In this essay, group 2 will provide an overview of the case, discuss unconventional ways of doing business and close with some current information highlighting what Industrial Credit and Investment Corporation (ICICI Bank) has accomplished since the case was written. This introduction will briefly establish a framework of the Indian landscape, the bank, their initiatives they took upon themselves to serve the bottom of the economic pyramid and challenges of moving from a fragmented to a formal micro financing network.
According to Prahalad, the number of people living on less than $1 dollar per day in India is significantly greater than the entire population of the United States.1 There are 428 million bank deposit accounts in the country, 30 percent of that total was in the rural areas of India. With a population of 741.6 million, the banking penetration in these areas is as low as 18 percent. At first glance, this is alarming, but traditional institutions have focused on upper-income groups in urban areas, ignoring the poorest of poor. Micro financing has existed for a long period of time but has been characterized by a donor led model, which is capital intensive. Unfortunately, these same institutions have ignored the other side of the coin: savings. Men and women, in the absence of formal banking, have to deal with excessively high interest rates and inefficient practices from informal lending institutions. Even commercial banking in these areas are choosing to deny services to the poor because they are seen as non-profitable. The Reserve Bank of India, through government led programs requires one in three banks to open branches in rural locations. They also started a pilot program in the early 90's that linked self-help groups (SHGs) to banks. The goal was to provide the poor with access to credit through formal channels vs. informal micro financial institutions. ICICI Bank, a financial institution that provides a wide range of financial services saw this as an opportunity to enter the retail banking sector and provide capital to the BOP market.