ICICI Foundation – New Approach to Microfinance

When Nachiket Mor was an undergrad studying physics in Mumbai, he spent his vacations working with nonprofits. The obligation to help others, he recalls, grew from his years at Brockwood Park, a boarding school founded by philosopher Jiddu Krishnamurti outside London to teach, among other things, the value of community. Today, after a career in finance, the 44-year-old banker has made philanthropy his full-time occupation. In the process, he may alter financial services in rural India.

Last fall, Mor stepped down as deputy managing director of India’s largest private-sector bank, ICICI Group (IBN), to become president of the new nonprofit organization he had helped it begin, ICICI Foundation for Inclusive Growth. The foundation’s mission: to underwrite other nonprofit groups so they can provide microloans, insurance, and other banking and business services to the estimated 600 million Indians in the so-called bottom of the pyramid, enabling more to join India’s economic boom.

The Chennai-based foundation might seem ill-equipped to pull this off. It counts just two managers—Prerana Langa, vice-president of strategy and communications, is the other—and opened with a kitty of $820,000. ICICI has promised to replenish it with 1% of the annual profits of its ICICI Bank and other subsidiaries, but the financial meltdown is hurting its operations in Canada and Britain, threatening earnings. Mor says, though, that he can tap individual donors, corporations, and international foundations. Besides, he says, big numbers aren’t important: “Having a corpus is the least of my worries.”

Microfinance has become a much-praised tool for fighting poverty, especially after the Nobel Peace Prize in 2006 was awarded to Muhammad Yunus, whose Grameen Bank of Bangladesh was the first to make tiny loans to would-be entrepreneurs. Mor helped ICICI get into this business when he ran the Mumbai company’s rural lending program. Since 2003, when the Indian government made such lending mandatory for private and foreign banks, ICICI’s rural portfolio has grown from nothing to over $4 billion. Over that span, losses have come to just $80 million.


But Mor no longer uses ICICI’s approach. The old way was setting up a microfinance shop in a central urban location, which would dispatch employees every week to disburse loans—to buy a buffalo, repair a home, or get a daughter married—in a specific rural community. The new model is to help finance and advise partners which, in turn, reach out to poor consumers.

For instance, the foundation is mentoring one of its five partners, the Institute for Financial Management & Research (IFMR) Trust, on offering services such as lending and savings from neighborhood branches. The institute, set up in 2006 to promote universal access in India to financial services, pays 9% interest on savings, while charging 11% for loans. It expects to invest $150 million by March. “I’ve spent years working with the market understanding what they can do and cannot do,” Mor says.

The foundation also functions as an adviser, helping poor families figure out ways to take advantage of their situations. For instance, Mor wants to establish traditional bed-and-breakfast lodgings in the foothills of the Himalayas. His partners plan to extend loans to households to convert their homes or build small facilities for budget travelers, with rooms costing less than $10 a night. “It’s great income for the household, and a great deal for a traveler,” he says. The foundation is also working behind the scenes to find financing for a technology backbone to aid bookings.

Another partner is Grameen Capital India, which began in 2008 in Mumbai as a microfinance venture with IFMR and Citicorp’s (C) Indian subsidiary.


Mor has also pushed the foundation beyond finance. In the northern Indian state of Chattisgarh, his nonprofit helps a health-care partner rope in local volunteers to bring expectant mothers to hospitals in time for delivery. The women volunteers are now hailed as heroes, and the state’s infant mortality rate has plunged. “We have to find the points of failure and fix that one point,” he says.

A native of western India, Mor has come to juncture not only because of Krishnamurti’s teachings; he knows banking inside out. After earning a master’s degree in management from the elite Indian Institute of Management in Ahmedabad, Mor took a job at ICICI, then known as Industrial Credit and Investment Corp. of India. Part of him still wanted to be a frontline activist, but he concluded he wasn’t cut out for it. “I was interested in the issue,” he says in his soft voice, “but couldn’t connect with people.”

Instead, he asked to be placed in ICICI’s distressed-assets unit. He was soon seen as a rising star and was dispatched a decade ago to the University of Pennsylvania’s Wharton School, where he received a PhD in finance. While in the U.S., he worked with a Philadelphia hedge fund and shadowed another rising star, Morgan Stanley’s Vikram S. Pandit, who is now chief executive of Citigroup. Mor then returned to India to hold jobs at ICICI in corporate finance, project finance, and treasury.

Mor notes that some of his classmates at the Indian Institute of Management have gone onto become CEOs. Another is Raghuram G. Rajan, who was the economic counselor at the International Monetary Fund. Mor says he’s where he belongs. “It’s not about giving back to society. It was more about given my competencies, this is where I would be able to make the most impact.

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