icici case study beginning

8/9/2019 ICICI Case Study Beginning

1/18

ICICI Bank in Micro-fnance: Breaking thebarriers


2/18

About ICICI Group

About ICICI Group

Agenda

ICICI Bank & Micro-fnance


Issues

Issues

Micro-fnance in India



3/18

The ICICI Group today

Largest private sector bank in India

Largest consuer credit provider in India

!ver "# i$$ion retai$ custoer accounts

%erving over ''' $arge and sa$$ corporatehouses (ith a variety o) (ho$esa$e and treasuryproducts

Largest private sector $i)e and genera$ insurerin India

Bui$ding a g$oba$ presenceLargest rura$ and icro $oans provider in thecountry

Asset base o) *+%, # bn. /AT o) about+%,#'' n


4/18

About ICICI Group

About ICICI Group

Agenda



Issues0

Issues0




5/18

Indian banking syste has achieved a

)oridab$e outreach in rura$ areas 12 34.#456 o) a$$ schedu$ed coercia$

bank branches are rura$

4"2 3"4"7" i$$ion6 o) the tota$ deposit

accounts are in rura$ India 4237 i$$ion6 o) tota$ credit accounts

arein rura$ India

8uber o) peop$e per branch has reduced)ro 9.''' in une "191 to "#.''' in une

"11; 3a$$ India average6

%ource:

B%


6/18

But $arge gaps persist in outreachto the poor

or the rura$ popu$ation o) ;"7' i$$ion/opu$ation per branch: .;14

/enetration o) savings accounts is be$o( "52

As against "'2 in urban and sei-urb

areas8uber o) vi$$ages per branch: "1

>igh dependence on in)ora$ sources 492 o) rura$ credit )ro in)ora$ sources

=ependence even higher )or $o(er incoehouseho$ds: ;52%ource:

B%


7/18

=oorstep banking

$eEibi$ity in tiings

Tie$y avai$abi$ity o)

services

Lo( va$ue and highvo$ue transactions

igh cost o) servicede$ivery

Tiings and procedures:

igh transaction cost )orthe custoers

HEpansion o) branchnet(ork eEpensive and

tie taking

8ature o) =eand8ature o) =eand 8ature o) %upp$y8ature o) %upp$y

Banking (ith poor ischa$$enging0

0and conventiona$ banking (as not poisedto eet these deands0


8/18

0$eading to ne( innovations incredit

de$ivery

MIs8G!MIs8G!

ariety o) ode$s underip$eentation (ithstress on =oor step de$ivery o)

services

/ro)essiona$anageent andcoputeriJed systes

Govt 8ABA


9/18

About ICICI GroupAbout ICICI Group

Agenda

ICICI Bank & Micro-fnanceICICI Bank & Micro-fnance

Issues0Issues0

Micro-fnance in IndiaMicro-fnance in India


10/18

Bank-$ed Mode$ )or %e$) >e$p Groups3%>Gs6


11/18

The %>G Bank $inkage Mode$0

%tructure%tructure

BankBank

%>G%>G

BranchBranch

Branches assess credibi$ityo) individua$ %>G andonitor repayent process

Group )oration by Bank or8G!s

Branches assess credibi$ityo) individua$ %>G andonitor repayent process

Group )oration by Bank or

8G!s

NGO

/ub$ic %ector banksip$eentingGovernent schees

/overty eradication

inancing )arersand sa$$entrepreneurs

Hphasis on %>Gs

Concept prootedby 8ABAGs fnanced

Innovative /ractices !rienta$ Bank

/ub$ic %ector banksip$eentingGovernent schees

/overty eradication

inancing )arersand sa$$

entrepreneurs Hphasis on %>Gs

Concept prootedby 8ABAGs fnanced

Innovative /ractices

!rienta$ Bank

CharacteristicsCharacteristics


12/18

Divisional Manager

Project Manager

Coordinators

Promoters

20 Bank employees

able to manageproject

Coordinator

manages ! Promoters"it# eac# Promoter$orming % managing20 &'Gs

(C(C( Banksta)

O*tso*rcedsta)+leaders o$old &'Gs,

&'GsComm*nity

Gro*p o$ 20 poor

"omen

0(as odifed by ICICI Bank0

0thereby enab$ing increase in outreach )ro".'' %>Gs to ore than ".''' %>Gs in 4years


13/18

>igh in)rastructure costs

>igh operating overheads

Long gestation period

Lo( techno$ogy usage inrura$ areas

Transaction at branchcosts +%, " vis-a-vis #cent at ATM

Liited outreach

Concentrated in urbanareas

>igh cost $o( ticket ites

Cash intensive transaction

Transaction cost o) 5-'2

HEistingBranches

HEistingBranches

8e( Branches8e( Branches

Bank $ed %>G banking (as notsca$ab$e0

0and (e decided to $ook beyond

our o(n net(ork0


14/18

Bank

HEtends $oan to MIs

Create charge on capita$)or the $oan to MI

Bank

HEtends $oan to MIs

Create charge on capita$)or the $oan to MI

MI

HEtends $oan to c$ients

Create charge on capita$)or the $oan to c$ients

MI

HEtends $oan to c$ients

Create charge on capita$

)or the $oan to c$ients

C$ientsC$ients

0at channe$s o) MI $ending


15/18

!ptiising costs0

Branch $icence Kanpo(er intensiveprocess

%ta Costs K at $east"' ties due to highersa$ary structure inCoercia$ banks

Larger overheads dueto centra$ised operationsand $arger gegraphiescovered

Branch $icence K notapp$icab$e

%ta costs Ksubstantia$$y $o(er dueto hiring o) $oca$anpo(er

Considerab$y $o(er

cost structures due to$oca$ area approach

Bank CostsBank Costs MI CostsMI Costs

Leading to a reduction o) upto 92 intransaction costs0


16/18

But opening up ne(cha$$enges0

=oub$e counting o) capita$ by bankand MI

%ub-optia$ $ending structureLo(er o( o) resources )robanks

>igher pricing than (arranted byriskiness o) port)o$io due to siJe o)ba$ance sheet


17/18


18/18

Issues0

8eed )or structures that

+ses capita$ parsionious$y

/erits a$$ the costs o) the operation tobe recovered in a coercia$$y viab$eanner and incentivises gro(th

/reserves the incentives o) theoriginator 3o) the port)o$io6 to aintainport)o$io per)orance Care)u$ se$ection o) borro(ers

!ngoing supervision and in)orationanageent0through structures capab$e o) assive sca$e up

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