18-08-2012, 01:58 PM
ICICI Bank’s Strategy for Promotion of Financial Inclusion
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Introduction
People from low-income groups live in high-risk and unpredictable environment,
making access to financial services vital for their sustenance. Dealing with life
cycle events, emergencies and planning for future are some aspects in which
financial intervention can help. A large part of this financially under-served
segment resides in rural India. Integration of rural India into economic mainstream
will boost rural household incomes and have a multiplier effect on the demand for
goods and services across the economy while promoting financial inclusion.
However, considering the sheer size of the population and the geographic spread,
neither the existing bank branch based infrastructure nor the standard financial
products are optimal to meet the financial needs of the rural populace. Seasonality
in income, coupled with dependence on weather, necessitates creation of financial
products that mitigate such risks. At the same time, traceable credit histories need
to be built that will help in designing products that meet needs such as housing,
health, education, child care etc. Further, varying financial needs of different
customer segments viz. manual labourers, farmers, traders, and rural
entrepreneurs calls for customised financial products.
Focus on Underserved Segments
ICICI Bank has taken up specific initiatives to ramp up financial literacy as well as
intermediation to the underserved and underbanked segments in both rural and
urban areas.
Customers’ Financial Behaviour
In the absence of a formal Credit Bureau, extending financial service to low income
segments becomes a challenge. To overcome this challenge, ICICI Bank’s financial
intermediation models, both through the microfinance institutions and business
correspondents have been designed to build a repository of information with regard
to financial behavior of the customers. Through Financial Information Network and
Operations Limited (FINO (Refer Annexure I for details on FINO)), the technology
platform it has helped conceptualise, and the biometric card, the Bank is able to
collect demographic information of the customers. It would be possible to trace
details such as credit history, savings habit and investment patterns of individuals.
This information would be useful to incentivise those with good credit history and
to discourage wilful default, at the same time developing better-suited financial
products.
Technology
The Bank has been actively looking at technology solutions to scale up the micro
finance portfolio. Further, the Bank has been considering adopting a 'Core Banking
System' (CBS) for managing the loan portfolio generated under the partnership
model. In this regard, the Bank has found an able partner in FINO to provide
technology solutions to the micro finance sector. The technology solution
comprises of core banking and smart card systems. In light of the technology
solutions available through FINO, the Bank has designed a new process for
delivering loans under the partnership model.
Some of the key aspects where a strong technology platform will add value to the
micro finance operations include reduction in transaction cost; better data
management and reporting capacities and capability to interface with multiple
peripherals, etc. This will also enable enhanced disclosure and transparency in the
operations of MFIs, setting a platform for robust securitisation / buyout
opportunities to meet the priority sector lending objectives of the regulator.
Business Correspondent
In line with the RBI guidelines ICICI Bank employs Business Correspondent (BC)
model to extend financial services, especially the much-needed savings services to
rural customers.
In the pilot stage, the transactions by BC are being done with the help of an 'e-
Passbook' and an Authentication Device (AD). The e-Passbook can display and store
the customer KYC information, customer account details and the transactions in
each account. It also has a unique feature of biometric authentication by the way
of fingerprints, thereby mitigating the risk related to PIN (Personal Identification
Number) in the rural scenario.
Hybrid channels
ICICI Bank employs delivery channels backed by technological innovations to
achieve scale and outreach in a sustainable manner. The Bank’s channel
architecture includes branch and non-branch channels. Branches act as a business
hub providing banking services on the one hand, while facilitating the fulfilment of
products that have been sourced by the business facilitators and business
correspondents.
Non-branch channels are of two types, business facilitators and business
correspondents. Business facilitators, referred to as ‘Vikas Sahyogis’, are
outsourced channels that generate business opportunities for the Bank. Network of
Vikas Sahyogis has been set to act as referral or sourcing agents for loans,
insurance and investment products such as mutual funds. These centres are
operated by local people with existing relationship with the Bank’s customer
segments. Vikas Sahyogis include agri input dealers, tractor dealers, automobile
dealers and diesel dealers.