISWAtolenddirectlyto1168SHGs;theICICIBankloanwentto
afurther297groups.StateBankofIndiaisconsideringofferinganoverdraftlimitofsome
$220000,at7.5percent,andHDFC,anotherprivatebankwhichhasbeenintroducedto
BISWAthroughtheCASHEproject,hasofferedaloanof$120000,possiblyincreasingto
$500000withinafairlyshortperiod.TheUnitedBankofIndiaisalsoofferingloansonthe
same terms as State Bank of India, and, as described later in this paper, BISWA has
negotiatedaloanfromABNAMROBankfor$10000at11percentinterest,whichisyetto
bedisbursed.
Inaddition,BISWAmobilizesSHGsavingsfromtheSHGswhichithaspromoted,andthe
balanceofthesesavingswas$10500.TheSHGsreceive5percentannualinterestonthese
savings.ItisnotstrictlylegalforanNGOsuchasBISWAtotakepeoplessavingsinthis
way,but,astheydowithmanysimilarNGO/MFIsinIndia,theauthoritiesturnablindeye
tothepractice.
RMKmakesverysmallloans,sinceitaimstoreachlargenumbersofsmallMFIs.The
CARECASHEprojectisdivertingitsattentionanditsfundstosmallerMFIswhichneedits
assistancemorethanestablishedpartnerssuchasBISWA,whicharebeingencouragedto
replacetheCASHEfundswithloansfromcommercialsources,suchasICICIBank.The
CASHEprojectwillinanycasebeterminatedby2008,soloansfromthissourcecannotbe
reliedonforthelongterm.
TheloanfromICICIBankwasdisbursedintoaspecialaccountopenedforthepurposeatthe
ICICIBankbranchinSambalpur,in2004.BISWAdidnottakethe$250000loanfrom
ICICIBankonitsownbooks,sincetheloanwasimmediatelydistributedtotheSHGsdirect,
withfeespayabletoBISWAinthesamewayasfeeswerepaidtotheMACSandPSSin
AndhraPradesh.InthecaseofBISWA,however,theSHGs pay14.25percentinterest,
whichismadeupofa5percentservicechargeforBISWAaddedtothe9.25percentinterest
chargedbyICICIBank.TheICICIBankloanhasenabledBISWAtoassistthe297SHGsto
obtainloans,whichwouldnothaveotherwisebeenpossiblebecauseBISWAdidnothave
sufficientfunds.ThisbroughtthetotalnumberofborrowingSHGstothetotalof4351and
theICICI
3
3

BankloansrepresentedanexpansioninthetotalfundsoutstandingwithSHGsofabout50
percentinjustthreemonths.
TheSHGsloansarerepayableovereighteenmonths,butICICIBankhavemadeitclearthat
theywishtomaintainandexpandthearrangement,solongastherepaymentexperienceis
satisfactoryThusfar,the297SHGswhichhavetakentheICICIBankloanshaveachieved
100percentontimerepayment.ThisisslightlybetterthantheaverageSHGrepaymentrate
of98.6percent,partlybecauseBISWAensuredthattheSHGswhichborrowedfromtheBank
werewellestablished,withprevioushighrepaymentrates.TheBankhasinformallyindicated
thata95percentrepaymentratewillbesufficienttoensurethattheycontinuetosupport
BISWAsSHGs,andtheyhavestatedthattheyhopethatBISWAsSHGswillbetakinga
totalofsome$3.5millionwithinthenextyearorso.BISWAanticipatesthattheBanksloans
willeventuallymakeitpossibleforSHGmemberstoaccesslargersumsthanareavailable
fromothersources,andthe5percentservicechargeshouldtheyhopebesufficienttocover
BISWAsoperatingexpensesastheportfolioincreases.
Ifthe$25000loanat9.25percentisaggregatedwiththeotherfundsshownabove,asifit
wasaloantoBISWAitself,thiswouldmarginallyincreasetheweightedaveragecostof
funds,from8.7percentto9percent.Thisnominalincrease,however,isacheappricetopay
forthelargerandmoreflexibleloanswhichICICIBankiswillingtomakeavailabletothe
SHGs.
8.3ThefinancialimpactoftheICICIBankloans
BISWA has beenactive inmicrofinanceforten years.Duringthis timetheSHGs have
accumulatedabout$280000worthofsavings,andtheSHGshaveborrowedalmostoneanda
halfmilliondollars,directfrombanksandfromBISWA.
BISWA onlent to SHGs at 18 percent, plus a two dollar service charge, and the group
memberspays24percenttotheirSHGs.Thespreadof6percenthasbeenretainedbythe
SHGs to build their own funds, or has been distributed to the members as a dividend,
dependingonthewishesofeachgroup.Therateof14.25percentwhichtheSHGsarepaying
toICICIBankrepresentsaconsiderablereductionintheircosts.Thisreflectsthegeneral
marketsituationoffallingrates,wheresomebanksarelendingdirecttoSHGsataslowas9
percent.ItisalsodesirableastheSHGsmatureandmembersborrowmoresubstantialsums;
it is not difficult for a women to pay 2 percent or more a month for a loan of $50 for
emergencymedicalexpenses,butwhensheisborrowing$200ormoreforaninvestmentsuch
asadairyanimalthecostofmoneybecomesmorecritical.TheSHGsarefreetosetwhatever
onlendingratestheyprefer,butatthepresenttimemostarelendingtotheirmembersat2
percentamonth,or24percentayear.
BISWA is also anagent ofthe Life Insurance Corporation (LIC) ofIndia, the countrys
largestlifeinsurancecompany,whichisgovernmentowned.BISWAhassoldsome3000
SHGmemberstheheavilysubsidizedlifepolicies,availablefromLIC,andBISWAreceivesa
fivecentcommissionontheannualpremiumsoffourdollars.
3
4

Inadditiontoincomeearnedfrominterestmargins,feesandcommissions,BISWAhasalso
beenabletotapothersourcesofassistancetocoveritsoperatingcosts.NABARDpaid$6000
forthepromotionof200SHGs,underitspromotionsupportscheme,andBISWAhasalso
beenapartneroftheCASHEproject.Inadditiontotrainingandothersupport,CASHEhas
alsopaid$14,000in2004toassistwiththecostsofBISWAsmicrofinanceprogramme.
Thesegrantsiswillbereducedandterminatedoverafouryearperiod.
BISWAmustalsocarrythefirstriskofdefaultsonloanstotheSHGswhichithasintroduced
toICICIBank,byopeningaguaranteedepositwithICICIBanksbranchinSambalpur,inthe
samewayasPSSdidinWarangal.Inthiscase,however,thedepositisfor12percentofthe
loanratherthan15percentoftheoutstandingbalances,becausetheICICIBankteammember
whovisitedBISWAandasmallsampleofitsaffiliatedSHGsassessedthatthequalityoftheir
recordsandtheirrepaymentperformancewassomewhatbetter.Nevertheless,thisfirstloss
guaranteedepositimposesaheavyburdenonBISWAslimitedcashresourcesanditishoped
thatICICIBankwillrelaxthisrequirementorreplaceitwithanoverdraftaccount,which
wouldonlybedrawndowniftherewereanydefaultsandwouldthereforenottieupanyof
theNGOsscarcecashresources.
ThetransactionwithICICIBankwasfairlysimple,andinmanywayslessdifficultthanthe
earlier bulk loans from other banks. The initial introduction was made by the CASHE
representativewhohadworkedwithBISWAforsometime,andonlytwofurthermeetings
were required, over a period of six weeks. BISWA estimate that the whole transaction,
includingsettingupthenecessaryrecordingandreportingformats,andinformingtheSHGs
oftheirobligations,tookfourdaysandtheapproximatelycostwas$400.
AsaresultoftheICICIBankloans,BISWAhasbeenabletoretireanumberofitsearlier
loansfrombanksandothersources.ByJanuary2005,theICICIBankloanrepresentedover
half the funds which were available to BISWAs associated SHGs. This has materially
reducedthecostoffundstotheSHGs,sincetheirloansfromBISWAcostthem18percent
whereastheICICIBankloancosts3.75percentless.
TheactualtransactioncostsforBISWAareverylow;thefundsaretransferredtoitsspecial
accountinSambalpurwithintwohoursofthe12percentguaranteedepositbeinginplace,and
canthenbedisbursedtotheSHGs,incashorbycheque,withinadayorso.BISWAhas
everyincentivetotransferthefundstotheSHGsquickly,sinceinterestischargedbythebank
fromthemomentthefundsaretransferred.UntilthefundsreachtheSHGs,BISWAitselfhas
tocovertheinterestcosts.
TheICICIBankreportingsystemshavenotposedanysignificantproblemsforBISWA,since
theirexistingsystemsalreadygeneratemoreinformationthanisrequiredbytheBank.The
BankrequiresaquarterlyauditofeachSHGsrepaymentrecord,whichtakessometimeto
carryout.BISWAplanstoasktheBanktoreducethefrequencytotwiceayear.TheBanks
auditorhasalsosuggestedthatBISWAshouldkeepidentificationdataatitsheadofficefor
everySHGmemberwhotakesaloanfromtheICICIBankmoney.Thiswouldnotbeatall
easy, since many women in rural Orissa do not have voter identity cards or any other
documentwithwhichtoproveidentity.
3
5

TheSHGsmustmaintainseparaterecordsfortheuseofloansfromICICIBank,includinga
cashbooktotracethemovementofthemoneyandpassbooksforeachborrowingmember.
Thisdoesnotcausetoomanyproblems,andBISWAisinthefirstinstancemeetingthecost
oftheextrastationerythatisneeded,butthemaintenanceofsuchrecordsattheSHGlevel
doesaddtothecostofthewholeoperationforBISWAandtheSHGs.
Effectively, apart from the few relatively minor record keeping requirements mentioned
above,theICICIBankloanhasnotfundamentallychangedtheSHGfinancingpractices,apart
fromthelowerinterestratetotheSHGs,andthefixedtermof18months.Earlierloansfrom
othersourcesweremoreflexibleintheirterms.TheBISWAboardhadtopassaspecial
resolutiontoallowtheinstitutiontocarryoutthecompletetransaction,andithasbeenmade
clear that BISWA must never suggest that the ICICI Bank loan is its own liability, but
otherwisethetransactionisfairlysimilartothosewithotherlenders.
8.4Remainingchallenges
ICICIBankrequiresthattheservicechargetoSHGsshallnotexceedfivepercent,andwhile
BISWA hopes that this reduction from previous onlending rates may eventually be
compensatedbylargervolumes,buttheywouldprefertotakeahighermargintobesureto
sustainthequalityoftheirservicestotheSHGsandtheirmembers.AspartoftheICICI
arrangementBISWAmustundertakeasmanytasksasifitwasbefore,whentakingbulkloans
fromtheBankandonlendingtotheSHGs.BISWAmustalsofacilitatethetransactions,and
bear the opportunity cost of maintaining the first loss guarantee deposit, and cover the
expensesinvolvedinadditionalrecordkeeping.
In addition to more readily availability funds, the main benefit to BISWA has been its
enhancedcredibilityamongbankssuchasHDFC,ABNAMROandSBI.Mostofthesebanks
arekeentoprovidebulkloanstowellestablishedinstitutionssuchasBISWA,atcompetitive
interestrates.BISWAisoneofthefirstMFIsinOrissatohaveundertakenSHGlinkagewith
ICICIBank,andthiswillundoubtedlyhelpBISWA,andotherMFIs,toaccessloansfroma
widerrangeofinstitutions.
ArepresentativeofABN/AMROBanknegotiatedabulkloanfor$200000withBISWA,
and,unliketheICICIBankloan,theborrowerisBISWAitself,nottheSHGs.Theinterest
rateis11percent,andBISWAplantoonlendthefundstotheirSHGsat18percent,thus
makingaratherlargermarginthanthefeewhichtheygetfromSHGsforfacilitatingtheloans
fromICICIBank.
TheinterestratetotheSHGsishigher,butBISWAbelievethattheyshoulddiversifytheir
sourcesoffunding,intheinterestsoftheirclientsandtheirowninstitutionalfuture.BISWA
planstosetupanonbankfinancecompanyasavehicleforitsmicrofinancebusiness.This
newinstitutionwilltakebulkloansfrombanks,andBISWAhopesthatinstitutionssuchas
ICICIBankwillinvestintheequityofitsnewNBFC,astheyhavewiththeNBFCinthe
Basixgroup.
ThiscompanywilleventuallyworkthroughfederationsofSHGs;BISWAhasalready
3
6

promotedsevenofthese,andthreehavebeenregisteredasMutualBenefitTrusts(MBT).The
SHGs are the members of the Trusts, and it is planned that each Trust will cater to a
maximumofabout1000membersinagivenlocality.ThiswillgivetheSHGstheoptionof
workingwiththeirTrusts,andthuswithBISWA,ordirectwiththeirlocalbankbranches.In
thisway,BISWAbelieves,theSHGsandtheirmemberswillbegenuinelyempowered.
BISWAtruststhattheSHGswillprefertosaveandtotakeloansfromtheirownTrusts,and
thusfromBISWA,ratherthangoingdirecttotheirlocalcommercialbankbranches,even
thoughtheloansmaycostthem5percentormoreabovethedirectratefromthebanks.ICICI
BankhavealsoindicatedthattheymayinfuturebewillingtodealdirectwiththeTrusts;if
this happens,BISWA willberequiredto performasimilar management function tothat
whichtheypresentlydofortheloanstoSHGs,withsimilarfeebasedremuneration.
BISWAnowhaveawiderangeofoptionsforfinancing.Theyareawarethatthemembersof
SHGsrequiretimelyserviceaboveall,andloanstoSHGsfromICICIBankareelectronically
creditedtoBISWAsaccountinSambalpur,foronwardtransmissiontotheSHGs,onthe
same day that BISWA sends an email requesting the funds, sometimes even before the
papershavebeencompleted.
ICICIBankisalsowillingtolendtoanySHGwhichBISWArecommends.Nevertheless,
BISWAdonotwanttheirSHGstobecomeentirelydependentonICICIBank.Itisalways
possiblethattheBankwillexerciseitsrighttosecuritizetheloans,andsellthemtoaless
amenablepartner.BISWAalsogenerallypreferstotakedirectbulkloansfrombanks,since
BISWAcanexercisetotalcontroloversuchfunds,andovertheonlendingratewhichthey
chargetheSHGs.ICICIBankmayinfutureincreasethemanagementfeeof5percentwhich
theyallowtoBISWA,butBISWAfeelthatthisratebarelycoverstheircosts,particularlyif
theopportunitycostofthefirstlossguaranteefunddepositedwiththeBankistakeninto
account.Theywouldpreferinanycasetobeabletocontroltheonlendingratethemselves.
8.5StoriesfromatwoSHGs
TheLaxmidunguriGosthiSHGinDurgapalliVillage
TheLaxmidunguriSHGwaspromotedbyBISWAin2000,andhaselevenmembers,all
women.TheirvillageisafewkilometersfromSambalpurtown,andmostofthemworkin
pettytradingofsomesort.ThisgroupisoutsidetheareacoveredbytheMBTswhichBISWA
haspromoted.
ThefinancialpositionofthegroupinJanuary2005wasapproximatelyasfollows:
Assets/UseofMoney
Loansto10members
fromICICIBankloan
Cashatbank
Savingsdeposit
at
SHGfederation
Savingsdeposit with
BISWA
Loantoonemember

$2000
$15
$30

Liabilities/SourcesofMoney
Memberssavings
$380
LoanfromICICIBank

$2000

$295
$40

3
7

fromownfunds
Total

$2380

Total

$2380

Themembershaddecidedthatonememberwhosehusbandmightmisusehermoneyshould
borrowfromthegroupsownfundsratherthanfromtheICICIBankloan,sincetherewasa
substantialriskthatshewouldnotbeabletorepay.Theothertenwomeneachtookaloanof
$200from theICICIBankmoney,andthey usedtheir loans tobuyrickshaws fortheir
husbands, for vegetable vending and for small grocery shops. They decided to charge
themselves2percentamonthfortheseloans,astheyhadinthepast.
ThegrouphadtakentwoloansbeforetakingtheICICIBankloan.Inthefirstcase,they
askedfor$800butreceivedonly$400.Thesecondtime,theyrequested$1400andwerelent
$840.Whentheyhadrepaidthis,theyappliedfor$1600,andtotheirsurprisetheyweretold
theycouldhave$2000.TheywereinformedthatthisloanwouldbefromICICIBank,and
theysaidthatitwaswellworthpayingahigherinterestratetogettheamountofmoneythey
needed,andwhentheyneededit.Theyhadalsofounditnecessarytomakeseveralvisitsto
thenearbybranchoftheBalasoreGramyaBankfortheirearlierloans,and,tothem,timewas
money.
ThePresidentandSecretaryoftheSHGsignedtheloanagreementwithICICIbank,and
werequiteaware ofthefactthatthatwas fromthe Bank,andnotfrom BISWA orthe
BalasoreGramyaBankliketheirearlierloans.Theywerealsotoldthattheywouldhaveto
repaytheloanoveroneandahalfyears,ineighteenmonthlyinstallments,andthiswasnoted
intheirindividualpassbooks.Theydecidedneverthelesstorepayovertwentymonths,since
thismadethecalculationssomucheasier.Theyreasonedthattheycouldifnecessarydraw
ontheirsavingstopaythelastthreeinstallmentsallatonce.
TheBhalubahalSHG
TheBahlubahalSHGwasstartedinSeptember2001,with14members.Theyinitiallysaved
tenrupeesaweek,orabouttwentycents,andthemembersthendecidedthattheycould
managetwelverupees.Theyfounditwaseasiertokeeprecordsofroundnumbers,however,
sotheyrevertedtotheoriginaltenrupeefigure.
Thegrouphadtakenatotaloffiveloansbyearly2005.Thefirstthreeloanswerefrom
BISWA,for$280,$980and$1400;theSHGpaidBISWA18percentinterest,or1.5percent
amonth,andtheychargedthemselves24percent,or2percentamonth,fortheloansthey
tookfromtheirgroup.Ineachcase,everymembertookaloan,forapproximatelythesame
amount.InNovember2004theSHGtookafourthloan,for$2000,fromICICIBank.The
memberswerenotentirelyclearastothesourceofthisloan,northeinterestrate,sincethey
werepaying9.25percenttotheBankandadditionalfeestoBISWAandtotheirnewMutual
BenefitTrust(MBT)whichBISWAhadpromotedforsome40SHGsinthearea.Theystill
chargedthemselves2percentamonthfortheirindividualloans.
In February 2004 the group had been advised by BISWA to transfer their accumulated
savingsbalanceof$800fromthelocalbranchoftheStateBankofIndiatotheMBT.They
lefttheminimumpermittedbalanceof$10inthebankaccount,buttheyplannedtowithdraw
thisalsoandtoclosetheaccountwhentheMBTwasproperlyregistered.Byearly2005their
3
8

savingsbalancewiththeMBThadreached$580,andthegroupusedthisbalance,plusaloan
fromtheMBT,toprepaytheirloanfromICICIBankandthustoqualifyforafurtherand
muchlargerloanof$3920.ThemembersborrowedthismoneyfromtheirSHGat2percenta
month,asbefore,andtheyuseditforavarietyofpurposes,suchaspaddyandvegetable
cultivation,andcattleandsheeprearing.Thehighestindividualloan,for$400,wasusedto
recoverthetitletohouseholdslandwhichhadearlierhadtobemortgaged,atanexorbitant
rate.
Thememberswerenotaltogetherclearastohowtheyweregoingtobeabletorepaythe
second ICICI Bank loan on time, since their savings account with the MBT was now
exhaustedandtheyhadalsotorepaytheirloanfromtheMBT,buttheBISWAadvisers
reassuredthemthatallwouldbewell.Thememberswerekeentohavetheirowninstitution,
ratherthanbeingdependentontheirlocalbankbranch,andtheywerewillingtopayahigher
pricefortheirloanssincethedifferencewouldgotobuildtheirownMBT.
9.ICICIBankandCashpor
CASHPOR,whichisanacronymforCreditandSavingsfortheHardcorePoor,isaGrameen
replicatorwhichoperatesinEasternUttarPradesh,oneofthepoorestpartsofIndia.Inmid
2004Cashporhadaportfolioofaroundthreemilliondollars,lenttosome50000women
borrowersthroughits32branches.
CashporsmainsourceoffundshasuntilrecentlybeenarangeofIndianandforeignfunders.
Theorganization,likeallMFIs,hasalwayshaddifficultyinraisingmoneybecauseitisnot
permittedtoraisedepositsfromitscustomers,butCashporalsolaboursunderanadditional
handicapbecauseitdoesnotusethestandardIndianselfhelpgroupmethodology,andis
therefore effectively ineligible for assistance from NABARD or other official sources.
Cashporhasalsobeenseriouslyundercapitalized,anditsrapidgrowthhasmadeitimpossible
toachievesubstantialprofitssinceittakesovertwelvemonthsfornewbranchestoreach
breakeven.
CashporisthereforeanidealpartnerforICICIBank.Itsoutreachhasoutpaceditsfinancial
strength,anditisnotableitselftoborrowthesumsitneedsforitclients.ICICIBankhas
thereforemadeanarrangementwithCashporwhichissimilartotheirloanstoSHGswhich
areoriginatedandmanagedbyBISWAandPSS.Onecriticaldifference,however,isthatthe
loansareactuallymadedirecttotheindividualwomen,sincetheGrameensystemdoesnot
involve any form of financial intermediation. The groups of five members, through their
centresofsixorsevengroups,actasguarantors,andtheyfacilitatethewholeprocessofloan
appraisal,cashhandlingandrecovery,buttheirweeklymeetingsareconductedbyCashpor
fieldstaffandeverywomanhasherownloanaccountwithCashpor.
When a member borrows, she signs a loan agreement with ICICI Bank (every Cashpor
borrower,likeeveryborrowerintheGrameensystem,mustlearntosignhernameaspartof
memberqualification.Thesigningprocessisoftenslowandlaborious,buteventhismodest
levelofliteracyisanimportantstepforvillagewomeninthispartofIndia.Theagreement
statesthattheinterestratechargedbytheBankis8.75percent.Cashporaddsa3.75percent
fee,makingthetotalinterest12.5percent,andCashporalsochargesa6percentflatupfront
3
9

fee.This12.5percenttotalplus6percentfeeisthesameasCashporchargeswhentheloans
arebeingmadewithitsownfunds,notfromICICIBank,sothereisnoeffectivedifference
for the borrower. The centre leader countersigns the loan agreement, signifying that the
Centresmembersguaranteetheloan.ThedocumentationreferstotheCentreasanSHG,
which is incorrect since the members are the borrowers; the group only facilitates and
guaranteestheloans.
TheBankhasnegotiatedasimilarfirstlossguaranteearrangement,consistinginthiscaseof
anoverdraftfacility,onwhichinterestispayableat19.5percent,whichtheBankcandrawup
to the required amount if necessary. This was initially set at 12 percent of the amount
outstanding,butthiswasreducedto8percentforlatertransactionsbecauseoftheearlygood
experience.
Byearly2005,ICICIBankhad$1.75millionto24000Cashporclients,whichwasaround
onethirdofthetotalclienteleatthetime.TheBankhascommittedafurther$2.75millionfor
Cashporborrowers,tocoverloansuntiltheendof2005.
Inaddition,ICICIBankhasmadeanunsecuredloanof$360000toCashpor,atanaverage
rateofabout9.5percent,tocovertheoperatingdeficitsofthebranchesintheareaswherethe
Bank is lending to Cashpor members. This loan has a 42 month grace period, and it is
estimatedthatthebranchprofitswillgeneratethenecessaryrepaymentsaftertheendofthis
time.
10.OutstandingIssues
ICICIBankdesignedandimplementedaveryinnovativeandapparentlyeffectivestrategyfor
engaginginthegrowingmicrofinancemarket,despitethefactthattheBankhasonly88
branchesoutsidethemajorcities.AlthoughtheBanksoutreachhasthusfarbeenlimited,itis
growingfast,andlargenumbersofpoorpeoplearebecomingabletoaccessformalcreditfor
substantiallylargersumsthanhaspreviouslybeenavailable.Thiscanenablethemnotonlyto
alleviatetheirimmediateneedsbutalsotolaythefoundationsforsustainedimprovementsto
theirlivelihoods.
ICICI has mobilized a number of specialist institutions with long experience of social
mobilizationandfinancialintermediation.Theseinstitutions,particularlythesmallerandless
experienced ones (with which they must deal to reach the bulk of the market) are often
financiallyweak,poorlycapitalized,anddependentongrantfundsfortheirsurvival.Many
are registered as charities, and while they can legally borrow and onlend, they do not
constitutegoodrisksfortheBank.
TheBankhasthereforedevisedmeanswherebyitcanusetheexpertiseandnetworksofthese
institutions,withouttakingontheriskofactuallylendingmoneytothem.TheBanksloans
aremadedirecttoselfhelpgroups,oreventoindividualmicroborrowers,whoseaggregated
credit risks have been shown to be very low. The intermediary institutions provide their
servicesforafee,whichisbundledwiththeinterestpaidbythefinalborrowers.
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TheBankhasalsoworkedcloselywithCARE,adonorfundedinstitutionwhichbuildsthe
capacity of NGO/MFI intermediaries. The Bank has been able to benefit from their
institutionaldevelopmentservices,thusfaratnocost,andispresentlyplanningacostsharing
initiative whichwill, itis hoped, eliminatethe needfordonorsubsidy tosupportCares
capacitybuildingservices.
ICICIsstrategyisworkingwell,theportfolioisgrowing,andtheloansareasprofitable,as
theBanksothermoretraditionalassetssuchashousingorvehicleloans.Bydealingdirect
withmicrofinanceclients,theBankcansatisfytheReserveBankrequirementstolendtothe
socalledweakersections,andhascreatedassets,withthenecessarycreditenhancements,
whichcanbesecuritizedandsoldontootherfinancialinstitutions.
Thereare,however,anumberofoutstandingissuesandchallengeswhichshouldbeaddressed
beforethisstrategycanbesaidtobecompletelysatisfactory,forboththeBankanditsfinal
customers.
1 Thepoorclientneedsaccesstosavingsfacilitiesfromthesameinstitutionwithwhom
theyinteractonloans.ICICIBankispresentlyunabletooffersavingsproductstoitsSHG
clients. They are trying to persuade regulators to allow more flexible use of savings
collectionagents,butitisunlikelythattherewillbemuchchangeintheforeseeable
future,inviewofthelonghistory,ofdishonestsavingscollectors.ThethreatisthatICICI
clientsmightnowgototheirneighbouringbankbranchesforsavings,andmaythentake
loansfromthem.
2 TheBanksloansaremadetothegroupsortoindividuals,andnottotheMFIsorother
intermediariesorcooperatives,andtheborrowerssignlegaldocumentswhichstatethis.
However,iftheMFIsareunabletorecovertheloans,itisunclearifICICIwillbeableto.
TheBankhasnopresenceinorknowledgeoftheareaswheretheclientslive,andhasno
stafftocollecttherecoveries.Howwilltheyrecoverdebts,evennetofthefirstloss
guarantees?.
3 TheSHGsarepayingbetween15and24percentinterestfortheirloans,andindividual
borrowersfromGrameenreplicatorssuchasCashporpaysimilarrates,orsometimeseven
more,includingthefeestheypaytotheintermediatingMFIs.BanksinIndiahavemade
loanstowelloveramilliongroups,at12percentinterestorless.Somebranchmanagers
arestillreluctanttoenterthisbusiness,butitislikelythatSHGclientswillsoonbeableto
borrowfromthemorethan70000commercialbankbranchesandfrommanyofthe93
000primarycooperativesocieties.AsSHGmembersbecomemoresophisticatedthey
willshoparoundforlessexpensiveloans,atrateswhichcannotbematchedbyICICI
Bankanditscollaboratingintermediaries.
4 TheICICIBanksystemiscumbersome,andisalsoinsomesensedemeaningfortheMFIs
whoarereallyonlyloanagents.SomeMFIsarebecomingfinanciallystronger,andcan
borrow bulk funds direct from ICICI Banks competitors, such as ABNAMRO and
others.ManyofICICIBanksbestcollaborators,particularlythosetakingthelargersums,
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mightprefertotakebulkloansdirect,andtoonlendtotheirSHGs,thusenhancingtheir
ownstatusintheeyesoftheirclients.
InspiteoftheseissuesICICIBankisdemonstratingthatanurbanbasedprivatebankcan
effectivelyandprofitablyreachtheruralpoor.ItisnowmainstreambusinessforICICIand
otherIndianandforeignbanksarefollowing.Thisisincreasingfinancialdeepening,anda
widerrangeoffinancialservicesisbecomingavailabletothehundredsofmillionsofpeople
whohavehithertolackedaccesstoanyformalfinancialservicesatall.

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Bibliography
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Harper,MandAroraS.2005.SmallCustomersBigMarket.ITPublications,Rugby.2005.
IBABulletin.2003.VolumeXXVno.3.IndianBankersAssociation.Mumbai.2003
MCrilMicrofinanceReview.2003.MicroCreditRatingsInternational.Gurgaon.2004
Microscanatechnicalbulletin.2004.Vol.1No.2.CARE.NewDelhi.2004
NABARD.2004.ProgressofSHGBankLinkageinIndia,20031004.Mumbai.2004
SharmaV.2005.MicrofinanceOverview.CAREIndia2005
Shylendra,HSandSingh,K.1994.FarmLoanWaiversandtheCreditSystem;anImpact
studyoftheagriculturalandruraldebtreliefscheme,1990.IRMA.Anand.1994
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