CitibankCSV Strategy

TEAM A

Citibank: 200 years of commitmentall over the world

“Wherever people come together to imagine something, create something, build something,we're there to help make it real” 1.

That’s the promise that Citibank, one of the largest and most influential banks, makes to the world. In the last 200 years, this institution has grown to be part of the top 20 global banks list2; something that has enabled it to help its clients to imagine, create and build everywhere.

The bank has presence all around the globe with branches in almost every country. One of the countries with the largest presence is, without doubt, India. Citi started operations in the country more than a century ago and «today is a significant foreign investor in the Indian financial market». Furthermore, as promoter-shareholder, “Citi has played a leading role in establishing important market intermediaries such as depositories, credit bureau, clearing and payment institutions”. However, Citibank India, following the pattern of the global brand, is also committed to other aspects beyond the economical one: also committed to other aspects beyond the economical one:

Citi India is committed to enabling socio economic progress in the communities where we live and work. The Corporate Citizenship function is the umbrella entity for all corporate social responsibility activities undertaken by Citi India, and is an important and integral element of the daily functioning across the organization. We continually strive to be active participants and contributors to the well-being of the community in which we live and work. Each year, we identify and endeavor to support the nation’s priorities, be they education, empowerment, or environmental sustainability3.

According to a World Bank study, one in three of the world’s poorest people are living in India, one of the fastest growing economies globally speaking4. Furthermore, its population is expected to reach 1.5 billion, so this country will become the world's largest nation before 2030. However, “its economy is not growing fast enough to create the 20 million new jobs per year they will need to prevent poverty increasing further”5.

India has recently been a “natural candidate for experimenting with microfinance as a tool for poverty alleviation”.

Not in vain, the microcredit concept is directly linked to empower those with a less privileged social status. According to Professor V. K. Sapovadia (School of Business Management at Gujarat University), “the principles of microfinance are founded on the philosophy of cooperation and its central values of equality, equity and mutual self-help. At the heart of these principles are the concept of human development and the brotherhood of man expressed through people working together to achieve a better life for themselves and their children”6. From a more financial perspective, we can conclude that:

The meaning of microfinance is supplying micro credit to people living in abject poverty and has no reach to the conventional and formal financial products. It is an aid for them to engage in productive activities or grow their small businesses. Microfinance is focused on availing the credit in a standard manner. The downtrodden people just need a diverse range of financial products to build their own business, be able to build assets and maintain consumption and protect themselves against risks7.

80% of poverty in India is inrural areas

Micro Finance and human development: understanding the correlation

If we take into account that almost 80% of the poverty found in India is located in the rural areas, we can understand the increasing interest that microcredits and microfinance are generating in these parts of the country. The lack of access to financial services and productive resources is one of the main reasons which explain the poverty levels.

In fact, the credit exclusion is really severe in several regions of the country: only 10 per cent or less out of 100 persons have access to credit. Thus, in order to help people improve their income and living standards, there has been a notable growth in the number of institutions which support the development of microfinance.

However, most of these institutions are public cooperative societies whose reach and power is limited, mainly, because of their size and the lack of resources. Also, the formal banking sector has had a limited impact on microfinance or lending to the poor due to different reasons, such as political pressure or prudent practice policies. Therefore, we can conclude that the current situation is in an experimental phase and there is still a lack of resources in terms of microfinance.

“India has built up a network of rural banks that is rare if not unparalleled in the world”.

They engage in a wide range of socially responsible activities, from corporate philanthropy, employee volunteer programmes, and strategic training and workshops for financial education. One of the major avenues through which they perform CSR activities is via the Citi Foundation, the global umbrella foundation of Citi Group, which “works to promote economic progress and improve the lives of people in low-income communities around the world.”8

The objectives of the Citi Foundation are: to increase financial inclusion, to create and catalyze youth economic opportunities, and to transform urban environments by building economically vibrant cities. In their 2014 Global Citizenship Report, Citi stated that they are committed to the communities they serve beyond their business activities, “providing the tools, platforms and technologies that expand financial inclusion and empower the workforce of tomorrow"9.In order to achieve this, the Citi Foundation has several core Signature Programs, of which the most notable are the following:

Better than Cash Alliance was founded because of the need to integrate the world’s poorest people (those who move within a cash-only environment) into mainstream economy and to provide them access to affordable financial services. The Citi Foundation has committed $1.5 million over three years to launch the alliance, which would focus on tech support and peer

1. Investing in Youth

Pathways to Progress is a global flagship initiative that support Citi’s longtime vision of supporting economic opportunities for the youth and boosting their career readiness. It is a three-year $50 million dollar endowment to help low-income youth develop the skills they need in order to compete and thrive in today’s workplace10.

2. Driving Financial Growth and Inclusion in Low-Income Communities

Citibank CSR

learning for electronic payment expertise. Already, the alliance has helped bottom of the pyramid markets around the world, India included.

Specifically for Citi India, the Citi Foundation aims to address the country’s socio-economic challenges. Their primary programme is the India Innovation Grant – a unique initiative that aims to encourage and accelerate innovative financial inclusion for low-income populations. Through this effort, Citi Foundation invests up to INR 125 Million to support NGOs to develop new and innovative financial education and inclusion programs that are scalable and replicable11.

Citi India also puts value on diversity, as shown via the Citi India Woman Leader Award (CWLA), an initiative aimed at recognizing, rewarding and developing talent of women across India’s best business school. Winners are awarded a full tuition scholarship and the opportunity to intern at Citi, learn from Citi senior management, and participate in capability building workshops.

Citibank has been very proactive when it comes to CSR

Citi India Grant and Outreach Portfolio:

Citi Microentrepreneurship Awards (CMEA)

For the transformation of CSR to CSV, we would like to put our focus on Citi Foundation’s Micro Entrepreneurship Awards: a Signature Program aimed at raising awareness about the importance of microentrepreneurship and microfinance in supporting the financial inclusion and economic empowerment of low-income individuals12. Since 2004, the Citi Foundation has awarded innovative entrepreneurs and microentrepreneurs for their extraordinary efforts in gaining self-sufficiency through the innovative use of microfinance. The Foundation provides awards of up to $9 million in cash prizes to 6,000 outstanding microentrepreneurs in more than 30 countries13. To date, they have invested more than $17 million to support the efforts of microfinance networks.

CMEA in India

For the Microentrepreneurship Awards in India, Citi India specifically recognizes individuals and small enterprises that exhibit a superior ability to emerge from below the poverty line and build self-sustaining businesses, create employment, and contribute meaningfully to their communities. The Foundation implements the awarding process together with a not-for-profit organization called Partners in Change. The awards are divided into several categories: National Micro Entrepreneur Award, Youth Entrepreneur, Community Owned Enterprise, Green Entrepreneur, and Innovative Entrepreneur. The winning nominations are selected from across the country’s four regions: East & North East, West & Central, North, and South. In total, the winners are presented with cash prizes of up to INR 1.8million, their respective trophies and citations.

Criticism of Citi’s CSR

It is true that Citibank and the Citi Foundation are doing a great deal to promote micro enterprises and put the spotlight on local microentrepreneurs who are helping to lift the economic fortunes of their communities and bringing more capital into their developing economies. However, our criticism of their CSR Signature Programs, specifically the Microentrepreneurship Awards, is that this activity consists only of sponsoring money for the awards and grants. Furthermore, sponsoring awards and corporate giving can easily be dismissed as a mere PR exercise in order to lift the image of the company. They are not necessarily long-term and sustainable programs, and do not add value to the company’s economic value chain.

“Given the vast number of individuals whose livelihood is self-employment through micro-enterprise, we know that the India growth story needs an inclusive financial ecosystem. By bringing the marginalized into the mainstream, microfinance has served this endeavor well. The Citi Micro Entrepreneur Awards not only celebrate the achievements of those who have accessed micro finance to break the circle of poverty, they serve as a symbol of hope for those who continue to be in its grip." 14

Mark T. Robinson, CEO, Citi South Asia

NEW CSV STRATEGY

Not all profits are equal. The new capitalism as introduced by Porter15 focuses on profits involving social purpose, creating a positive cycle of prosperity for both company and community, and enduring profits. CitiBank will create shared value by reconceiving their current CSR strategy. They will recreate their value proposition for the community and create a new market for the company.

We propose CitiSashakti as CitiBank India’s flagship micro-lending program to encourage rural entrepreneurship at the grassroots level. Sashakti literally translates to “Empower” in Hindi and is the central theme of this CSV initiative. CitiBank will redirect the Citi Micro Enterprise Award (CMEA) fund of INR 3.8 million to creating a micro financing platform in conjugation with Citi Foundation.

The Fineprint

What is CITISashakti?

CitiSashakti offers micro loans:

1. Of up to INR 100,000 (~$1500)2. For entrepreneurial ventures3. In rural and semi-rural areas4. to applicants from lower socio- economic backgrounds

The loan process follows the minimax theory- smaller loan amounts to a large group of people.

How does it work?The inspiration behind the initiative is primarily social good. The micro loans will typically be unsecured, with a nominal rate of interest, long term-period payment plans (up to 5 years depending on principal) with flexible EMI options.

Moreover there will be SOPs like better rate of interest for women entrepreneurs and for group loans. This stems from the idea of solidarity lending. It is a lending practice where small groups borrow collectively and group members encourage one another to repay. It creates a system of trust and lowers cost to company. Borrowers would

be offered flexible repayment terms to ensure they are not unnecessarily burdened yet work hard to ensure the payments are made.

CitiBank would appoint a collection agent who will recover installments of the loan on a weekly basis, this will not burden them financially as the amount will be much more manageable.

Borrowers will have the opportunity to activate a complimentary savings bank account with a free ATM card, allowing easy direct withdrawals from the loan account. These savings accounts will be accompanied by better interests rates than the regular savings accounts.

One of the contractual obligation that the borrowers will have to abide by is the promise to send their children to school. India has a free primary and secondary public education program. Hence this is not a financial burden. This would ultimately help India in not only prospering as a society but also better reaching the Millennium Development Goals (MDGs) [set by the UN], which are to convert to the Sustainable Development Goals after 2015.

Value for societyPoverty limits demand for products and causes social degradation16. CitiBank’s CitiSashakti microlending program creates an overarching value for society because it brings financial security to a community that is marginalized and financially isolated. One of the ancillary services that the program

offers is free savings accounts with CitiBank India. For an ‘unbanked’ community this is a great opportunity to secure their finances and develop a habit of saving. Citi would provide free financial literacy services as a supplementary service to their borrowers. Financial inclusion is an essential form of societal development for rural India, where the concept of traditional banking is largely unknown and underutilized.

Besides receiving a free of cost ATM card and better rate of interest on their loan upon opening their savings account, the borrower will also receive guidance on pertinent and relevant issues such as: • How to use an ATM• Mobile and SMS banking• Budget and funds management• Fringe benefits like security of money and

interest on deposited amount We believe that over time, this will help create a society that knows and values the benefits of banking over generations, of course if a parent gets into the habit of using secure and traditional banking methods, they will pass those traits on to their children and close family members as well.

Overall, this micro lending program is meant to empower the local communities, especially women by encouraging self reliance and developing the entrepreneurial spirit of the society at large. An initiative like CitiSashakti can help build a sense of accomplishment in the borrower and reduce the dependence of charity by including them in the mainstream financial system.

Value for CitiAs a strategy that creates shared value, there is economic and social value for Citibank in the whole venture. Apart from earning goodwill as proponents of social change, Citi will enjoy increased reach by tapping into a whole new market in rural and semi rural India.Citi will be able to create a differentiation strategy by tapping a big market that has largely been ignored by other private banks. Differentiation will also be in terms of brand image that Citi is a caring bank. This differentiation will give Citi an unparalleled competitive advantage because it has the means already, now it will also have the reach.

Citibank is reconceiving its products and market and enabling local cluster development in the long term, thereby creating shared value.

Target audience for Citi Sashakti Indian citizens :

• residing in a town or village with a population of maximum 15,000

• daily income of less than INR 700 (~USD 10)

• engaged in any kind of entrepreneurial venture or agriculture

• of legal age (18 years and above)

communication plan

Transformation of the CSR to CSV will also need to be accompanied by a communication plan to ensure stakeholder awareness and brand promotion. As CitiSashakti is a microlending program aimed at reaching the rural audience, the communication needs to be organized accordingly.

The target audienceGiven the strategy for CitiSashakti, the communication plan will target two groups. First target group is the end users of the microloans, while the second target group includes all other stakeholders of Citi. We propose different tactics to reach these audiences and communicate and promote the concept of CitiSashakti.

1. Rural entrepreneurs

The communication directed to this target group is highly important, not only because they are the end users of the CitiSashakti, but also to show the rural communities that microloan programs will help to secure a better future for themselves and their children. It will give a sense of hope and realization of dreams to the entrepreneurs.

2. Other Stakeholders

In this target group, the communication plan intends to increase the awareness of CitiSashakti as a new model of CSV and promote the idea that shared value is a significant and measurable way of doing business while at the same time solving social problems.

communication strategy

CitiSashakti’s strategic messaging is Cultivating India - it is not only a tagline, but also the name of the communication campaign. India has tremendous potential in its democracy, resources and most importantly its people. The slogan of the campaign would be:

“Empowering rural India to cultivate growth and safeguard the future.”

tactics

1. Bulk SMS

Bulk SMS is an effective means to reach the rural population of India and inform them about the CitiSashakti program. Messaging will be in local languages and mostly informative in order to get as many reads as possible. Given that most of the rural population does not have access to internet, mobile phones are an achievable method to spread the word about CitiSashakti and its activitie.

2. Traditional Media

Traditional media is a good medium to reach wide audiences, particularly TVCs, radio, and print media ads explaining the vision of CitiSashakti and "Cultivating India". Through these media, CitiSashakti will be portrayed as a social initiative created to promote entrepreneurial spirit in the country.

3. Cultivating India Tour Bus

Since our end-users are people living in rural areas with limited exposure to digital media and the internet , Citibank will create a "Cultivating India Tour Bus". This bus will go to several rural areas promoting CitiSashakti’s microloan program, with additional benefits that come with it.

4. Presentations at Panchayats

In addition to the Tour Bus tactic, special presentations will be done at Panchayats. Panchayats are “village councils” that are present all over India, where official meetings between town/village officials and residents are held. Presentations by the CitiSashakti team will be held at Panchayats throughout the country to inform, explain and promote CitiSashakti as a social initiative. This will also be an effective way to answer the concerns and questions of the end-users, as it is also a personal approach. In time, mobile desks will be installed during Panchayats, which will serve as CitiSashakti representative offices to continue personal connections with potential and current end users of the microloan program, to offer advice, and to enable people to sign up for the service.

Cultivating India campaign will run all across India, reaching the two target audiences mentioned above. For each segment, we propose various tactics to ensure that the message and the promotion of the campaign are clearly delivered.

tactics

1. Digital Campaign

Digital channels such as corporate website and online publications will be used to create online presence for CitiSashakti. These mediums will contain all necessary information about CitiSashakti’s mission, strategy, and procedures. As the program progresses, success stories will be shared to showcase to the public and the stakeholders that the initiative is indeed a shared value concept which develops local economies and banking systems.

2. Social Media Campaign with #CultivatingIndia

Growing from the digital campaign, Social Media presence is also important for the promotion of CitiSashakti. Social Media Channels, such as Facebook, Twitter, Blogs and Instagram will be created and managed to ensure everyday communication with the stakeholders. Even though the accounts will be corporate, the tone of voice used throughout the social media channels will be less formal, and social listening will be

Apart from the end-users, CitiSashakti will be targeted to other stakeholders as well. Given that this audience is also quite large, yet more digitally advanced, several promotional tactics will be used to communicate the message “Cultivating India”. It is important to note that the traditional media that will be used for the end-users is also highly effective when promoting to this target group.

other stakeholders

implemented to ensure that information/questions/concerns regarding CitiSashakti are communicated clearly in real time. Pictures and stories with the hashtag #CultivatingIndia will create a more personal connection with the audience and these types of content will promote what is good about this CSV campaign.

1 Citibank website. Section: About us. Progress [online]. Available on: http://www.citigroup.com/citi/progress/index.htm

2 Accuicity website. Bank ranking, top banks in the world. 24 June 2015 [online]. Available on: http://www.accuity.com/useful-links/bank-rankings/

3 Citi India website. Citi in India. Citizenship activities [online]. Available on: https://www.online.citibank.co.in/press-room/citi-in-india.htm?eOfferCode=INHOGNTHEABOUS

4 THE WORLD BANK. The State of the Poor: Where are the Poor and where are they Poorest? The World Bank, April 2014 [online]. Available on: http://www.worldbank.org/content/dam/Worldbank/document/State_of_the_poor_paper_April17.pdf

5 NELSON, Dean. India has one third of world's poorest, says World Bank. The Telegraph, 18 April 2014 [online]. Available on: http://www.telegraph.co.uk/news/worldnews/asia/india/10003228/India-has-one-third-of-worlds-poorest-says-World-Bank.html

6 SAPOVADIA, V. K. MICRO FINANCE: The Pillars of a Tool to Socio-Economic Development. School of Business Management, Gujarat University, no date available [online]. Available on: http://www.sarpn.org/documents/d0002220/Micro_Finance_Sapovadia.pdf

7 CHAKRABARTi, Rajesh. The Indian Microfinance Experience – Accomplishments and Challenges. College of Management, Georgia, no date available [online]. Available on: http://scripts.mit.edu/~varun_ag/readinggroup/images/b/b6/The_Indian_Microfinance_Experience_%E2%80%93_Accomplishments_and_Challenges.pdf

8 Citibank website. Section: Citi Foundation. Philanthropic Focus. [online]. Available on http://www.citigroup.com/citi/foundation/philanthropic-focus.htm

9 Citibank website. Section: Corporate Citizenship. [online]. Available on http://www.citigroup.com/citi/about/data/corp_citizenship/2014-citi-global-citizenship-report-en.pdf

10 Citibank website. Section: Citi Foundation. Pathways to Progress.. [online]. Available on http://www.citigroup.com//citi/foundation/pdf/p2p_brief.pdf

11 Citibank India website. Section: Citi Foundation. Citi in the Community. [online]. Available on https://www.online.citibank.co.in/Corporate-Affairs/Standalone/IIGP/jun15/htm/India-Innovation-Grant-Program.htm

12 Citibank website. Section: Citi Foundation. Signature Programs. [online]. Available on http://www.citigroup.com/citi/foundation/programs/microentrepreneurship-awards.htm

13 Citibank website. Section: News. [online]. Available on http://www.citigroup.com/citi/news/2010/100319c.htm

14 Citi Announces Winners of 2009 Citi Micro-Entrepreneur Awards. The Telegraph. Retrieved fromhttp://www.telegraphindia.com/external/display.jsp?mode=details&id=21980

15 PORTER, Michael and Michael Kramer. “Creating Shared Value: How to reinvent capitalism and unleash a wave of innovation and growth”. Harvard Business Review. Jan-Feb (2011) 15. Reprint. 16 PORTER, Michael and Michael Kramer. “Creating Shared Value: How to reinvent capitalism and unleash a wave of innovation and growth”. Harvard Business Review. Jan-Feb (2011) 12. Reprint.

endnotes