India: Banks aim for profits in a new market - The rural poor
Date: 01-10-2005
With every debit card replaced by a thumbprint, every mutual fund peddled at a village store and every insurance policy sold in $2 bits, a new variety of bank is germinating in the bleak, unlikely soil of rural India. One in nine human beings is an Indian villager, and 70 percent of Indian villagers have no bank account, inhabiting a financial parallel universe in which savings are a gold necklace and loans come from pistol-packing
moneylenders.
As global megabanks penetrate India, as in other developing markets like China, these are not their customers. Banks like Citibank and HSBC skim the
top and dip into the middle, serving as investment bankers to corporations, lenders to a mushrooming "consumer class" and money managers for a widening sliver of the fabulously rich. In India, that leaves 700 million people for the taking. Now, a handful of domestic banks, led by ICICI Bank, India's second-largest after State Bank of India, are tapping rural India with innovative new business models and technologies. And their moves suggest that while the cream hovers on top, more riches may lurk below for those willing to alter their offerings for a radically new client.
Getting the poor to bank, and bank profitably, could push rural finance past a tipping point: from philanthropy with a hint of business logic to real commerce with a hint of compassion. "You ought to have a commercial justification for doing a business," K.V. Kamath, ICICI's chief executive, said in an interview. "You ought to then be able to scale it up." Those, he said, are the "prerequisites to success" for transforming rural banking from "small, isolated examples of do-good" to something lucrative enough to take root and spread.
