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

Single
Singlelargest
largestemployer
employer
SME
SMESector
Sector Fastest
Fastesttotoadopt
adoptinnovation
innovation
Ensures
Ensuresequitable
equitablewealth
wealthdistribution
distribution

Use Higher
Higherproductivity
productivity
Useof
of
High
Highquality-
quality-greater
greatercompetitiveness
competitiveness
Technology
Technology
Sustainable
Sustainablerevenue
revenuemodels
models

Enables
Enablesvirtuous
virtuouscycle
cycleof
oftechnology,
technology,innovation,
innovation,
Virtuous
Virtuous competitiveness,
competitiveness,openness
opennesstotomarket
marketeconomy
economyand
and
cycle
cycle globalisation
globalisation

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

Long Seed capital /

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

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 Financing for SMEs

Financing for SMEs

Unit Level - Standalone Cluster Financing

Unique for
cluster Productised

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 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 closed
•Loans user groups
•Capital Markets •Smart cards in closed loops
•Technology based
financing solutions

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Constraints in Financing SME’s..

Banks
Banksperception
perceptionof
ofSME’s
SME’s SME’s
SME’sperception
perceptionof
ofBanks
Banks

Lack of transparency of
Lack of transparency of
••No
Nospecial
specialschemes
schemesfor
for
information technology
technologyfinancing
financing
information
Low technology ••Inadequate
Inadequateand anddelayed
delayed
Low technology credit
Low capitalization / Collaterals credit
Low capitalization / Collaterals ••Cumbersome
Vulnerable to market changes Cumbersome procedures
procedures
Vulnerable to market changes ••Insistence
Insistenceononcollaterals
collateralsand
and
High risk sector
High risk sector guarantees
guarantees
Low profitability
Low profitability ••High
Highrates
ratesof
ofinterest
interest

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SME Financing

Approaches
ApproachestotoSME
SMEFinancing
Financing
Prudent
PrudentSegmentation
Segmentation
Cash
Cashflow
flowbased
basedevaluation
evaluation
Multiple
Multiplechannels
channelsofferings
offeringsby
byleveraging
leveraging
Technology
Technology
Migration
Migrationtotonon-branch
non-branchchannels
channels

Key
Keyaspects
aspects
Measurement
Measurementof ofrisk
riskand
andmitigation
mitigation
Reduction
Reductioninincost
costof
oftransactions
transactions
Delivery
Delivery––cost
costand
andreach
reach

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

Fiscal Measures, System Priority Sector

and Infrastructure Mandated Lending

Cluster Development Technology Specialised Stock-

markets
Financing

VC/ Angel incubators Competitive pressure to

encourage innovation

Institutional framework
of nodal agencies for Industrial extension Protection to nascent
refinance/ guarantees services technical units

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BIS 2 Proposals – Advantage SME

Banks free to evolve capital allocation according

Banks free to evolve capital allocation according
totointernal
internalrating
ratingbased
basedapproach
approach
SME’s with turnover less than EUR 50 mn will
SME’s with turnover less than EUR 50 mn will
have
haveexplicit
explicitlower
lowercapital
capitalcharge
charge
Small businesses with loan size less than EUR 1 mn
Small businesses with loan size less than EUR 1 mn
with
withcollateral
collateralwill
willget
getbeneficial
beneficialcapital
capitalallocation
allocation
Recognition to collaterals, credit derivatives,
Recognition to collaterals, credit derivatives,
guarantees
guaranteesforforallocating
allocatingcapital
capital

Risk
Risksensitive
sensitivecapital
capitalframework
frameworkholds
holdspromise
promisethat
thatthe
theregulatory
regulatory
framework
frameworkwill
willsupport
supportSME
SMElending
lendingby
bybanks
banks

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ICICI Bank Initiatives

SME
SMEPortal
Portal--Internet
InternetBanking
BankingGateway
Gatewayfor
forB2B
B2B
sites
sites

Supply
SupplyChain
ChainFinancing
Financingon
onB2B
B2Bloops
loops

Subsidiary
Subsidiarynetwork
networkrole
rolein
intechnology
technologyfinancing
financing

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15
Case Study I - Supply Chain B2B Solution

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

Despatch
Despatch
Invoices
Invoices

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 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

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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 using
Innovative
InnovativeDelivery
Delivery corDECT WiLL
Mechanisms
Mechanisms 100 kiosks managed by
entrepreneurs to be set-up

Providing e-governance, and

information services
Delivering banking services
through Internet kiosks

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 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, SME
Select web interface
Portal

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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

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Subsidiary network support technology financing
 Software consulting development
ICICI Infotech Services  IT enabled services
Limited  IT infrastructure

ICICI Web Trade Limited  Internet based broking services

 Business process outsourcing

ICICI OneSource Limited  Call Centre Activities

ICICI Information  Investment in equity

 Investment in medium sized IT
Technology Fund companies

ICICI Equity Fund  Investment in equity

 Investment in securities of medium
sized IT companies

ICICI Eco-Net Internet &  Investment in equity

 Investment in unlisted internet &
Technology Fund technology companies

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Our recommendations

Lifecycle
Lifecycleapproach
approachto
todetermine
determinewhich
whichchannel
channelto
tofund
fund
SME
SMErequirement
requirement

Fiscal
Fiscalbenefits
benefitsto
toattract
attractVC
VCfunds
funds

Dedicated
DedicatedInstitutions
Institutions

Public-private
Public-privatepartnership
partnership

Banks
Bankstotobe
bepermitted
permittedto
touse
usenon-bank
non-bankinfrastructure
infrastructureto
to
deliver
deliverservices
services

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 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

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Thank You