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ICICI Bank's "branchless" rural thrust

Business Today has a detailed article on ICICI Bank's massive rural thrust using a franchisee model.

This is a scaleable model," says K.V. Kamath, Managing Director & CEO of the bank, describing his "No White Spaces" rural business architecture-a mix of franchisees, micro finance instititions, NGOs and branches-that provides for "touch point" within 10 km of every rural customer. Every touch point is financially viable; branches are opened only where business volumes are large; other places are serviced by the so-called "non-branches". This is in contrast to the strategy of public sector banks, which have indiscriminately opened branches all over the countryside. Result: 80-90 per cent of their 60,000-65,000 rural branches are bleeding.

The ICICI bank model, which draws on the experience of fast moving consumer goods and telecom companies, has never been tried in banking. By partnering with franchisees like Likhite, ICICI bank is eliminating both the fixed and recurring costs of maintaining branches. "Our approach to rural banking is based on a partnership model," says Mor. Franchisees like Likhite even share business risks with the bank-they put up 10 per cent of all advances, pocket 10 per cent of profits and also share a similar percentage of any losses. There are also other franchisees who procure business for a fee but don't share the risks. If the model succeeds, it could become the template for all future rural banking initiatives not only in India but in other developing nations, and provide an alternative to the one pioneered by Bangladesh's Grameen Bank.

... ICICI bank's rural rollout blueprint has a staggering sweep: it plans to cover 600,000 villages in 600 districts by 2008; that's effectively the entire country. In the first phase, it has already covered 60 districts mostly in the south and the west; this will increase to 200 by the end of 2006-07. "We are also tying up with NGOs and other community-based societies to deliver our products; they are closer to our customers and understand their language," says Hegde. The bank is training and equipping NGOs to handle its products and has already transformed 100 of them across the country into micro-finance institutions (MFIs).


Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.

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