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Released August 31, 2003

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From the Department of

CORPORATE STRATEGY AND INTERNATIONAL BUSINESS

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=C A S E S T U D Y S E R I E S
[=

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This report was written by Todd J. Markson

and Michael Hokenson under the
supervision of Professor C.K.Prahalad. The
reports are intended to be catalysts for
discussion and are not intended to illustrate
effective or ineffective strategies.
Copyright, The University of Michigan
Business School, 2003

f=
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THE INNOVATION. . .
Can lending to the very poor be financially viable for banks? Should
leadership training precede access to saving and credit offered by
the organized financial sector? Are there alternate models of credit
evaluation, contract enforcement and building trust in large
institutions among the poor consumers? The ICICI experience
provides insights on how formal banking can convert the poor into
customers, at the same time empowering the poor.

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LE ADI NG I N T HO UGHT A ND A CT I O N

Released December 12, 2003

The Nature of the Market in India

_~==f~========K==q=~==~=~==
=~===K===
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Share of Consumption by
Income Stratification
11.6%

Highest 20%

8.1%

Fourth Quintile
46.1%

Third Quintile
Second Quintile

15.0%

Lowest 20%
19.3%

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==~==~=====~~==~=~K==
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~=~===~K=q=~==~===~===~=
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2003 University of Michigan Regents

2 of 24

Released December 12, 2003

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~===K=q=I==pedJ_~=i~=m~I=~=~=~==
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NM

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===~=~=K=hKsK=h~~I=`bl=~=j~~=a==f`f`f=_~I=
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~~====~=~=====~==o_f=~==~===
~=~=K=f===f`f`f=I==~===~==~==~I=====
~=~==~=~~=~==~==~~KNO=t===~=
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History of Microfinance

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~~===J~~=J=K=q=~===jcf=~==~==
I=~==~~J=K=q==~==~I=~=~I=~==~=
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==~=~=~==~=~=I=~=~=~==
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2003 University of Michigan Regents

3 of 24

Released December 12, 2003

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2003 University of Michigan Regents

4 of 24

Released December 12, 2003

j=====jcf=~====~==~==~===~==
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ICICI Bank and the Bottom of the Pyramid

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===~=~=========~K=^==f`f`f=
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==~==~~==~==~====~~I=====~=
~=~KNS=qI==~~==f`f`f===~======
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NT
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~===~=ENVVVF=~===~==f~===~====
K=f`f`f=~=~===~=~~=~=~K=

ICICI's Channel Usage- January 2002

6%

5%

7%
35%

Branch
ATM
Call Centers
Internet

47%

=============

2003 University of Michigan Regents

COPS

5 of 24

Released December 12, 2003

Branch

ATM

Call Centers

Net

COPS

18%
19%

82%
81%

0%
0%

0%
0%

0%
0%

41%
50%

33%
39%

9%
6%

7%
5%

10%
0%

Cash Transactions
January 2002
April 2001

Non-Cash Transactions
January 2002
April 2001

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=~=~=~===I=~==~~==~====~=NPIMMM=
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=============

Represents Value Loss

=
=
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Supply Focus of MNCs
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Economic Pyramid
=
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Represents Value Opportunity
=
^=f`f`f===~=~=~==_===b=m~=E==
~FI==~==~===~====~=~=~===~=~=
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~===========~===~==

2003 University of Michigan Regents

6 of 24

Released December 12, 2003

===
=
=

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K=eI==~~=J~J~=~~==~====
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Financial Cycle in the

Developing World
=
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1. Savings

3. Building
Equity

2003 University of Michigan Regents

2. Access to
Credit

7 of 24

Released December 12, 2003

q=f~=~==~===K=q==I==f`f`f=I===
~=~I====~=~~=UMK=f====~=~=~=~I==
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Direct Access - Bank Led Model

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History of the Bank of Madura: The Rural Development Initiative

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2003 University of Michigan Regents

8 of 24

Released December 12, 2003

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==~=~===~=======~X=I===
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2003 University of Michigan Regents

9 of 24

Released December 12, 2003

q=~=~====~=~==I=~=~=~=~=====
~=~I=~=~=K=q=====~==pJe=dK=Ec==
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1. Organization of

2. Mobilization of

3. Directing of Savings

Group
(Formation of SHG)

Savings
(Fiscal Responsibility)

(Sense of
Ownership/ Options)

4. Leadership

5. Responsibility for

6. Capital Micro-Loans

Delineation
(Meeting Regimen)

Village
(Local Politics)

=
=
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2003 University of Michigan Regents

10 of 24

Released December 12, 2003

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Merger with Bank of Madura

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2003 University of Michigan Regents

11 of 24

Released December 12, 2003

Scaling Self-Help Groups

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2003 University of Michigan Regents

12 of 24

Released December 12, 2003

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q====ped==p~=c==`=i~K=q=~=~=~==~=
~==~==========~===~=~=
K=l===~===~=~===~===I==
pp`==~=====I=======~=~====~=
~~==~K=^==p~=p=`~=~==OM=I===~=~=
OIMMM==ErpAQMF==f`f`f=_~=~====~=mK=a==I===
~===~===`~======pp`K=
f==ped=~I=~=`~===~===p~=p=
`~Lm==~===~===OM====~K=p~==
=pp`I==m=~====~==~=~=K=t=~=m==~==OM=
I==~=~===~==NOM=K=f`f`f====~=
~~=~~==OIQMM==ErpAQUF===NOM====~====
==~=~=K=q=`~=~==m=====~==
~===K=q=~===~====~==~==
~=~=~==~==~~=K=q==~=~==~=
===~=~======~=~=~=K=qI==I=
~=~===~=~~=ped=~======~=~=K=
t==~=~==f`f`fI==~=~~~==~======
ped=~==~=K=
=

2003 University of Michigan Regents

13 of 24

Released December 12, 2003

Structure for SHG Promotion

Divisional Manager
(Social Service Consultant)

Area Manager
(ICICI Bank Staff)

6 Project
Managers

Project Manager

6 Coordinators
720 SHGs

Co-ordinator

6 Promoters
120 SHGs

(ICICI Bank Staff)

(Social Service Consultant)

Promoter
(Social Service Consultant)

20 SHGs
400 Members

Learning to be Financially Smart

q=ped====~====~=~~K==`=
=~===~=~=~=~~K==q~==I===~==
~=W=
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=
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=~=~====K=q=~=~=~=~====
==~====~=~===K=f=~=====o=
_~==f~==~=~=~==~==~==ped===~=~==
==~K=f==~=~=~=~==~=~~=~=K=q==
=====~=~=f`f`f===~==~==K==
^==I==~=~~=SIMMM==ErpANOMF==K=^==I==~=
=~======~==~===~=~==K==
q=~=~===~=K==q==~=~===~======
=~=~===K=q=~=====~=~==~==~=
~======~==K=b==~===~=
~=~==~=~=I=J=======
2003 University of Michigan Regents

14 of 24

Released December 12, 2003

~=~K=q==~====I=~===~=~==~==OQB==
~===~K=q==I====~====~I=~===~=
~==~==K=q=~==~=~===ped===~=
~I==~==~==~=NMB=~=~K==
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==~==~=~I=~==~=~====~=~K=`~~=
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=ErpARIMMMF==~===NOIRMM==ErpAORMF==~=K=^=~===
===~===~==I=~==~==~~=I=
===~=~=~=I=~=~~=~==~==~=K=q=~=~=J
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~I==~===~~==VBI=~==~==~=NOBK=f`f`f=~==~==
==~==~=~~===m=~=`~=~=~==~=
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~===ped====K =^=~===~==~K=
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2003 University of Michigan Regents

15 of 24

Released December 12, 2003

=======~K=q===~=~==~=====
ped=~===~~=~=~~===K=q==~=~=~=
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~=~==~=~=====~=~=~~=====
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K==
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~=^~==~==SUIMMM=~=~==QIMMM=K=s~=~=~=
~==K==
f=~===~~====`~I=m=~=pedI==~==
~~=~~========I===~=
~=K=q=~===g=j=`=Egj`F====~=
==~======~====K=b~==gj`====
=~==~====OM=ped==NM==OM=~===~=~~K=q=
==========~==~===OMM==QMM=
K=q=~===~==~===NM==ErpAKOMF=~==~~~=
~==~====~==K=q=~==~====~=K=
q====~====PMM==ErpASFK=q===~=~=~===~==
OB=~=~=J===~=NM=~K=f=~==~I===~===ErpAKMOF=~=
~===NMM==ErpAOF=K=q=gj`=~=====~==~=
~~==~=~=======~=~K=q=~==
~===~==~=~===~=~==K=q===NIMMM==
ErpAOMF==~=~==~===~===m=~=`~=~==~=~~K=
q===~=====~=~===gj`===^~=`~=~=
m=j~~K==
o~=f~===~=~===~==SP=~===~=
~~K=f===~==~===~=~=======
2003 University of Michigan Regents

16 of 24

Released December 12, 2003

I=ped=~==~========t~=c=p=
EtcpF=~=~====~K=f======~=~==~=~=~=
==~==~==~====~=~===~=K=q=pJe=d=
~=~=======tcp=~=NN===~=~====
~~=~=~=K=b~===PNM==ErpASKOMF==~=====~==
=~=~=f`f`fK=`I==~~==t~=c=p==OIUTP=pedp=
==~=RQIMMM==~=NRKT===ErpAPNQIMMMF==K=q===
~===~==~==~==~==~==~==~=~~=~=
=~K=q=t~=c=p==========
~~=K=^==j~=OMMPI===TQ=~~=====tcp=
~=~===RNMIMMM==ErpANMIOMMFK=

=
f`f`f==~~=~====~~=====ped===q~=
k~=~~=~====~=K=f`f`f======~====~~==
f~=~==~==~=====~I=~I=~==
~=~K=q====ped=====~====~~==
OV
===~=~=~===~==~=====K? ==
=

Dec-02

Sep-02

Jun-02

Mar-02

Dec-01

Sep-01

Jun-01

Growth of SHGs under ICICI Bank

Mar-01

8000
7000
6000
5000
4000
3000
2000
1000
0

==========
=
=
j~=~=~=~===~~=K=f==~=~=~==~==~=
~==~=~=~~=~I=jK=m===k~~~~=~===~==
2003 University of Michigan Regents

17 of 24

Released December 12, 2003

~=~=~=~==~==~====~===~=K=q===
=~=~=NMIMMM==ErpAOMMF===~I=~=====~==~=K=
`I=jK=m=~=~=~=TIMMM==ErpANQMF==TMB===~=====
~===~K=f==~=~I=jK=p~~~==~=~=~=~===
=~=~==~====K=t==NMIMMM==ErpAOMMF=~I==
~====~===~====K=jK=p~~~=~==
=~==~=~=~=~=~=SIMMM==ErpANOMF==SMB===~K=l=
=~======~===~=~=~==~====
=~K=p=~==~=~=~=OR==ErpAKRMF=====~==
~=K=q=~=====~=~======~=
K==
q=~=~==~=~===I==I==~=~=
=~===~=~==~=~~=~=~==~==~=~==
k^_^oaI==k~~=_~==^~=~=o~=aK=f=~===
~==OMMOI=k^_^oa=====ped=~=~=~===~=RSM==
===OOM=ped=~=NN=~K=q==~===~=J=~=
~==~====~=J~=~K=f=~==~==
=====ped=~=~====J=~=
~=K=_=~=~=~=~==k^_^oa=~=~===W=
Average Asset Value in Pre- and Post- SHG Situations
7000

Rupees

6000
5000

Pre-SHG

4000
Post-SHG

3000
2000
1000
0

NGO Groups

Bank Groups

Overall

=====================
Average Household Income of SHG Income
25000

Rupees

20000
15000

Pre-SHG

10000

Post-SHG

5000
0

NGO
Groups

=======

2003 University of Michigan Regents

Bank
Groups

Up to 2- 3-4 Years
Years

5 Years
and
Above

Overall

18 of 24

Released December 12, 2003

Agency Share of Loan Amount- Pre-SHG

Agency Share of Loan Amount: Post-SHG

Banks
Money Lenders
Friends and
Relatives
Others

Banks
Money Lenders
Friends and Relatives
Others
SHGs

PM

f`f`f=~===ped=~=~=~=~=~K=q===~=f`f`f===
~======~~====f~=~=~==ped=I===~=
~=~~I=~===K=q=~=~===~=~===
=======~~======~~=~=ped=~K=
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ped=~~=~=~=~==~=~==I=~=~==
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=ped=I==k^_^oa=~==~=======~K=
q====k^_^oa==NNR======~=
~=~=~=~==~~====~==I=~=~=
K=q=~=~=====~=I=~=~===~=K=l=
=~==~==I===~=~==~====
~====~==~=~K=q=~==~===~==
======K=_=~==~=========
=~~=~=====~=~=====~W==~=~===
==I==~===~I=====~K=q~===
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~K=q=====~==ped===~~===
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~=K =
=
=
=
=
=
=

2003 University of Michigan Regents

19 of 24

Released December 12, 2003

Indicator of Change
Self-Confidence & Self-Worth
> Respondent exudes confidence
> Can confidently meet financial crisis
> Respectful Treatment from family members
> Comes out to help neighbors/others
Decision Making
> Joint decision making on purchase of household assets
> Makes joint decisions on social matters such as education of
children and marriage
Communication Skills
> Speaking out freely
> Talks only if asked
Behavioral Changes
> Protests drinking/gambling
> Protest wife beating by husbands
> Domestic violence
> Increased Mobility

Pre-SHG %

Post-SHG %

21 %
33 %
40 %
51 %

78 %
85 %
89 %
95

39 %
42 %

74 %
69 %

23 %
40 %

65 %
9%

37 %
52 %
67 %
45 %

81 %
78 %
49 %
75 %

=
q=~===f`f`f=~=~=~===~~=~=====ped=
==J~====~=~====~=~==
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==~=~==kdl=~=jcf==~===~K =
q==~J~===~=~~==~==f`f`f=_~===
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~===I=f`f`f===~===~==J~J~=~=
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===~==K==
Micro-Finance Institutions

f`f`f=~=~===~J~===~=~~=K=q=~=~=
=~=~=~==jcf=======~===~=K=eI==
2003 University of Michigan Regents

20 of 24

Released December 12, 2003

=~=~==~~=~=~=======f`f`f=~===~=~==~=
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=~=f=~==~=K =f`f`f=~=~==mo^a^k==~=
~~~======pJe=dK=f`f`f==~==mo^a^k===
=~==ped==~I===I=~=~====~=~=
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~==I==~~==jcf===f~=~==~===~=
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~=======~=K=
Rural Kiosks

f`f`f=~====~~=~==bfa=m~I=JiI=fq`=J`~=~=
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========~=~~=~===~===
~=~K=q=~=~~=====~===J~=~=
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jcf=~=kdl=~=~===~=~====~=K==
Future Initiatives

q=f`f`f=~=~~=~=~=~=~======_===
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===~===~==~===K=t=
=~==~=~=~I==~~I==^qj=~=~I=f`f`f==~~=
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~==~=~==~~I==~=^qj===~==~=~====
===f`f`f==~=====f~=K=f===
2003 University of Michigan Regents

21 of 24

Released December 12, 2003

====~==aK=^=g~~=~=====~==PIMMM===
rpASMM===UMIMMM===rpANSIMMM=~====~=~=^qj=~K=^=~=~I=
f`f`f==~==~=^qj=====~=~=~~=K==
f`f`f=~==~=====~==^qjK=q=^qj=~===
~==~=f`f`fJ~==~==~==~===~==~=I=
J=K=o~=~=====^qj=~====~=~=
==~==~=~===~===~=~K=t===^qjI=f`f`f===
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f`f`f==~=~==~==~==~=K=f=~I===
==~=======~===~=J=~===~=
K=p=~==~===f~=~===~=^qj===
=~=~=~=^qj===~K=
f`f`f==~=~=====~=~=~J~=~====
==~===~~==~=~K=q===~=~===
===~===~=~==~=~=~L===~=
PS
~=~=~==J==~K =p~=~==~===
~~=====~=~=====K=_===~==~=~=
L=~===~~~=~=~~=~=~===
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PT
=~~K =p~=~==~==l=OMMM==f`f`f=~==f=`~==
_~~=~=~=j~~=^~==e=b~=Ej^ebF==~=~=~=K=^=
===~=~==~==K==eI=~====~=~I==
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==~=~=========~=~K==_==~=~~===
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=
=

2003 University of Michigan Regents

22 of 24

Released December 12, 2003

1. Farmer Service Centers/

MFIs (Provide inputs and

technology to start process)

2. Input

(Customer desires goods

or services)

6. Collect Cash

5. Output Sale

Smart Card Cycle

(Products or Services)

3. Merchant Stores

(Credit/ Debit/ e-Purse)

4. Bank Account/
Credit History
(Online update of
bank accounts)

=
=
f~==~==f`f`f=_~==~===K=q==~==
====~===~====~=f`f`f===~=~==~=
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==~===~=~====K=qI=f`f`f=_~===~=~=~=
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~==~=~I===~=~======~===
=~===~K=
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======K=q=~========I=f`f`f==
=~==~~==~======~===
====~======~=~~====~~=
QM
QN
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===~=~=~===~====_lmK==
a~=~=~==~=f`f`f===~===K=^~==~=~=
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~==~~=~=~=~=~======KQO=f=~I=~=~=~=
~~=~==~=~=~===~===K=f`f`f===~=
~=~=~==K=

2003 University of Michigan Regents

23 of 24

Released December 12, 2003

Conclusion

f`f`f=~=~=~=~====_===b=m~K=_~=
===~==~=~~=K=f=====~=~==~=~K=f==
QP
~~=~=~=K =f`f`f==~=~===~==~==~=
=jcf=~=kdl====~==K=^=~===~J=I=f`f`f=~=
====ped==~=NIRMM===~=UIMMM====~===
~===_~==j~~K=q==I=f`f`f=~===~===
~=~=~===~===~~===~=~==~==~=
~K=^~I=f`f`f=~=~=~=~====~=~=~=~=~=
~=~=~=J~=~==~==K=f`f`f=~==~===
=~===~==~=kdl=~=jcf==~=~==~==
==~=~~K=q=====~==~===~K=t=~==~I=
======K=f`f`fI=I=~===~=~==~=~===
~=~=~~====_===b=m~K=
q=~=~=f`f`f===~==_===b=~=~=~==
=~~=K=_=====_lm=~I=f`f`f==~~==
~=~===~K==
^~I====_lmI=f`f`f=~===~=~=~==~=
K=q=======~======~K=p=~==
~==f`f`f=~~====o_f=~===K==

2003 University of Michigan Regents

24 of 24

Released December 12, 2003

Endnotes

=h~I=`~~K=b=a==f`f`f=_~K=m~=fK=q~I=j~=OTI=OMMPK=
=WLLK~~K==
P
=j~==f~W=o=bI=K=VK=
Q
=a~I=_~I=C=p~I=^K=EOMMOFK=b=~=====f~I=f`f`f=p~=f~=dI=OK=
R
=WLLKKKL~L~~K~\~ZKCZ==
S
=j~=`~==_~=iI=o=_~==f~=J=
WLLKKKLKLNQ\\~ZC~ZCNZNMMNCOZNMMNCZMC~ZM=
T
=_~I=b~K=j~==~W=o=I=QK=
U
=WLLKKKLKLNUSPS\lp\~ZNNLOOLMOC~ZNNLOOLMOCNZMCOZMCZ==
V
=p~I=jKpKI=C=r~~~~I=o~=pK=q=~~==~==f~W=bI==~=I=RK=
NM
=WLLK~~KLLLOMMONK==
NN
=h~~I=hKsK=`blL=j~~=a==f`f`f=_~K=m~=fK=q~I=j~=OTI=OMMP==
NO
=h~I=`~~K=b=a==f`f`f=_~K=m~=fK=q~I=j~=OTI=OMMPK=
NP
=a~I=_~I=C=p~I=^=EOMMOFK=b=~=====f~K=f`f`f=p~=f~=dI=OK=
NQ
=fK=K=N=
NR
=fK=K=RK=
NS
=h~I=`~~K=b=a==f`f`f=_~K=m~=fK=q~I=j~=OTI=OMMPK=
NT
=d~I=jKkK=d~=j~~==old=C=oj_dK=m~=fK=j~I=j~=NTI=OMMPK=
NU
=WLLK~~K=
NV
=WLLK~~KLMPLVK==
OM
=WLLKKLM|~LL|~LOMMONML|K==
ON
=WLLK~~KL~K==
OO
=WLLK~~KL~K==
OP
=^~I=_I=a~I=_~I=C=p~I=h~~=EOMMOFK=j=~W=_==~~=====~~===~=
I=NK=
OQ
=WLL~K~~KL||~L~K==
OR
=WLL~K~~KL||~L~K==
OS
=WLLK~KLLOONOMM~K=
OT
=k^_^oaI=^=~===J=I=K=QK==
OU
=k^_^oaI=_~==J=W=e=~=\=K=RK==
OV
=h~I=`~~K=b=a==f`f`f=_~K=m~=fK=j~I=j~=NTI=OMMPK=
PM
=_~~~I=hK`KI=C=m~I=sK=EOMMOFK==pedJ_~=~=~==~=f~W=^=~=~I=k^_^oa=OTI=PP=~=PVK=
PN
=h~I=`~~K=b=a==o~=_~K=m~=fK=j~=NTI=OMMPK=
PO
=_~~~I=hK`KI=C=m~I=sK=EOMMOFK=pJ=J~=~=~==~=f~W=^=~=~I=k^_^oaI=
QRK=
PP
=d~I=jKkK=d~=j~~==old=C=oj_dK=m~=fK=j~I=j~=NTI=OMMPK=
PQ
=d~I=jKkK=d~=j~~==old=C=oj_dK=m~=fK=j~I=j~=NTI=OMMP=
PR
=WLLK~KKLp^ofL~L`kK==
PS
=a~I=_~I=C=p~I=^=EOMMOFK=b=~=====~K=f`f`f=p~=f~=dI=QK=
PT
=fK=K=RK==
PU
=^~I=_I=a~I_~I=C=p~Ih~~EOMMOFK=j=~W=_==~~=====~~===~=
I=RK=
PV
=p~=f~=dI=f`f`f=_~I=NPK=
QM
=^~I=_I=a~I=_~I=C=p~I=h~~=EOMMOFK=j=~W=_==~~=====~~===~=
I=ORK=
QN
=fKI=ORK=
QO
=fKI=ORK=
QP
=k^_^oaK=pJe=d==_~=i~=m~I==NK=
O

2003 University of Michigan Regents

25 of 24