ICICI Bank has conquered India’s cities with savvy, consumer-oriented
marketing. Now, the country’s No. 2 bank wants to tap India’s
vast, rural market with micro loans.
In the past three years, ICICI bank has set up for-profit joint
ventures with four microcredit non-governmental organizations
in order to extend its reach into the country side. The largest
of these NGOs, the “Credit and Savings for the Hardcore
Poor”, has disbursed 12 million rupees ($265.000) of ICICI’s
loans to 2000 borrowers since last December—a figure ICICI
hopes to double every six months for the next two years.
“We feel the rural market is too large to ignore”,
says Brahmanad Hegde, head of ICICI’s rural microbanking
group. “We see microcredit as a great way to go rural”.
The microcredit model—doling out small loans to poor entrepreneurs
with little collateral— is used by many NGOs and non bank
institutions worldwide for poverty alleviation. In recent years,
as Asian banks look for new growth in the region’s rural
markets, some are also turning to microcredit.
India requires banks to lend 40% of their profile to priority
sectors like agriculture and small-scale industries, but ICICI
says this requirement is not driving their move into microcredit.
“We’ve already achieved that target; we don’t
need microcredit to fill in the gap.”says Hegde. “We’re
doing this because of the potential”.
ICICI bank opted to work with NGOs rather than set up its own
branches because it costs less—and the NGO staff have skills
in assessing and dealing with clients without collateral that
bank staff might not have, Hegde says.
“Being a commercial bank, our cost structure is high”
he adds. “We provide the credit and technical support, but
they take care of mobilizing the rural poor and working with those
clients, leveraging our different strengths.”
Extracted from Far Eastern Economic Review, November 13, 2003