What Works: ICICI Bank Innovations In Rural Finance - Bringing Modern Financial Services to India's Rural Poor

This document is a part of the Digital Dividend What Works case study series published by the University of Michigan Business School. It presents the innovations of ICICI Bank, India's second largest bank, in the rural financial sector of the country.

The document highlights the following points while describing ICICI Bank's foray into the rural financial sector:

• There exists a large untapped potential market with about 700 million poor people;
• ICICI Bank views it as a crucial business as well as social mandate to serve this market.

The document describes the two approaches adopted by the Bank in serving the rural markets:

• Direct lending:
  • The direct lending commenced in 2001 when it acquired Bank of Madura in Tamil Nadu;
  • Through this channel, it lends not only to the groups, but also trains and empowers them financially and socially;
  • With its lending rates much lower than the existing sources, it serves more than 8,000 groups and is on an expansion path.
• Indirect lending:
  • The Bank provides microfinance institutions (MFIs) with a line of credit to help them meet their cash flow needs;
  • It has made equity investments in few MFIs;
  • It partners with enterprises to provide financial services through their channels or technologies;
  • It is also exploring new financial products like insurance and derivatives.

The document states that ICICI Bank's intervention has led to positive economic and social impact on its clients. It concludes that the Bank, with its innovative and visionary approach, is in a position to lead India's financial sector.