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					New Technologies for Small and Medium -
              Size Enterprise Financing


                           Washington D.C.
                          December 6, 2002
ICICI Bank - The e-Universal Bank



                                        Globally held
  Assets of US $
                                       (ADR, FII own
      21 bn
                     Second largest     47% stake )
                     Bank in India -
                      Technology
                        Leader
     Rated by                             First Indian
   Moodys above                           Bank to be
  sovereign rating                     listed on NYSE



                             2
       A universal banking powerhouse...

     Retail Financial Services       Corporate Financial Services

         Car Loans                              Term Loans

      Mortgages                                 Project Finance

    Credit Cards                                 Commercial Bank

Personal loans                                      Investment Bank

      Deposits                                    Venture Capital

     Life Insurance                            Genl. Insurance

       Mutual funds                              IT Services



                                 3
  Establishing an international presence


Canada                                  UK

 USA                                                            China

                                                        UAE


                                                              Singapore




         Phase I   : Offices opened/to be opened shortly
         Phase II : Geographies under advanced stage of evaluation
                                                    4
   Universal Banking Theme
   Leveraging Technology to enhance delivery capabilities

                     Empanelled expert for
                      B2B Solutions
                        tax and accounting
   Smart Card                 advice             Portals



                                                 e-Commerce
Web Trading             Technology                 initiatives


       Internet                               Call Centre
       Banking              Mobile
                            Banking
                                    5
Importance of SME Sector in Technology

             Single largest employer
SME Sector   Fastest to adopt innovation
             Ensures equitable wealth distribution


  Use of     Higher productivity
             High quality- greater competitiveness
Technology
             Sustainable revenue models

             Enables virtuous cycle of technology,
 Virtuous    innovation, competitiveness, openness to
  cycle      market economy and globalisation



                             6
      Financing options for SME
   SME          Duration of
                                     Suitable type         Suitable
 Lifecycle       financing
                                                           Channel
                  required

                   Long              Seed capital /
 Creation                                                Promoters
                                       Subsidy
                                    VC / Angel              VC /
Start up          Long              investor /           Promoters
                                     Subsidy/
                                 Tax incentive           VC/ Angel
Upto               Long        VC / Angel investor /     Investor /
breakeven                     Subsidy/ Tax incentive/    Promoters

                 Mid Term                                VC / Bank /
 Growth                             Loan/ Debt/ IPO      Promoters

Sustainable      Short term         Bank Finance /      VC / Bank / Debt
  growth                              Debt/ IPO             markets


Maturity         Short term       Public Debt/          Capital Market/
                                 Capital Market          Debt markets


                                7
Financing for SMEs


               Financing for SMEs



Unit Level -
                                    Cluster Financing
Standalone



                     Unique for               Productise
                      cluster                     d




                          8
      Financing intervention for technology


 Financing intervention for technology can happen at 2 levels

                                        Cluster & System Level
        Unit Level
                                      •Cluster financing
  Direct Finance to SME by
                                      •B2B models
•VC
•Equity                               •Internet payments in
•Loans                                closed
•Capital Markets                         user groups
                                      •Smart cards in closed
                                      loops
                                      •Technology based
                                        financing solutions


                                 9
Constraints in Financing SME’s..

Banks perception of SME’s            SME’s perception of Banks


 Lack of transparency of            • No special schemes for
                                        technology financing
  information
 Low technology
                                     • Inadequate and delayed
                                        credit
 Low capitalization / Collaterals
                                     • Cumbersome procedures
 Vulnerable to market changes
                                     • Insistence on collaterals and
 High risk sector                      guarantees
 Low profitability                  • High rates of interest



                                     10
SME Financing

Approaches to SME Financing
       Prudent Segmentation
       Cash flow based evaluation
       Multiple channels offerings by leveraging
       Technology
       Migration to non-branch channels



Key aspects
       Measurement of risk and mitigation
       Reduction in cost of transactions
       Delivery – cost and reach


                                11
         Enabling Framework for Technology Financing
                                                                Financing Quality
                                   Enabling technology          Initiatives
       Technical education/
       skilled manpower            transfer incentives

 Fiscal Measures,                                                        Priority Sector
 System and                                                              Mandated Lending
 Infrastructure


Cluster Development                 Technology                         Specialised Stock-
                                                                       markets
                                     Financing

VC/ Angel incubators                                                    Competitive pressure
                                                                        to encourage
                                                                        innovation
           Institutional
           framework of nodal      Industrial extension   Protection to nascent
           agencies for            services               technical units
           refinance/ guarantees

                                                  12
BIS 2 Proposals – Advantage SME

Banks   free to evolve capital allocation according
 to internal rating based approach
SME’s with turnover less than EUR 50 mn will
 have explicit lower capital charge
Small businesses with loan size less than EUR 1 mn
 with collateral will get beneficial capital allocation
Recognition to collaterals, credit derivatives,
 guarantees for allocating capital


Risk sensitive capital framework holds promise that the
regulatory framework will support SME lending by banks


                                 13
ICICI Bank Initiatives

SME Portal - Internet Banking Gateway for B2B
sites



Supply Chain Financing on B2B loops




Subsidiary network role in technology financing


                         14
15
Case Study I - Supply Chain B2B Solution

                                ABC Ltd
               ICICI Bank
                                Purchase
                                  Order
                Dealer
  SME          Overdraft
 Dealer                            ERP
               Account
                                 Interface




                                Despatch
                                 Invoices




                        16
    Case Study II - Smart card solution for FSCs

                                 Merchant       • Credit
                        Input
                                  Store         • Debit
                                                • e-purse



                                                Bank Account/
Farmer Service Center                           Credit History



                        Output Sale


        Collect Money                 Online update of Bank accounts


                                17
Innovations in Delivery Channels

                            Sustainable Access for
                           Rural India (SARI) project

                                Partners: MIT Media Labs,
                                Harvard University, I-Gyan,

                                      Providing reliable Internet
                                       access through Kiosks
     Innovative Delivery                using corDECT WiLL
        Mechanisms                    100 kiosks managed by
                                     entrepreneurs to be set-up

                                     Providing e-governance,
                                    and information services
                           Delivering banking services
                             through Internet kiosks


                           18
          Other initiatives - I

                                 Pay Seal          Corporate Infinity
    Bill Junction
                           electronic payment       online transfer/
Utility bill payments
                                  system           settlement system




                        e-banking in ICICI Bank


                                                   Roaming Current
   ICICI Markets
                          ICICI Direct and ICICI      Account
  online FX, Debt,
                                  Select            web interface
    SME Portal




                                        19
Other Initiatives - II

                          Fleet card for transporters

                           Smart card for retailers
                          Escrow payment services
OTHER INITIATIVES
                               Cluster Financing
                           Facilitating e-Sales Tax/
                              Octroi payments

                         Shopping Mall arrangements


                          20
Subsidiary network support technology financing

                                   Software consulting
ICICI Infotech Services             development
         Limited                   IT enabled services
                                   IT infrastructure
ICICI Web Trade Limited            Internet based broking services



                                   Business process outsourcing
ICICI OneSource Limited            Call Centre Activities

                                   Investment in equity
   ICICI Information               Investment in medium sized IT
   Technology Fund                  companies

                                   Investment in equity
   ICICI Equity Fund               Investment in securities of
                                    medium sized IT companies

                                   Investment in equity
ICICI Eco-Net Internet &           Investment in unlisted internet &
   Technology Fund                  technology companies

                           21
Our recommendations

  Lifecycle approach to determine which channel to
  fund SME requirement

  Fiscal benefits to attract VC funds

  Dedicated Institutions


  Public-private partnership

  Banks to be permitted to use non-bank
  infrastructure to deliver services

                           22
     Road Ahead
                           Directed lending norms
                              to include all tech
                                intensive SME




    Tax incentives
                                                         Re-finance ,
Infrastructure status
    to IT, Bio-tech,
                        Public - Private Partnership     guarantees,
                                                       subsidies, VC funds
        telecom




                              Liberalised norms
                               for tech transfer
                             JV with foreign VC




                                         23
Thank You

				
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