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HSBC Brings a Business Model of Banking to the Doorsteps of the Poor

Tiny loans can make a huge difference, especially when coupled with nancial literacy and capacity building. With a global commitment to sustainable business through nancial inclusion, HSBC partners with micronance institutions and other organizations to empower micro-entrepreneurs among Indias rural poor, who in turn are changing lives, families, and entire communities. The authors provide an overview of HSBC Groups sustainability strategy, a brief history of micronance in India, and HSBC in Indias role in serving the micronance industry. They also discuss the banks multistakeholder initiatives for capacity building, which include two schools where rural women learn essential business and technical skills and nancial literacy, and an environmental and social village-based initiative for water conservation and livelihood creation. 2009 Wiley Periodicals, Inc. Indirani, a 53-year-old wife and mother of four living in Chennai, India, is one of micronances success stories. She and her husband, Chandrabose, used to earn a paltry income of about Rs. 1,500 (U.S. $33) per month as laborers. Moreover, as Chandrabose began to age, he was unable to nd regular work. A local institution, which grants small loans at prevailing interest rates using funds it borrows from The Hongkong and Shanghai Banking Corporation Limited (HSBC in India), lent Indirani Rs. 5,000 ($109), which she used to purchase a wet grinder to mill grains and rice into our for customers. With her husbands assistance, her new business was soon bringing in Rs. 50100 ($12) a day. As more locals became regular customers, Indirani took a second loan of Rs. 10,000 ($218) to expand her business

PRAMOD MARAR, BALAJI S. IYER, AND UNMESH BRAHME

by purchasing two more grinders, and eventually renting a shop for the business. Today, Indiranis our business generates around Rs. 300400 ($79) a day After paying the monthly rent for the shop and electricity bills, she earns a net income of Rs. 5,0006,000 ($109131) per month. Thanks to micronance and her hard work, Indirani is now a successful entrepreneur managing her own business and supporting her family. The plight of women in poor communities in India is well documented. The pressure for survival against the backdrop of poor or no education, failing health, low agricultural/labor productivity, and degradation of the environment affects women and children the most. Whether because of tradition, their economic environment, or other factors, millions of women in India today are still unable to break out of the vicious cycle of gender bias, deprivation, and victimization imposed on them. HSBC in India and the intermediary micronance institutions (MFIs) that it funds to extend credit and other nancial services to women like Indirani are part of the growing micronance industry in India and elsewhere. The micronance segment seeks nancial inclusion for the worlds poor through sustainable means as a way to empower millions to lift themselves out of poverty. Micronance coupled with nancial literacy is a proven approach to intervene in the lives of poor women, their families, and their communities to ensure they have the opportunities to invest in their businesses, increase their income, build assets, and create economic security.

c 2009 The Hongkong and Shanghai Banking Corporation Limited, reprinted by its permission. Published online in Wiley InterScience (www.interscience.wiley.com) Global Business and Organizational Excellence DOI: 10.1002/joe.20247 January/February 2009

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A Commitment to Corporate Sustainability HSBC in Indias growing involvement in micronance and related activities is part of the London-based HSBC Groups global commitment to inclusive growth. As the worlds largest banking and nancial services organization, with assets of $2.547 trillion and an international network of about 9,500 ofces in 85 countries and territories around the globe, HSBC provides a comprehensive range of nancial services to personal, commercial, corporate, institutional, investment, and private banking clients. HSBCs overall strategic direction reects its position as the worlds local bank, combining the largest global emergingmarkets banking business and a uniquely cosmopolitan customer base with an extensive international network and substantial nancial strength. Our strategy is aligned with key trends that are shaping the global economynamely, that over the long term, emerging markets are growing faster than developed economies, world trade is expanding at a greater rate than GDP, and life expectancy is increasing virtually everywhere. In addition, climate change is having an impact on economic development, particularly in developing countries, and HSBC faces the challenges of a shift toward a low-carbon economy. In response to these trends, we are reshaping our business by investing primarily in the faster-growing emerging markets including Indiaand in developed markets by focusing on businesses that have international connectivity.

business. We believe that doing so will strengthen the HSBC brand, helping to deliver long-term value to our stakeholders. Our sustainability strategy recognizes that the groups continued nancial success depends on our ability to manage and address nonnancial considerations in our business. This requires an understanding that these nonnancial issues do not exist in isolation from our core functions and operations but are integral to the way we do business. We use the term corporate sustainability rather than corporate responsibility, as it describes more succinctly the management of our direct environmental footprint, sustainability risk and business opportunities, and our community investment activities. As a major employer, lender, and investor, we can make an important contribution to sustainability, providing nancial solutions to environmental and social challenges while building a healthy business for the benet of all of our stakeholders. Financial inclusion through micronance and other activities is one part of our sustainability strategy. An Introduction to Micronance Micronance serves as an umbrella term for the provision of nancial access through focused nancial intermediariesmicronance institutions, or MFIsto those parts of the population that are not being served by mainstream nancial services providers. Few elds in development or commerce other than micronance emphasize a twin bottom line, effectively combining economic and social performance. Presently the most widely prevalent service of micronance in India is microcredit. Typically, these are small loans to the unserved or underserved, either for consumption or for incomegenerating activities.
Reducing Poverty in Sustainable Ways

HSBC is determined to be one of the worlds leading companies in addressing the challenges of embedding sustainability into its business.
We believe companies that manage their business in a sustainable way are better placed to compete in the global economy. HSBC is determined to be one of the worlds leading companies in addressing the challenges of embedding sustainability into its
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Although the amounts involved may be small, the services that micronance offers have proven to be a powerful instrument for reducing poverty.
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Household Income. Financial services can improve poor peoples lives by providing much-needed nance for business activities, which can increase their household incomes. By offering a variety of nancial products such as savings, insurance, loans, and remittances, micronance empowers poor people to diversify their income sources, meet basic needs, and cope with shocks to their income. Building Assets. As a result of increased income and

and new opportunities. Women involved in micronance also own assets, including land and housing, and play a stronger role in decision making. Empowerment has also translated into declining levels of violence against women.
Measuring the Benets

the ability to save and obtain credit through micronance services, poor people can gain the means to acquire land, construct or improve their home, purchase animals and consumer durables, and create or expand their businesses.

The Consultative Group to Assist the Poor (CGAP) cites the following empirical evidence of the positive impact on participants in micronance programs, including improved well-being at both the individual and household levels as compared with those who did not have access to such nancial services:1

r Bangladesh Rural Advancement Committee r


(BRAC) clients increased household expenditures by 28 percent and assets by 112 percent. After more than eight years of borrowing, 57.5 percent of Grameen Bank borrower households in Bangladesh were no longer poor as compared to 18 percent of nonborrower households. In Lombok, Indonesia, the average income of Bank Rakyat Indonesia (BRI) borrowers increased by 112 percent, and 90 percent of households graduated out of poverty. In Vietnam, Save the Children clients reduced food decits from three months to one month. At Kafo Jiginew in Mali, clients who had been with the program for as little as one year were signicantly less likely to have experienced a period of acute food insecurityand those that had had experienced a shorter period.

As a result of increased income and the ability to save and obtain credit through micronance services, poor people can gain the means to acquire land, construct or improve their home, purchase animals and consumer durables, and create or expand their businesses.

r
Reducing Vulnerability. Access to nancial services

has allowed poor households to make the transition from the daily struggle for survival to a nancially secure future. Poor households are now able to send more children to school for longer periods and to make greater investments in their childrens education. Increased earnings and access to microinsurance have also led to better living conditions, which translates into a lower incidence of illness. This has also enabled clients to seek out and pay for health care services when needed.
Empowering Women. Most micronance programs

target poor women, for whom money management, greater control over resources, and access to knowledge leads to more choices and a voice in family and community matters. Economic empowerment is accompanied by growth in self-esteem, self-condence,

HSBCs Involvement in Micronance With signicant operations in the emerging markets and expertise in transactional solutions, and supported by our ofce network, services, processes, capital, and customer relationships, we are well placed to serve the micronance sector. Our approach to this sector is based on commercial viability with high social benet, with the aim to create selfsustaining, stable nancial services to help people out of poverty. We integrate micronance activities

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with our local business capabilities rather than as a separate business line. Our strategy is to concentrate on our strengths and to work with others rather than try to build expertise quickly in the short to medium term. Following pilot projects in 2005, HSBC has engaged more closely with micronance enablers and MFIs on the ground to understand the principal issues facing the sector, and the ndings have informed and shaped our priorities.

Our strategy is to concentrate on our strengths and to work with others rather than try to build expertise quickly in the short to medium term.

Although HSBC in India has 47 branches and 178 ATMs in 26 cities, it lacks a branch network and accessibility in rural areas, where the majority of Indias empoverished population lives. The rural poor need a diverse range of nancial services, including credit and safe and exible savings services, to run their businesses, build assets, stabilize consumption, and shield themselves against poverty. However, access to quality nancial services in rural India is still heavily inadequate. Eighty-one percent of villages in India do not have banks within a distance of 2 km (1.2 miles); 41 percent of the population does not have a bank account; and available credit in rural areas meets just 10 percent of the actual need. Micronance established a foothold in India during the 1990s, but this decade has seen rapid growth, with a distinct shift away from a welfare model toward a business model for delivering these services. (For a discussion of the evolution of micronance in India, see the sidebar Micronance in India: The Journey.) HSBC in India started its micronance activities as a pilot and primarily as an experiment to understand the micronance space in 2005, and it has come a long way in expanding its micronance services during the last year. Since it is quite expensive for HSBC in India to provide services directly to the rural poor, it lends funds to micronance intermediaries, the MFIs that further on-lend the funds to the ultimate clients. (For a discussion of the types of organizations engaged in micronance activities, see the sidebar, Micronance in India: The Players.) HSBC in India established a team for micronance under its Commercial Banking division in December 2007 and plans to eventually create regional-level teams to facilitate initiatives in their respective parts of the country. HSBC in India has put in place a clear strategy for FY 20082010 for conducting micronance business in line with the overall HSBC Group Strategy. The key objective of the strategy is

HSBC is currently working with MFIs in Argentina, India, Mexico, the Philippines, Sri Lanka, and Turkey through our operations in those countries. To provide a closer view of our involvement in the micronance sector at a country level, the rest of this article will focus on HSBC in India, which, in addition to other initiatives that promote nancial inclusion for the poor, offers customized loan products to micronance institutions across the country to help them provide microcredit to the underserved segments of Indias population.

HSBC in India and Micronance The Hongkong and Shanghai Banking Corporation Limited is one of Indias leading nancial services groups, with more than 3.4 million customers and 34,000 employees in our banking, investment banking, and capital markets; asset management; insurance broking; software development; and global resourcing operations. The bank is at the forefront in arranging foreign investments into the country and deals for Indian companies investing overseas, and it is custodian of more than 40 percent of the foreign institutional investments (FIIs) in India, with total assets under management in India that exceed $5 billion.2

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to develop a host of services around a lending portfolio with MFIs that can facilitate capacity building, improve operational efciency, and bring the best practices of a transactional banking business to the micronance domain. The approach is to leverage HSBC in Indias footprint, products, and services, generating nancial and nonnancial returns.

tivities, although there are no restrictions on the end usethe loans can be used for consumption as well as income generation.

The key objective of the strategy is to develop a host of services around a lending portfolio with MFIs that can facilitate capacity building, improve operational efciency, and bring the best practices of a transactional banking business to the micronance domain.

How MFIs Work with Their Clients The operating methodology that forms the crux of an MFIs service delivery typically involves the steps described below for setting up new branches and making loans.3
Village Selection

The Clients of MFIs Micronance clients are a diverse group of people and require diverse products. A typical micronance client is a person with little or no access to formal nancial services. Clients are often described according to their poverty levelvulnerable nonpoor, upper poor, poor, and very poor. These clients operate small businesses, work on small farms, or work for themselves or others in a variety of businesses. Some of these micronance clients are truly entrepreneurs who enjoy creating and running their own businesses. Others become entrepreneurs by necessity when there are few jobs available in the formal sector. In India, as in Bangladesh and other Asian countries, women make up a majority, and sometimes all, of an MFIs clientele. Ninety percent of those who borrow from the MFIs that HSBC in India nances are women between 18 and 60 years of age. They would typically be involved in small businesses, including grocery, tailoring, embroidery, tea/food stall, trading, and in dairy and poultry farming activities. The loans are generally used for income-generation ac-

A branch manager conducts a survey and selects certain villages with high potential for promoting local client groups. Although loans are made to individuals, a client group is the focal unit in an MFIs service delivery model. Peer pressure and collective accountability are strong factors in ensuring a high rate of loan payback. The branch manager then conducts a series of meetings in each village to lay the groundwork for moving ahead.
Group Formation and Training

The branchs loan ofcer steps in to help form one or more groups. Each MFI has its own norm for the size of a group, with ve members being the norm for a number of MFIs, and each group usually selects a leader. The loan ofcer trains the group members and leaders on the processes and modus operandi of the MFI, and the responsibilities of the group and its members. The training ends with a Group Recognition Test (GRT), in which the loan ofcer and/or a supervisor visits the residences of the members to test them on the MFI principles taught during training.
Appraisal, Documentation, and Disbursement

After successful completion of the GRT, the loan ofcer brings the prepared loan documents to the groups next meeting for members to sign. At the following meeting, loans are disbursed. Some MFIs will disburse the loan amounts to all the borrowers

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Micronance in India: The Journey The micronance industry as it exists in India today is about a decade old, though one can trace its roots to the mid-1970s, when some prominent Indian nongovernmental organizations (NGOs) such as Myrada and Pradan started using the Self-Help Group (SHG) model, a platform for social mobilization in which nance is one of the various services provided to the grassroots community. In this community-driven and -managed micronance model, the NGO plays the role of a facilitator, providing capacity-building services to the self-help groups and establishing relationships with banks. This approach was widely replicated across other developmental NGOs working in India. Earlier models of lending to the poor were characterized by state-sponsored programs, such as the Integrated Rural Development Programme (IRDP), which were in line with the directed credit agenda of the welfare state. The emphasis was on keeping the cost of credit to the poor articially low through interest-rate ceilings, but it resulted in low levels of institutional lending to this segment. However, the early 1990s saw a denite shift as new players emerged, micronance institutions and NGOs, whose approach has been characterized by an emphasis on access to credit rather than the cost of credit, as was the case earlier. During the late 1990s, the Grameen model, promoted by Nobel Prize winner Muhammad Yunus of Grameen Bank, and the ASA model, promoted by the Association for Social Advancement, both from Bangladesh, found rapid acceptance among the newer breed of micronance institutions in India. Known as on-lending models, they have the capability for rapid scaling in terms of client outreach, and they are less dependent on grants and donor funds by enabling the micronance institution itself to borrow lending capital from larger credit institutions and then pass the actual service charge on to its individual borrowers while retaining a margin for its own growth. These models have proven to be robust revenue models and, as such, have spurred the emergence of for-prot institutions (nonbanking nancial companies) in the Indian micronance sector and a slow but distinct trend away from nonprot, grant-supported organizations. In recognition of the importance of providing the poor and near poor with access to needed capital, the Reserve Bank of India (RBI) removed most interest-rate ceilings on micronance in February 2000. The RBI issued guidelines that deregulated interest rates on loans to microcredit organizations and by microcredit organizations to self-help groups and their member borrowers, which, in combination with the emergence of credible intermediaries such as NGOs and MFIs, made commercial models in micronance possible. The SHG model, in the form of the SHG-Bank Linkage Programme (SBLP) initiated in the early 1990s by the National Bank for Agriculture and Rural Development (NABARD), and the rapidly growing MFI on-lending model both dominate the micronance industry in India today. Exhibit 1 compares recent microcredit activity under both models. As of March 31, 2008, the outstanding microcredit portfolio of the India micronance industry was about Rs. 220 billion ($4.8 billion), three-quarters of it with the SHG-Bank Linkage Programme (SBLP) and one-quarter with MFIs. Together, both delivery models have reached about 50 million households. For 20062007, the SBLP increased its number of borrowers by slightly more than 30 percent, extending credit to an additional 9.6 million individuals, more than 90 percent of them women, and about half of them poor. During the same period, the number of MFI microcredit customers grew even more rapidly, by about 40 percent, as MFIs added an estimated 3 million new borrowers. As banks and other MFIs gain market share, there is widespread evidence that the stronger competition has led NGOs, public agencies, and other members of the informal sector of the micronance industry to signicantly improve the terms of credit they offer to their borrowers. Indian micronance continues to grow rapidly toward its main objective of nancial inclusion, extending outreach to a growing share of poor households and to the approximately 80 percent of the population yet to be reached directly by mainstream banks.

in the group simultaneously, while others will stagger disbursements among borrowers over a period of a couple of weeks.

Depending on the area and the MFI, in the rst year of a groups existence, individual members may secure income-generating loans of Rs. 2,00012,000

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Micronance in India: The Players A number of formal nancial institutions provide micronance services in addition to their general banking activities, including apex development nancial institutions, commercial banks, regional rural banks, and cooperative banks. MFIs, however, are separately regulated according to their status as either for prot, not for prot, or a mutual benet society (see Exhibit 2), and all are prohibited from taking savings deposits unless expressly licensed by the regulator. MFIs are mainly found in the private sector. However, in India, the emergence of the NGO sector and its endeavors to provide microcredit and support to microentrepreneurs has attracted nancial support from the public sectorinstitutions, agencies, ministries, and government departments of the central and state governments that wish to help NGOs extend credit and other welfare services to the rural and urban poor, particularly women.a
a The

most prominent of these public-sector partners are Rashtriya Mahila Kosh (National Womens Fund), the Small Industries Development Bank of India, the Housing and Urban Development Corporation, the Housing Development Finance Corporation, the National Housing Bank, and the Ministries of Agriculture and Human Resources Development (the Rural Development Department and the Department of Women and Child Development, respectively).

Exhibit 1. Distribution of Micronance Activity Among the Primary Providers in India

Percent of the Outstanding Microcredit Portfolio as of March 31, 2008


SHG-Bank Linkage Programme MFIs Large Medium and small 75% 20% 5%

Number of Borrowers 20062007


9.6 million 3 million

All Years
41 million 10.5 million

Exhibit 2. Types and Numbers of Micronance Institutions in India

Category
Not-for-Prot MFIs NGO MFIs

Types of MFIs

Legal Status
Societies Registration Act, 1860 or similar Provincial Acts; Indian Trust Act, 1882 Section 25 of the Companies Act, 1956 Mutually Aided Cooperative Societies Act enacted by State Government Indian Companies Act, 1956; Reserve Bank of India Act, 1934 Total

Estimated Numbersa
400500 2050 200250

Mutual Benet MFIs

For-Prot MFIs

Nonprot companies Mutually Aided Cooperative Societies (MACS) and similar institutions Non-Banking Financial Companies (NBFCs)

2025b 650825c

a The

estimated number includes only those MFIs that are actually undertaking lending activity. b Sources: National Bank for Agriculture and Rural Development, 2007, at http://www.nabard.org; and Reserve Bank of India, Report on Trend and Progress of Banking in India, June 2006, which is modied based on current trends. c Modied based on analysis of current trends.

($44262). Loan eligibility increases by an additional Rs. 2,0006,000 ($44131) in each subsequent lending cycle, provided neither the member nor the group has defaulted on any loan. Borrowers repay the principal at a 12.515 percent at interest rate in equal weekly installments over a period that

usually ranges from 50 to 55 weeks, depending on the MFI.


Monitoring and Collection

The group has weekly meetings in which an MFI eld worker collects members loan payments and

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hears members reports of how they are using the money and to what effect. Peer pressure is the basic principle behind group-level monitoring. In case of any repayment problem or misutilization of any members loan, the other members of the group take responsibility for repayment. The loan ofcer visits the group to make one or more loan utilization checks during the loan cycle and continues to provide group training to ensure that the borrowers fully understand the processes and report any aberration to the MFIs branch ofce or head ofce. These checks and balances coupled with the certainty of a continuous credit line from the MFI ensure that the members loans are repaid on time.

the like. The team also meets with borrowers to understand their requirements. As a nancial intermediary, an MFIs ability to manage a high-quality loan portfolio that HSBC in India will fund is an understandably important concern. Asset quality categorized by delinquency buckets is thus part of the criteria for qualifying an MFI. For instance, one of the most common measures of asset quality is portfolio at risk (PAR), dened as the principal balance of all loans in arrear as a percentage of the overall portfolio. In India, PAR is usually measured for loans more than 60 days overdue, with an industry norm of 10 percent. Furthermore, the MF team remains in touch with HSBC Group micronance enablers, lending institutions, private equity players, industry inuencers, and thought leaders to keep its members updated on market dynamics and trends. As of July 2008, HSBC in India has partnered with some of the best-managed MFIs in India. Collectively, our MFI partners serve more than 110,000 borrowers in 11 states, thus indirectly touching the lives of half a million people. One thing we have learned from our exposure to these MFIs is that Tier 2 MFIsmidsized and next-generation MFIs require much more support, both in terms of debt and capital, than large MFIs do. This year we are working on a special lending program for this group to support them at an early stage, with the goal of facilitating their growth and thereby enabling them to reach out to even more people who are marginalized and underbanked.

How HSBC in India Works With MFIs Success in reaching the poor with micronance is determined by the mission of an MFI and its ability to translate that mission into effective products and services. Given the renewed focus on social performance in designing and delivering micronance services, the expectation is that MFIs will serve their clients with increasingly appropriate and varied products and services.

Given the renewed focus on social performance in designing and delivering micronance services, the expectation is that MFIs will serve their clients with increasingly appropriate and varied products and services.

All MFIs nanced by HSBC in India are assessed by the banks micronance (MF) team on principles of governance and operations as well as nancial parameters. The MF team not only meets the MFIs management ofcials and other relevant personnel but also visits its eld operations and branch ofcials to evaluate their operating methodology, including group formation techniques, delivery mechanism, number of clients handled per eld staff, and

Capacity Building for Rural Women Despite the surge in micronance growth in India in recent years, its rural poor are still underserved and far from nancially included, with the most poverty-stricken communities outside the ambit of todays micronance charge. HSBCs vision is to enable the most disenfranchised rural poor

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women to rise up the learning curve from consumption borrowers to micro-entrepreneurs. There is also an imminent need to bolster microlending with capacity-building activities and investment, with a view toward making the utilization of borrowed money more efcient and sustainable in order to create visible, high-impact livelihood strategies for these women. Toward this end, HSBC in India has engaged in several partnerships with other organizations to provide nancial education and build the capacities of poor youth and women so that they can become sustained and successful entrepreneurs and participate in the formal economy. These HSBC partnerships operate in 18 districts in the two large Indian states of Maharashtra and Gujarat, and cover more than 10,000 rural poor women.

fers skill-building courses in screen printing; how to make oral bouquets, cotton bags, blankets, leather bags, and blouses; basic sewing and dress making; household equipment repair; photo lamination; fast-food preparation; basic computer skills; the English language; and career guidance. The business school creates an inclusive platform through its locally and culturally sensitive policies: no restrictions on age, affordable courses, timelines adapted to womens needs, condence-building incorporated into all courses, practical knowledge, low start-up costs for new businesses, and support for product marketing and sales. Since its opening in December 2006, the HSBC Manndeshi Business School for Rural Women has delivered 17 different courses and trained 5,987 rural poor women, with more than 60 percent of them starting their own businesses. The emphasis on livelihood and self-condence has also had other direct social benets for the women, including an increase in daily average income, improved daily meal constitution with more nutrition, and enhanced status and respect within the family and community. To further the cause of institutional inclusion, HSBC has also established a correspondent banking relationship with the Manndeshi Bank, thus bringing the rural bank into the mainstream-banking fold. The combination of micronancing and capacity building through this multistakeholder partnership has enabled many women in the community, such as Aruna Gaikwad, to become independent entrepreneurs. Aruna began to invest in her business as a vegetable vendor, starting with a small loan of Rs. 5,000 ($109) in 2004. With continued investment, including a loan of Rs. 100,000 ($2,200) in 2006, she expanded her business to fruits and bought a mobile phone, which made it easier to contact and develop customers in nearby towns and villages. She was soon supplying fruits and vegetables to other market merchants, which increased her total weekly sales to 6,000 pieces.

HSBC in India has engaged in several partnerships with other organizations to provide nancial education and build the capacities of poor youth and women so that they can become sustained and successful entrepreneurs and participate in the formal economy.
HSBC Manndeshi Business School for Rural Women

HSBC Manndeshi Business School for Rural Women, in the Satara district of the western Indian state of Maharashtra, is a unique multistakeholder collaboration among communities, the local bank, the local NGO, and a mainstream corporate bank, HSBC in India. Its mission is to equip young girls who have dropped out of school and women with no or limited formal education with the training and knowledge to run their own businesses. The schools extensive curriculum, which is based on a needs assessment of the local economy and the market potential therein, focuses on nancial literacy, marketing, technical skills, negotiation skills, and condence-building measures. It of-

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The mother of three and just 30 years old, Aruna is also now a collection agent for Manndeshi Bank, and she upgrades her business skills by attending nancial literacy classes at HSBC Manndeshi Business School for Rural Women. Aruna says that the marketing module has greatly helped her to promote her business because it taught her about customer relations and how to sell and negotiate. Her weekly income has increased from an average of Rs. 200 ($4.37) in 2004 to Rs. 1,200 ($26). As further demonstration of a strong instinct for business, Aruna used her loans to also buy a piece of land, which she later sold for a large prot. For the future, she plans to build a house and invest in her childrens education.
HSBC RUDI Managers School

members improve the marketability of their products by teaching them managerial and leadership skills and advanced production techniques, and by disseminating information on projected supply and demand. The school has created many women entrepreneurs, who in turn have beneted their local communities in numerous ways. Among them is Manjulaben Babulal Shah, who lives in Degam village of Patadi block of Surendranagar district. Manjulabens husband did some stitching and casual labor as the only earning member in the family until he suddenly collapsed due to a heart attack, leaving Manjulaben with ve children to look after, the youngest just six months old. Manjulaben had never worked outside of the home, and now the entire responsibility for supporting the family fell to her. She started doing household work in other peoples homes, which earned her only Rs. 100 ($2) each month, not nearly enough to feed her children, who would go days without a square meal. Things had become very difcult for her. Once Manjulaben connected with SEWA, she began to sell to other villagers the products made by women attending the HSBC RUDI Managers School. After using her house as a base of operations for a year, her monthly sales now average Rs. 30,00040,000 ($656875), which earns her a monthly income of Rs. 2,0002,500 ($2255). Manjulaben is able to deposit Rs. 20 ($0.44) a month in an account as a member of the SEWA savings group; has purchased insurance, a sign of her growing nancial knowledge; and is now able to send one of her sons to study at a nearby school. With growing condence in her business acumen, Manjulaben recently took out a microloan from the district association to purchase and resell cattle feed to other members of her villagefeed that helps to improve the quality and the quantity of milk the cattle produce.

Our work with the HSBC RUDI Managers School is helping create a new economic paradigm of linking poor rural producers with local markets, thus ensuring local economic growth and helping catalyze peoples purchasing power and a better quality of life. The promotion of buying/selling of local goods in local markets to be consumed by local citizens reduces migration of rural people to cities. With access to sustainable livelihood and hope of enhanced social and economical conditions, families can stay together.

Our work with the HSBC RUDI Managers School is helping create a new economic paradigm of linking poor rural producers with local markets, thus ensuring local economic growth and helping catalyze peoples purchasing power and a better quality of life.

HSBC in India partnered with SEWA (SelfEmployed Womens Association),4 to establish the HSBC RUDI Managers School, which is operated by SEWA Gram Mahila Haat in nine districts in Gujarat. The schools objective is to help SEWA

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HSBC Water-Based Livelihoods Model

Many development projects tend to separate nancial inclusion from environmental sustainability to the detriment of both goals and the long-term welfare of the community. HSBCs work with SHARE India in the state of Maharashtra involves an initiative that successfully integrates both goals by emphasizing water resources conservation and creating livelihoods at the bottom of the economic pyramid. The HSBC Water-Based Livelihoods Model seeks to revive the economic livelihood of villages through rainwater harvesting systems, the formation of selfhelp groups of women and men, and the creation of entrepreneurship and agricultural livelihood opportunities.

ciency in Indias micronance industry, which is still in the emerging stage, and bring to it the best practices of a transactional banking business in order to further extend its reach to more households without access to nancial services. Technology will undoubtedly play a huge role in helping micronance providers reach new customers and deliver their services electronically for improved efciency, accuracy, and increased transparency. For example, the explosive growth of mobile phones offers an opportunity to protably bank large numbers of the unbanked. According to estimates, more than two billion mobile users live in developing countries, and many of them do not currently have adequate access to nancial services. Conducting transactions with a mobile phone can dramatically reduce transaction costs. With the objective of greater nancial transparency and transaction efciency through a technology solution, HSBC in India launched an E-dairy card earlier in 2008 to enhance banking and payment/collection efciency for milk producers in rural Haryana (Northern India). HSBC manages the payments between milk producers and the milk federations to whom they sell their products. The digital E-dairy card makes it possible to automate timeconsuming manual payments processing, in turn allowing milk producers to receive their payments in a much shorter time. HSBC in India plans to take similar initiatives all across the nation.

The HSBC Water-Based Livelihoods Model seeks to revive the economic livelihood of villages through rainwater harvesting systems, the formation of selfhelp groups of women and men, and the creation of entrepreneurship and agricultural livelihood opportunities.

Other Financial Inclusion Initiatives HSBC in India is also exploring partnerships with various government and related agencies to bring about solutions for nancial inclusion to the countrys poor and underserved. In addition, it facilitates forums and platforms to inuence decision makers, disseminate sector information, and create a dialogue between policymakers, academia, and industry representatives. This year, HSBC in India has been instrumental in launching two signature forums in nancial inclusion, The Economic Times Financial Inclusion Summit and the FICCI5 Conference on Financial Inclusion for Sustainable Development. The Future Focus In addition to capacity building, HSBC will be looking for opportunities to improve operational ef-

Conclusion For any bank or nancial services institution, longterm growth is dependent on the manner in which it creatively accesses untapped markets. HSBC is no exception, and its rm belief in inclusion and sustainability, translated into direct support of both micronance and nancial literacy, has helped rural women in India and elsewhere acquire credit and equip themselves with the nancial skills and entrepreneurial know-how to build successful business

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platforms that make dignied economic opportunities and self-sufciency a possibility. An intervention of this nature at the grassroots level is an innovative mechanism to propel capital assimilation, local entrepreneurship, and economic growth for entire communities. Such capacity building and intense personal empowerment, as demonstrated by the case studies of the women in this article, are beginning to change sustainable banking at the bottom of the pyramid from dream to reality.

leading players in domestic and export factoring, and one of the leading banks for an increasing number of SMEs. More than 5 percent of Indias exports and imports pass through HSBC in Indias banking channels. 3. Shankar, S. (2006). Transaction costs in group micro credit in India: Case studies of three micro nance institutions. Institute for Financial Management and Research, Centre for Micro Finance, Working Paper Series. 4. SEWA is Indias largest movement of more than 700,000 self-employed women working in the informal economy in the urban and rural areas of the western India state of Gujarat. 5. Federation of Indian Chambers of Commerce and Industries, Indias premier industry federation.

Notes
1. Consultative Group to Assist the Poor, What do we know about the impact of micronance? Accessed on September 26, 2008, from http://www.cgap.org/p/site/c/template.rc/ 1.26.1306. 2. HSBC in India also has a fully enabled and established insurance advisory of international standards. It is one of the Pramod Marar is senior vice president and head of micronance and Balaji S. Iyer is assistant vice president of micronance for The Hongkong and Shanghai Banking Corporation Limited in Mumbai, India, and Unmesh Brahme is senior vice president of corporate sustainability for The Hongkong and Shanghai Banking Corporation Limited in Mumbai, India.

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DOI: 10.1002/joe

Global Business and Organizational Excellence