India's second largest commercial bank, the ICICI Bank, was quick to recognize the microfinance market as a profitable investment, and eagerly seized the opportunity to expand its business while improving the lives of poor people. It utilized two business models to expand its presence in India, viz., the bank-led model and the partnership model. The article discusses these unique models which helped the ICICI Bank extend credit directly to India's rural areas without investing much in initial developmental costs.

Since the concept was born in Bangladesh almost three decades ago, microfinance has proved its value, in many countries, as a weapon against poverty and hunger. It really can change people's lives for the better, especially the lives of those who need it most.

ICICI Bank, one of the largest private sector banks in India, ventured into microfinance in 2001, and within a short span of time, it achieved remarkable progress. The microfinance portfolio of the Bank grew from $16 mn to $6 mn (the average loan is $223) from 2001 to 2003. Adopting the partnership model, it extended credit facilities directly to rural masses. Information irregularity, inability of poor people to offer collaterals and lack of details of credit history were the major challenges it faced. Apart from providing credit to rural people, it planned to develop various financial products like weather insurance, health insurance, remittance services and commodity derivatives. Despite these developments, the question that remains is whether the ICICI Bank will be able to sustain its success in the Indian microfinance sector as more and more entities have begun to jostle for a share in the burgeoning sector.

India is the largest democratic country and one of the fastest growing economies in the world. It is the second most populous country after China, with 1.1 billion population in 2007.The improving economic conditions and steady rise in Gross Domestic Product (GDP) growth rate have put the country in the center of focus in global business environment. With a huge population and an increasing number of the consuming class, the Indian economy was ranked among top 15 economies of the world. The agricultural growth coupled with steady expansion of industry and services contributed to a high GDP growth rate.

Professional Banker Magazine, Microfinance in India, Industrial Credit and Investment of india, ICICI, Global Business Environment, Gross Domestic Product, GDP, Indian Microfinance Sector, Integrated Rural Development Program, IRDP, National Bank for Agriculture and Rural Development, Nabard, Self-Help Groups, SHGs, SHG-Bank Linkage Program.