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9 Thus ICICI has sold some of its bought-out assets to Development Credit Bank which enabled it to meet priority sector targets. There could develop a demand for such assets in the future from institutions such as mutual funds if they receive high ratings in view of the safety of the underlying assets. 10 For a description see Ananth et al 2004 and Mor and Ruchismita (undated, mimeo). ICICI is reported to be considering making greater use of portfolio buyouts in the future, at the expense of partnership lending. 11 Much of this paragraph relies on Mor and Ananth (2006). For a comprehensive survey of the status, challenges and opportunities of extending technology applications in Indian microfinance see Intellecap (2006). Both Intellecap (2006) and Sinha and Rasmussen (Forthcoming) contain forceful reminders that most MFIs are still putting in place basic Information Systems to track lending operations and automate accounting and management reporting. For MFIs, this first stage of technology application is the foundation for more advanced technology applications such as POS (point of sale) devices which promise to reduce costs and improve accuracy in the field. A shared technology platform with connectivity to MFIs and their branches such as that being proposed by FINO could reduce the hardware costs of such IS systems while preserving confidentiality by ensuing data separation for the various users (including cooperative and rural banks). 12 CASHE has incubated 35 MFIs in Madhya Pradesh, Orissa and West Bengal (as well as AP) with grants for operational expenditures and capacity building, along with revolving fund assistance, and has prepared some of them for transformation. For ICICI's tie-up with CASHE/ACCESS for incubating new partners in MP see Chapter 6. 13 ICICI is experimenting with using MFIs such as KAS and Grameen Koota as BCs for opening and administering savings accounts. The BCs help fill in the account opening form and satisfy KYC requirements (e.g. checking identity cards and proof of address) some of which are cost-raising irritants. An e- passbook is issued to the account holder and all transactions are done only on an authentication device. Four free savings and withdrawal transactions are allowed a month. The challenge is to reduce costs below those of mobilizing much larger savings from regular bank customers. 14 The cost of a basic hand-held device is still Rs 10,000 to 15,000. 15 Another problem that has been pointed out is that the Khan Committee Report recommends that while BF/BCs can have relationships with different banks in different areas, only one contractual relationship is permissible with one bank in a defined geographical area. This modality of exclusion would require (i) the areas to be defined and (ii) monitoring to maintain geographical exclusions, therefore indicating the involvement of a regulator. Credit information on borrowers would be shared by the banks through the proposed National Microfinance Information Bureau (NMIB). The NMIB is a body proposed to be established under NABARD to collect and store data on clients. 16 HDFC Bank was reported to be considering this option. 17 This interest has generally been the PLR less 0.5 per cent. 18 See Sanjay Sinha, in "Debate: Cap the interest rate on microfinance", Economic Times, March 21, 2006, who anticipates a massive expansion of bank lending to the poor if the banks were allowed to recover their costs of 18-21 per cent of making small loans directly to the poor. 122
Lending to MFIs by the Commercial Banks References Ananth, Bindu, 2004, “Financing Micro Finance - The ICICI Bank Partnership Model”, Working Paper Series, Social Initiatives Group, ICICI, Mumbai. Ananth, Bindu and Others, 2004, “A Blueprint for the Delivery of Comprehensive Financial Services to the Poor in India”, Social Initiatives Group, ICICI, Mumbai. Intellecap, 2005. “Future Directions for the Growth of the Microfinance Sector in India” Draft report submitted to Sa-Dhan, Mumbai. Intellecap 2006, "The Way Forward: Technology in Indian Microfinance", Draft report for CARE India, Mumbai. Mor, Nachiket, and Bindu Ananth, 2006, "Inclusive financial systems: Some design principles and a case study of ICICI Bank" Centre for Development Finance IFMR, Chennai, August. Mor, Nachiket and Rupali Ruchismita, Undated "Catalyic Funding to Scale Microfinance in India", Social Initiatives Group, mimeo, ICICI Bank, Mumbai. Nair, Tara, M S Sriram, and Viswanath Prasad, 2005 in Malcolm Harper and Sukhwinder Singh Arora, “ Small customers, big market: commercial banks in microfinance”, ITDG Publications, Warwickshire, UK. RBI, 2005, “Report of the Internal Group to Examine Issues Relating to Rural Credit and Microfinance” (the Khan Committee Report), on RBI website. Sinha, Sanjay and Stephen Rasmussen, Forthcoming “Microfinance in South Asia: Towards Financial Inclusion for the Poor”, World Bank. Tankha, Ajay, 2006, “Banks Agents in Microfinance: RBI's Business Correspondent Model”, article published in Small Change, October 2006, www.smallchange.in. 123
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Microfinance in India A State of th
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List of Tables Page No Table 2.1 Gr
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Preface and Acknowledgements This r
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Abbreviations ABC ADB BC BF CAR CAG
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CHAPTER 1 Overview and Summary of M
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Overview and Summary of Main Recomm
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1 1a 1b 2 2a 2b 2c 3 3a 3b 3c 4 4a
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The Light and Shades Study A major
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highest proportion of weak records
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their profitability after accountin
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allow the programme to grow organic
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1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8
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Endnotes 1 It is very hard to compa
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as cash with the groups, the true r
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linkages", 11 percent 3rd, and 5 pe
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References APMAS (AP Mahila Abhivru
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CHAPTER 3 Progress Under the MFI Mo
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Progress Under the MFI Model is fun
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Table 3.4 Comparative performance i
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Progress Under the MFI Model on lit
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Progress Under the MFI Model 4 Howe
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Progress Under the MFI Model Refere
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MFIs, and the need for MFIs to plou
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size had actually come down during
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The point at which peer group press
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The lack of contact and communicati
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Box 4.1 Continued 4. MFIs will coll
Page 74 and 75: Endnotes 1 There will be many disag
Page 76 and 77: 19 The base suicide rate in AP is 1
Page 78 and 79: References APMAS, 2005, "A Report o
Page 80 and 81: (such as cattle and houses), and co
Page 82 and 83: The advantage of the provider model
Page 84 and 85: Some lessons learnt from experience
Page 86 and 87: Box 5.2 VimoSEWA: Synergies between
Page 88 and 89: 86 Table 5.1 Main Feature of Health
Page 90 and 91: Endnotes 1 While the microinsurance
Page 92 and 93: 16 A little less than a fifth of th
Page 94 and 95: 29 The rationale for transfer progr
Page 96 and 97: Roth, James and Vijay Athreye, 2005
Page 98 and 99: Issues and priorities for action re
Page 100 and 101: Endnotes 1 See for instance CGAP (2
Page 102 and 103: 100
Page 104 and 105: such as Chaitanya who soon became s
Page 106 and 107: money to support operational expens
Page 108 and 109: finance, and the microfinancial ski
Page 110 and 111: Box 6.1 Continued in experts and to
Page 112 and 113: Endnotes 1 In a sense it always was
Page 114 and 115: 16 Examples are Margdarshak in Luck
Page 116 and 117: 114
Page 118 and 119: Table 7:1 Commercial bank exposure
Page 120 and 121: The main constraints to the expansi
Page 122 and 123: further review, RBI has modified th
Page 126 and 127: B. Equity Investments by the Ventur
Page 128 and 129: Figure : The Bellwether triangle Lo
Page 130 and 131: Despite the weaknesses the public s
Page 132 and 133: Box 7.1 Continued foreign sources o
Page 134 and 135: Endnotes 1 At this point they will
Page 136 and 137: References ACCION, 2003, "The Servi
Page 138 and 139: SIDBI Foundation for Micro Credit (
Page 140 and 141: categories, depending on the amount
Page 142 and 143: The distribution of total disbursem
Page 144 and 145: Endnotes 1 It should be noted that
Page 146 and 147: B. Donor Participation in Indian Mi
Page 148 and 149: this has dropped to 8% on the curre
Page 150 and 151: and poor populations. More directly
Page 152 and 153: and expansion of available retailer
Page 154 and 155: 11 SDC through various programs for
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Page 158 and 159: 1.1 Impact evaluation of Spandana's
Page 160 and 161: in the loan tenure of 24 months. Th
Page 162 and 163: There are two main motivations of a
Page 164 and 165: compensation structures used by Ind
Page 166 and 167: Endnotes 1 By Annie Duflo, Anvesha
Page 168 and 169: 29 The main components of direct tr
Page 170: 168
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