Page 203 - DCOM208_BANKING_THEORY_AND_PRACTICE

Banking Theory and Practice

Notes like banking, saving and lending. By 2000, it had created around 1200 SHGs across Tamil
Nadu and provided credit to them.

Partnership Model
The SHG program had been fairly successful in several states of India, but the reach was
limited only to those areas where the bank’s branches were operational. The partnership
model of ICICI Bank aimed at reaching those areas where the bank did not have any
branches.

This model aimed at synergizing the comparative advantages and financial strength of
the bank with social intermediation, mobilization power and infrastructure of MFIs and
NGOs. Through this model, ICICI Bank could save on the initial costs of developing rural
infrastructure and micro credit distribution channels and could take advantage of the
expertise of these institutions in rural areas. Initially, ICICI Bank started off by lending to
MFIs and NGOs in order to provide the necessary financial support to their activities.
Later, ICICI Bank came up with a plan where the NGO/MFI continued to promote their
microfinance schemes, while the bank met the financial requirements of the borrowers.
Other Microfinance Initiatives

As a part of microfinance initiatives in the agriculture sector, ICICI Bank developed Farmer
Service Centers (FSC). An FSC was managed by an agricultural input supply company
which supplied inputs like seeds and technical knowhow to the farmers.
FSCs were also managed by an extension service organization which provided inputs,
credit and technology or by an NGO that provided all the services that farmers needed for
their agricultural needs. Working in close association with farmers, FSCs provided them
with services like advice on seeds, sowing techniques, pest control, weed control, usage
and dosage of herbicides, pesticides and fertilizers and other services associated with
agriculture. The FSCs also provided crop-related information and services to farmers,
apart from facilitating the sale of agricultural produce. The FSCs arranged to procure the
produce through agents and sold it in organized agricultural markets thus getting better
realization.
The Future
ICICI Bank plans to use the services of over 100,000 agents for its various microfinance
initiatives. The bank has encouraged direct sales agents to market microfinance products
into rural areas.

These agents contact several borrowers, thus expanding the reach of ICICI Bank at a low
cost. Taking the FSC initiative further, ICICI Bank plans to provide farmers credit from
sugar companies, seed companies, dairy companies, NGOs, micro-credit institutions and
food processing industries.
SIG has been involved in a project in the southern state of Tamil Nadu to find out how
wireless technology can be applied in the development of low cost models of banking.
Another plan to increase the reach in rural areas is to launch mobile ATM services. ICICI
Bank branded trucks have started carrying ATMs through a number of villages.
Question
Provide a business model of Microfinance, and explain how to make microfinance a
viable business option.
Source: http://www.icmrindia.org/casestudies/catalogue/

198 LOVELY PROFESSIONAL UNIVERSITY