The New Age of Innovation

Rural and Microfinance Solutions (2003)

The government of India mandated that every bank open rural branches. For every two urban branches that were licensed, the bank had to open at least one rural branch. Most established banks saw this as a burden and as a cost of doing business. In contrast, ICICI recognized, fairly early, how to effectively leverage this requirement into a new business opportunity. The bank realized that in order to reach the rural poor, it needed a new distribution system.

ICICI acquired the Bank of Madura, a regional bank in South India that had pioneered the concept of rural lending through selfhelp groups (SHGs)—groups of 20 village women who are organized to provide support to each other. As the women become a tight-knit unit, the bank then lends to the SHG, which in turn  provides loans to its members based on locally developed criteria. The SHGs prioritize, monitor, and collect dues.

ICICI recognized that rural community organizations and village self-help groups have a deeper understanding of customers in this market. ICICI has developed processes to efficiently screen, borrow, and manage loans as little as $100 at sites located every 6 to 10 miles in rural India. These borrowings include loans for crops, buying a buffalo or tractor, irrigation, education, health care, and mortgages in rural India.

ICICI has also innovated services such as biometric cards and digital kiosks to improve personalization and access to services. ICICI’s rural lending doubled in 2006 to reach $3.6 billion with over 3.2 million clients. These loans are personalized based on the earning potential of the borrower. For example, the terms of payment for a “buffalo loan” may be adjusted based on the milk yield from the buffalo. Biometric devices were introduced to protect the identity of each member in these self-help groups.

ICICI has partnered with thousands of community-based organizations and cooperatives to tap the microfinance market and provide unique solutions to finance different types of rural consumers at their convenience. In designing these services, ICICI has pushed along the N = 1 and R = G axes (see the figure at post: ) through personalization and resource leverage in collaborations.

Personalized Insurance for Diabetes (2006)

This initiative from ICICI Prudential is another powerful example of the many serving the needs of the one. ICICI has built an ecosystem of partners that includes pharmaceutical companies, local gyms, doctors, and nutritionists to provide access to its consumers. The company adjusts premiums based on individual levels of conformance. ICICI is building analytical models to understand the unique behavior of each patient and at the same time gain deeper understanding of the disease to further improve the services that it offers to customers.

These examples provide a remarkable range of business models at ICICI—many reaching “scale” in a short period of time. These initiatives combine access to resources from JPMorgan, analytics firms, self-help groups, and community banks (beginning of R = G) with portfolios of customizable products and services for the individual (N = 1). ICICI also allows rural self-help groups to decide their own priorities. Often, most of these initiatives have moved from conception to reality in one year. ICICI is still primarily an Indian bank with a growing appetite for global growth, and it is mastering the business of serving customers at every level of the economic pyramid.

by C.K. Prahalad and M.S. Krishnan, Via The New Age of Innovation: Driving Cocreated Value Through Global Networks (2008)

 Print This Post