Professional Documents
Culture Documents
Microfinance & ICICI Bank: June 2007
Microfinance & ICICI Bank: June 2007
Microfinance & ICICI Bank: June 2007
June 2007
Agenda
Microfinance:
Microfinance:An
AnOverview
Overview
Microfinance
MicrofinanceInstitutions
Institutions(MFIs)
(MFIs)
Financial
FinancialIntermediation
IntermediationModels
Models
Way
WayForward
Forward
Microfinance vs Microlending
“Poor people borrow some of the time but save all of the time”
Entrepreneurial Poor
Entrepreneurial People who are slightly below the poverty
Poor line.
credit insurance
Very Poor
Very Poor
People who have few (if any) assets – very
limited chances to earn money
Provision
Provisionof
of Poorly functioning
microfinance Markets
microfinanceisis
constrained
constrainedby…
by…
Regulatory
RegulatoryIssues
Issues
Staff Incentives within organisations not aligned to
maximise access to financial services for poor
Agenda
Microfinance:
Microfinance:An
AnOverview
Overview
Microfinance
MicrofinanceInstitutions
Institutions(MFIs)
(MFIs)
MFIs
MFIs––Financial
FinancialIntermediation
IntermediationModels
Models
Way
WayForward
Forward
Microfinance Institutions (MFIs)
Multiservice NGOs & SHPIs - under NABARD’s SHG Bank linkage
Cooperatives/MACs/federations
Microfinance:
Microfinance:An
AnOverview
Overview
Microfinance
MicrofinanceInstitutions
Institutions(MFIs)
(MFIs)
MFIs
MFIs––Financial
FinancialIntermediation
IntermediationModels
Models
Way
WayForward
Forward
Traditional models lack scalability…
SHG-Bank
SHG-BankLinkage
Linkage Bank-MFI
Bank-MFILinkage
Linkage
Bank
Bank Bank
Bank
Branch
Branch MFI
MFI
NGO
SHG
SHG Ind./SHG/JLG
Ind./SHG/JLG
••Branches
Branchesassess
assess credibility
credibilityof
ofeach
each ••Bank
Bankon onlends
lendsto
toMFIs
MFIsbased
basedon
on
SHG
SHGand
andmonitor
monitorrepayment process their
repaymentprocess theircapital
capital
••Group
Groupformation
formationby byNGOs
NGOs
Hence, the ICICI Bank Partnership
ICICI Bank MFIs
Microfinance:
Microfinance:An
AnOverview
Overview
Microfinance
MicrofinanceInstitutions
Institutions(MFIs)
(MFIs)
MFIs
MFIs––Financial
FinancialIntermediation
IntermediationModels
Models
Way
WayForward
Forward
Large geographic asymmetries exist…
Very
VeryFew
FewMFIs
MFIs
Economically
EconomicallyBackward
Backward
Low
Lowlevel
levelofofmicro
microcredit
credit
penetration
penetration
Large
Largeno.
no.ofofMFIs
MFIs
…Requires
…Requiresreduction
reduction Economically
EconomicallyVibrant
Vibrant
of
ofgeographic
geographic High
Highmicro
microcredit
credit
asymmetries
asymmetriesandand penetration
penetration
increasing
increasingdepth
depthofof
outreach…
outreach…
14
The Universe...
Capital
Capital Funds
Funds Model
Model
MFI
MFI
Training
Training Technology
Technology Manpower
Manpower
The Resources Required...
Funds and Capital – through Banks and VCs
Technology – Leveraging the developments
Human Resources
Training and Capacity Building for nascent MFIs
Manpower Requirement for bigger MFIs
Knowledge and Information
Mentoring on advanced financial instruments
eg: Treasury Operations, ALM
Finance – bringing in risk equity
Take
Takeout
outfinance
financemodel
model
Initial investment by venture capitalists – start ups.
Tie up with local venture capital firms. On-lending funds available
from ICICI Bank for building portfolio
Exit route - ICICI Bank provides long term debt (quasi equity) to
MFI to free up initial investments
Guarantees
Guaranteesleveraged
leveraged
Performance guarantees from corporates / banks
Guarantees leveraged – 3 to 4 times
Business planning and monitoring throughout the loan period
Documentation support to MFIs
18
Finance – access to secondary markets
19
And supporting systems…
Operational
Operationalprocesses
processes
Data recording system for start up MFIs
Business process re-engineering for mature MFIs
Internal control and auditing systems for multi-branch
operations
Cash flow management
Technology
Technology
Microbanking solution
FINO
Automation through card based solutions / handhelds
Evolution of banking interface of MFIs
20
Human Resources…
Microfinancejobs.com
Lateral Head hunters for senior level
Lateral recruitment
21
Enhancing Skills…
Staff
StaffSkills
Skills
Client assessment
Accounting and financial analysis
Management of information
Process flow and monitoring
Internal control
Product
Productdevelopment
development
Market research
Client needs assessment and hybrid product design
22
Building Capacities…
Mentoring
Mentoring
Corporate governance – ICICI Bank volunteering
23
Beyond Microcredit
Need for Diversification in the sector
Microcredit just the starting point
Larger suite of financial services - Insurance, Savings and
Remittances
25