ICICI Bank ties up with Microcredit Foundation

Chennai: ICICI Bank has tied up with Microcredit Foundation of India (MFI) for distributing micro- credit. MFI has been founded and run by Dr K.M. Thiagarajan, former Chairman of Bank of Madura, which was merged with ICICI Bank in 2001.

According to ICICI Bank micro-financing is good business as there are some 400 million people, in 6-odd million villages, are waiting for small loans. Only about 20 million of them have been served so far, by the organised financial sector.

However, in micro-financing, the largest loans may not exceed Rs 30,000, how to identify borrowers, high operational cost and collecting dues are problems issues. To overcome these issues, ICICI Bank intends to tie-up with micro-finance organisations all over the country.

Under the bankk's arrangement with MFI, MFI would facilitate formation of self-help groups (SHG) and help them acquire capability to generate income for the group. Later, MFI would provide finance for the income generating activities. In all these areas, ICICI Bank would back MFI with the funds needed.

Announcing this, Dr Thiagarajan said, MFI was involved with some 10,000 SHGs in Tamil Nadu. The Foundation expects the number to go up to 50,000 in the next three years.

These groups are expected to need about Rs 1,250 crore, which ICICI Bank will lend, through MFI. Risks would be shared between MFI and ICICI Bank as per different, agreed formulae.

Dr Nachiket Mor, Executive Director, ICICI Bank, said that the bank would tie up with some 20 micro finance institutions across the country. He said that today there are one million self-help groups and about Rs 2,000 crore of institutional credit has gone to these groups.