ICICI Bank Case Study

1. What is ICICI Bank's innovation?

• “ICICI deems the nearly 400 million impoverished people of India as a huge market with real economic potential and commercial viability[1].

• Also, there is a widespread belief within ICICI that the poor do pay for the services rendered to them and they ought to be viewed as consumers rather than passive beneficiaries[2].”

2. What is special about RBI's pilot project with NABARD in 1991?

• It initiates policies that reassure rural banking and the addition of credit to the rural hinterlands.

3. According to Mahajan, why are the transaction costs of savings in formal institutions as high as 10% for the rural poor?

• “This was because of the small average size of transactions and distance of the branches from the villages[3].”

4. What are some of the problems of MFIs in India?

• Most of the problems with MFIs are due to the fact their primary focus has been on access to credit. With such small loans (and thus meager interest payments) the key to sustainability becomes scale. If an MFI could achieve a large volume of loans, then the aggregate interest payments would suffice to cover operating costs.[4]

5. What are the two innovative BOP models of the ICICI?

• The two innovative BOP models of the ICICI are the direct access, bank-led model and the indirect channels partnership model.

6. What is the connection between Grameen Bank and Bank of Madura?

• Grameen Bank model started in Bangladesh, providing small loans to clients below the poverty line. Executives at the Bank of Madura felt the efforts in Bangladesh could be replicated in India[5].

7. Describe ICICI's three-tier system. Discuss why it is three-tiered.

• Under this system, the highest level was a bank employee called a project manager. The project manager oversaw the activities of six coordinators, approved loan applications for the area manager, and helped with the development of the SHGs. The coordinator herself an SHG member who had a contractual relationship with the bank. She was overlooking the actions of six promoters. The promoters’ primary responsibility was the formation of new groups. Within a year of election to promoter, the woman then becomes a social service consultant (SSC) and must form 20 groups within 12 months. If the groups are formed, she is financially compensated by the bank and becomes part of the pyramid structure of creating and monitoring the SHGs. Under the ICICI model, SHGs form and expand in a pyramid[6].

9. Discuss the NABARD checklist for SHG's. Comment on why each item on the checklist is necessary.

• The information on the checklist complicates things and my understanding about the material; some of the queries are very unlikely to be asked by the individuals.

10. What is the impact of micro lending in a household according to a NABARD study?

• It gives the household to be financially smart.

11. Discuss the possible implementation of a smart-card based payment system? Would it work? Why?

• ICICI implementation of a smart-card based payment system eliminate the costs associated with cash handling, which on my opinion will work since it secures the identity of the holder and give advantage for proper usage of transactions.

12. Discuss the quote: "Banking with the poorer has undergone a paradigm shift. It is no longer viewed as a mere social obligation. It is financially viable as well". Do you think this quote can be applied in the Philippines? Discuss.

• With our kind of resources? Maybe yes, but with our kind of government working into every channels. I doubt it. It is unusual of me to think about the governments potential to make these implementation but with the kind of people and stories we could not think of any options but to start to make the change and make it work.

[1] ICICI Bank: Innovations in Finance, p. 289

[2] ICICI Bank: Innovations in Finance, p. 290

[3] ICICI Bank: Innovations in Finance, p. 293

[4] ICICI Bank: Innovations in Finance, p. 294

[5] ICICI Bank: Innovations in Finance, p. 299

[6] ICICI Bank: Innovations in Finance, p. 302