Monday, October 3, 2016



Price: Rs.499/-

 BANDHAN-Micro-Finance & Banking On A Shoe-String

New economic success stories from Bengal over the last three decades are rare. And ones that feature Bengalis running things successfully  are even more scarce. There are a few notable exceptions- Bandhan is one, then there’s Peerless, and the ABP Group.

But Bandhan, a little like Sahara without its recent crash and burn, run by a Bengali, initially out of Gorakhpur in UP, is a success story of a shoe-string operation grown huge.

But Bandhan has done it thus far, without sacrificing its early work ethos, culture, and good name, as a helper of millions of poor entrepreneurs, over more than a decade of its existence.

This book by Tamal Bandyopadhyay, earlier a Bhartia/Birla owned Mint journalist, who later became a Bandhan employee, dwells on the stamp of founder Chandra Shekhar Ghosh, originally from seemingly eternally Communist Tripura.

It also reads as a highly HR driven profile, of the poor people who manned Bandhan, and essentially knew how to help their own kind.

One key employee used to sell eggs for a 20 paise profit on each egg, for example, before joining Bandhan’s team. Ghosh himself could barely feed his family, and his father was a struggling sweet-meats seller in Agartala.

If anything comes closest to the oxymoron called Communist enterprise, then Bandhan micro-credit, grown into Bandhan Bank recently, in August 2015, is a good example.

It sought, from the very start, to displace the 730% p.a. charging, but  no-questions-asked-no-collateral/guarantor money-lenders; who would charge 1% to lend Rs. 500 for half-a-day.

Bandhan’s value proposition was that it offered an infinitely better deal, without taking formal deposits, and it actually took a risk on its customers by choosing them well, but believing in them.

The Sahara Group, by way of contrast, may have retained some of the “Managing Worker” pretensions from its early days in ‘para-banking’, as well as a pater familias air in the top man; but otherwise it grew into something of a corrupt monarchy, with very feudal North-Indian DNA.

Bandhan’s Ghosh however, probably modelled himself, albeit unconsciously, after the great Communist icons, much admired in Bengal, Lenin, Stalin, Mao, even ‘Jyoti Babu’.

By strange coincidence, Ghosh’s family originally came from Sonargaon, in Dhaka, the Bangladeshi ancestral home of Bengal’s longest-serving chief minister Jyoti Basu.

The ideologically Communist way of doing things - simply, at minimum cost, and with statist-style tight control, worked well for Bandhan, particularly in the grindingly poor semi-urban villages of Bengal, not far from Kolkata.

But, Bandhan microfinance really got its inspiration from the Bangladeshi pioneers, including the Grameen Bank, ASA, BRAC, and others.

 ASA, from Bangladesh, provided early ‘technical support’ to Bandhan micro-finance.

Dhaka was also where Ghosh had studied and graduated from. He had first gone to work with BRAC (Bangladesh Rehabilitation Assistance Committee), and this gave him a very good grounding on how to assist the very poor.

ASA wanted, as Bandhan grew, to take over 75% of its equity, in 2007. When this failed, ASA started out as a competitor instead, poaching many key Bandhan employees.  

However, it is Bandhan which grew out to become the world’s largest micro-finance company. This, even as the concept took root in Africa, Sharia ruled Western Asia, and South America as well.

Essentially there was, and is, a great opportunity both for micro-credit and formal small-retail banking in the East and North East. It was there waiting to be tapped, throughout the life of Bandhan microfinance, and now Bandhan Bank.

According to RBI data cited by Bandyopadhyay: ‘as on 31 march 2015, the east accounts for 16 per cent and the north-east only 2.6 per cent’, of ‘126,000 bank branches’.

In Bengal however, recent scandals concerning both unscrupulous NBFCs and Chit Funds, tell us how the vacuum, between regulatory walls and being under-banked, was filled; but not, clearly, to the benefit of the numerous poor, easily duped depositors!   

Though Bandhan is now a ‘universal bank’, it will continue with its USP of giving ‘small loans’, but now, by encouraging ‘ deposits from small savers’. This is something it could not do legally, as micro-creditors are not allowed to take formal deposits.

Bandhan used to form ‘groups’ of people paying Rs. 5 a day for 40  days, and when this Rs. 200 was received, it would advance a loan of Rs. 1,000/-. 

It soon clocked up 195 borrowers out of two branches. Later, it got an early loan from SIDBI to enlarge its operations, and open at more locations.

In 2002, its first year of operation as a not-for-profit NGO, Bandhan had 2 branches in Bengal, 512 borrowers, and had disbursed loans worth Rs. 3,50,000.

Later, in 2006, as its growth engine beat their own projections, Bandhan converted itself into a ‘for-profit’ NBFC, and spread its wings to other states in the country.

In 2015, when Bandhan Bank was launched, it had 2,022 branches, 6.7 million borrowers, and a ‘loan book of Rs. 10,500 crores.’

The universal banking avatar however, started with 501 branches, a record in the banking industry globally, writes Bandyopadhyay.  And it was a high -technology driven, IT woven collective.

Tamal Bandyopadhyay ends the book with a review of some other players in the micro-finance space who mostly lost their way after a promising mid-heaven. It only serves to underline the enduring nature of the Bandhan success.

Of course, Chandra Shekhar Ghosh no longer scours the countryside on a motorcycle to spot possible branch locations and customer clusters. He now occupies a corner office in a large corporate HQ.  He also graduated to a Toyota Fortuner, some time ago. But now, Ghosh is driven around in a spanking new Land Rover Discovery.

For: The Sunday Pioneer, AGENDA, BOOKS
(939 words)
October 3rd, 2016

Gautam Mukherjee

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