Date post: | 07-Apr-2018 |
Category: |
Documents |
Upload: | vibhormehta |
View: | 228 times |
Download: | 0 times |
of 24
8/4/2019 ICICI Rural Banking
1/24
ICICIFinancialservices for thepoor
Presentation By:Ankit AgarawalAshok ChaudharyDeepesh AgrawalHarshil SamraVibhor Mehta
8/4/2019 ICICI Rural Banking
2/24
ICICI INDIA: Introduction
1st bank to launch a web site in 1996.
The 1st bank to launch online bill paymentin 1999.
It has more than one million onlinecustomers, the largest in India.
8/4/2019 ICICI Rural Banking
3/24
Facts about India
People living on less than $1 are greaterthan the entire population of USA.
Rural population is 741.6 million.
Rural penetration of banks is as low as18%.
428 million deposit bank accounts in thecountry,30 % are in rural areas.
8/4/2019 ICICI Rural Banking
4/24
In the formal sector micro financinginstitutes existed for some time.
Informal sector is characterized bymonopolistic practices.
Interest rates in the informal market varyfrom 3% to 10% for a month.
8/4/2019 ICICI Rural Banking
5/24
Steps taken by RBI for rural
development
It has instituted several policies to encouragerural retailing.
As per section 22 of the BRA 1949 privatesector banks are required to open a minimum30% of the total branches in rural areas.
It started a pilot project in 1991 by linking SHGwith banks.
8/4/2019 ICICI Rural Banking
6/24
ICICI: Strategic goals To increase banking penetration in rural areas
through innovative ways of definingdistribution points.
To prepare rather than react to theincreasingly important rural market.
To support the downtrodden
as a good corporate citizen.
8/4/2019 ICICI Rural Banking
7/24
Only 1 million households in India have accessto MFIs, so there is vast unmet demand.
However it was a challenge for ICICI due to: expensive set up costs, and
retaining educated staff.
So, Joined hands with NGOS & Micro FinanceInstitutions in this field.
8/4/2019 ICICI Rural Banking
8/24
Two channels used by ICICI
Direct access , Bank led Model
Acquired Bank of Madura (SHG model)
Indirect channel Partnership
Uses the network of MFIs and NGOs to savecosts of setting up a branch
8/4/2019 ICICI Rural Banking
9/24
Bank of Maduras SHG model
They are encouraged to begin savings
The group members are trained and educated by bank in basic banking
Leaders are selected from each group based on suitable qualities
Several such groups can be formed in a village
A group of 20 women from the same village, who are BPL are chosen to form agroup called the SHG
8/4/2019 ICICI Rural Banking
10/24
Formation Of SHG First step in the formation of SHG was to form
groups in order to build mutual dependence.
Also, the framework that created a joint
guarantee for loan of all members encouragedinteraction between women.
Slowly, these SHGs started to have own identitiesand it transformed village ethics and social norms.
To attain profitability for not financially sustainableSHG program, ICICI aimed at expanding SHGwithout increasing managing costs.
8/4/2019 ICICI Rural Banking
11/24
ICICIs 3-tier system for SHGsDivisional
Manager (SocialService
Consultanat)
Area Manager(ICICI bank staff,
6 projectmanagers)
Project Manager(ICICI, works with6 Coordinators)
Coordinator(SSC)
Promoter (SSC)
1. Project manager - He is a bank employee.
He approves the loan applications forarea managers, monitors six coordinatorsand helps in SHGs development
2. Coordinator- an SHG member incontractual relationship with bank.
She oversees the activities of sixpromoters.
3. Promoter- potential coordinator.
She has to form new groups andexpand SHG network.
8/4/2019 ICICI Rural Banking
12/24
Promoters become SSCs within a year and have toform 20 groups within next year and by doing so,
they will be financially compensated by the bank.
By march 2003, more than 8000 SHGs had beenformed
In order to retain their status, SSCs need to:
Travel to villages within 15-km radius and form fivenew groups every 2 months.
The members of all the groups formed need to befrom same village , married and in the age of 20-50.
8/4/2019 ICICI Rural Banking
13/24
NABARD Test
The National Bank of Agriculture and RuralDevelopment has a list of questions to assess thepoverty level of family and its eligibility for SHGparticipation. Some of these questions are:
Is there only one source of income for the family?
Are there any permanently ill members in family?
Do you regularly borrow from moneylenders?
Do you live far from your drinking water source? Do you belong to a scheduled caste or tribe?
8/4/2019 ICICI Rural Banking
14/24
Families answering yes to three or four questions areconsidered good candidates for SHG.
After establishment of core set of members , a leaderalong with two animators is selected.
The animators keep the minutes book that contains thedetails of the meetings, the savings and the loan register,the weekly registers and the members passbooks.
The preliminary meetings also include training by SSCs,coordinator or project manager.
8/4/2019 ICICI Rural Banking
15/24
Motto of SHG:
The motto is- Savings First- Credit Later.
The members are taught the importance of savings.
After training a particular group, SSCs leave to form newgroups.
After formation of 20 groups by a SSC, she earns 2000 Rs. fromICICI bank and becomes a promoter.
The activities of a SSC are closely monitored by a coordinator.
A Coordinator overlooks the activities of 120 groups and earnsan annual salary of Rs. 2400 from the bank.
8/4/2019 ICICI Rural Banking
16/24
So it goes like this.. In the 1st monthly meeting each member should
bring Rs. 50 to contribute to joint savings account
The leaders collect the money and open asavings account for each member. The accountwith bank however is in the name of the SHG
One year after the formation of SHG, the womenare ready to submit a loan proposal.
8/4/2019 ICICI Rural Banking
17/24
After submitting necessary documents, SHG is
given a total of Rs. 2.5 L i.e. Rs.12,500 permember
These loans are non-collateralized.
However SHG as group is responsible forpayment of loan, which forms a strong socialcollateral.
This has proved to be good enough to have arepayment rate of 99.99 %
8/4/2019 ICICI Rural Banking
18/24
To fulfill repayment terms, each member must
pay Rs. 400 to the bank in 43 monthlyinstallments.
The effective rate of interest is 18%
NABARD test
The bank remains in contact only with officersi.e. Coordinator and Promoter.
8/4/2019 ICICI Rural Banking
19/24
The Indirect-channel
Partnership Model To increase its distribution and cost-effectively
serve the BOP, ICICI uses the infrastructure ofMFIs and NGOs
ICICI provides MFIs with a line of credit to meeta cash flow deficit for three years.
In the 4th year, the MFI begins to repay theloan
8/4/2019 ICICI Rural Banking
20/24
Acquisition of bank of Madura
Meeting priority sector and rural lendingrequirements set by RBI
Micro finance activities through social and non-profit initiatives
ICICI banks approach to
reach the BOP in terms of threedrivers :
8/4/2019 ICICI Rural Banking
21/24
1. The Micro Credit and business CorrespondentModel
2004pioneered the partnership model
Between 2003 to 2008 lensing of more than $3.5million
FINO Smart Cards
8/4/2019 ICICI Rural Banking
22/24
2. Farmer Financing
Availability of finance at the right time
Warehouse receipt based financing
Enhancing credits by leveraging on corporatepartnerships
8/4/2019 ICICI Rural Banking
23/24
3. Micro Finance Plans (health and non health)
Bundling of insurance products with micro credit
Total life's insured increased from 64,700 in 03 to5,61,600 during April 2008 through December 08
Increase of 770% in 5 years
Nonlife insurance like health, weather and cattle
By november 2008 ICICI had extended its WIP tocover 33 crops in 50 districts in 12 states to about 3Lfarmers
8/4/2019 ICICI Rural Banking
24/24
4. ICICI Foundation
Facilitation of ICICI foundation which would targetinclusive growth.
Facilitation in private equity fundThe network
Enterprises fund Direct micro financial services to individuals via
200-300 micro finance institutions