India’s BIG microfinance revolution

Monday, September 25, 2006

ICICI Bank is a big money-center lender that deals with sizable companies in Bombay, Bangalore, and New Delhi. It is also one of India’s biggest consumer lenders. So why does Nachiket Mor spend a lot of time in India’s economically depressed rural hinterland looking for prospective borrowers?

He recently visited a family of five living in a soot-covered hut, getting by at barely subsistence levels in the North Indian state of Uttar Pradesh.

Mor signed off on a one-year, $130 loan that will allow the family to buy a buffalo and sell its milk. And written into this loan contract is a most unusual clause. If the animal isn’t milking, the family gets a moratorium on its monthly loan repayment.

“The client would need to find other money to service the loan or even sell the buffalo to pay us, which would be counterproductive for both of us,” explains Mor, deputy managing director at ICICI.

These kind of small IOUs are showing up more and more on the loan books of major Indian banks.

Continue reading “India’s BIG microfinance revolution”

Source: BusinessWeek (link opens in a new window)