ICICI bank, Grameen of USA set up JV for micro-finance
Thursday, November 17, 2005
MUMBAI, NOV 15: With a view to developing a commercial market for micro finance receivables, the country’s largest private sector bank, ICICI bank has tied up with Grameen Foundation USA to set up Grameen Capital India (GCI).
GCI will work with the micro finance institutions (MFIs) to access primary and secondary debt markets as also private placement of MFI portfolios with banks, said KV Kamath, managing director & ceo, ICICI Bank. GCI will also provide credit enhancements to the portfolios of MFIs to help them access funds from the banks.
ICICI Bank, has a micro finance portfolio of Rs 1200 cror, catering to 14 million people through 61 MFI/NGO partners. ICICI Bank works closely with MFIs and NGOs to adapt its products to suit their needs.
The guiding principles on the basis of which these models have evolved have been to separate the MFIs balance sheet risk from its operational risk and leveraging the core competencies of a bank and the MFI to achieve scale.
For this, the bank has developed the partnership model and the secutarisation model for extending micro credit.
The partnership model enables the bank to service the poor clients effectively, with substantial risk sharing between the bank and the partner NGO/MFI. Under this model, ICICI Bank forges an alliance with existing MFIs wherein the MFI undertakes the promotional role of identifying, training and promoting the micro finance clients and ICICI Bank finances the clients directly on the recommendation of the MFI. Whereas under the secutarisation model, ICICI Bank buys out the portfolios from MFIs. The MFIs continues to service the clients and acts as a collection agent. Here again, the MFI shares the credit risk with the bank. Under, the on-tap secutarisation model, the MFI receives an advance purchase consideration to create a portfolio of loans that could then be periodically sold to ICICI Bank.
ICICI Bank has also been working closely with its insurance subsidiaries-ICICI Lombard General Insurance and ICICI Prudential Life Insurance on the micro insurance front, wherin the products offered include life insurance, health and personal accident insurance, weather insurance and loan care.