Starting with Rs 2 lakh, he built a Rs 5,000-cr business!

What sets Bandhan apart is its firm belief in the loyalty of the poor. Today, Bandhan boasts of over 2,000 branches in 22 states, 13,000 employees and close to 54 lakh (5.4 million) clients.

“Some of the bouquets that you see here are really special."

“For, they have been sent by those banks and financial organisations that once refused to grant me loans,” Bandhan Financial Services Pvt. Ltd chief executive officer-cum managing director Chandra Shekhar Ghosh told rediff.com during an interview at his swanky Rajarhat office in the eastern fringe of Kolkata on a hot summer afternoon.

“My path of struggle was lengthy and tough but I had no option but to win."

“The only other alternative was to commit suicide as I had put everything at stake for Bandhan”, Ghosh recollected.

“This arduous journey had its pain but it taught me a lot. I learnt that to run a business successfully, especially in the money market, apart from capital and hard labour, it was essential to win people’s trust.”

. . .

Inception

Ghosh started the micro-lending unit Bandhan in 2001 with only two employees in Howrah.

He had only Rs 200,000 as capital.

Today, Bandhan boasts of over 2,000 branches in 22 states, 13,000 employees and close to 54 lakh (5.4 million) clients.

At present, Bandhan’s portfolio stands at Rs 5,000 crore (Rs 50 billion).

A new feather was added to his cap when Reserve Bank of India gave in-principle approval to Bandhan to start a new bank.

Bandhan won over 23 other applicants, including biggies like Anil Ambani's Reliance Capital, Aditya Birla Group, and Larsen & Toubro.

The approval will be valid for 18 months, during which Bandhan will have to comply with rules stipulated by the RBI.

If everything goes well, Bandhan will be the first bank in Eastern India post independence with its first branch in Kolkata.

. . .

Early years of struggle

Born at Bishalgarh near Agartala in a low middle-class family, Ghosh would help out at his family-owned sweet shop before rushing for school at 11 a.m.

After graduation, he lost his father and to sustain his family had to take up a low-paying job at a non-government organisation.

Work took him to remote villages where he could witness how the people struggled to make the both ends meet.

Poverty compelled them to borrow from moneylenders and soon the noose of a very high rate of interest tightened around their necks.

Ghosh wanted to do something for the poor, wanted to set up a lending unit that would give them easy access to money at easier rates.

The idea of Bandhan was conceived.

But family compulsions forced him to continue with his NGO job.

He wasn’t happy.

Ghosh kept switching jobs.

And in 2001, he left his low-paying nine-to-five work for good and launched Bandhan.

. . .

Bandhan’s initial capital: Rs 200,000 only!

Ghosh started Bandhan with Rs 200,000 only.

He borrowed Rs 1,75,000 from moneylenders at 7.5 per cent interest per month while his sister lent him the rest Rs 25,000.

With this meagre amount of money, Ghosh and two of his colleagues would cycle around villages surrounding two of their offices at Bagnan and Konnagar to convince people to borrow from them to set up small businesses.

. . .

Challenges

“People would participate in the first meeting in large numbers but in the second and third occasions, there would be a huge dropout,” Ghosh told rediff.com

“They couldn’t trust us, they failed to understand why someone would be so keen to lend them money,” he added.

“Our motto was to offer loans mostly to women so that they could be empowered and could contribute to their family income.”

Gradually, thanks to the Bandhan team’s persistence, villagers started borrowing and within one year, Bandhan spent the entire capital of Rs 200,000.

“That was the most difficult stage of our business,” the Bandhan CMD said.

“We did not know how to get money for the next phase. I approached Small Industries Development Bank of India. But in the first visit, I was not even offered a chair to sit at the reception of SIDBI’s office in Beckbagan, central Kolkata,” Ghosh smiled

"On the third visit, I got a chair. I started visiting the SIDBI office every day thereafter, put forth my proposal over and over again, waited for hours. Finally, my patience paid off."

“SIDBI granted Bandhan a loan of Rs 25 lakhs (Rs 2.5 million) in 2002. It was a major breakthrough and since then we did not look back”, the Bandhan chief said.

. . .

Mistrust among banks, financial organisations

Bandhan’s tale of growth was fraught with refusals and mistrust among banks and other financial organisations.

In 2005, Ghosh approached a number of banks with a home loan application but in vain.

That was not all.

When he knocked on the door of a reputed audit firm to get Bandhan's accounts audited, his plea was turned down as well.

“Ironically, now 34 banks and financial organisations lend money to Bandhan,” a beaming Ghosh told rediff.com.

“And we appointed the same audit firm to check our accounts in 2009,” he said.

. . .

3 big breaks

Patience was bitter but it bore fruit for Bandhan first when Small Industries Development Bank of India’s granted it a loan of Rs 25 lakhs (Rs 2.5 million) in 2002.

Sidbi is now a shareholder in Bandhan.

Success after that became a way of life for this micro-finance organisation.

In 2007, Ashoka, global organisation founded by McKinsey consultant Bill Drayton that promotes innovative social entrepreneurship, selected Ghosh as a senior fellow.

In 2011, the World Bank's affiliate International Finance Corporation helped Bandhan with funding and eventually became a shareholder.

. . .

Services

Bandhan offers both business and non-business loans.

Business loans @ 22.9% per annum reducing rate of interest consist of four categories:

• Suchana (micro loan): Rs 1,000 to Rs 15,000 for low-income group women
• Srishti (micro enterprise loan): Rs 16,000 to Rs 50,000 for consumers who wish to expand their enterprise
• Samriddhi (micro, small and medium enterprise loan): Rs 51,000 to Rs 5,00,000 for potential entrepreneurs
• Fisheries loan: Rs 10,000 to Rs 1,00,000 given to farmers engaged in pisiculture

Non-business loans @ 12% per annum reducing rate of interest consist of two categories:

• Suraksha (health loan): Rs 1,000 to Rs 10,000 to meet emergency health and sanitation needs of the borrower, her spouse and children
• Sushiksha (education loan): Rs 1,000 to Rs 10,000 for poor children

Other services that Bandhan offers include:

1. Pension for the unorganised sector in association with Pension Fund Regulatory & Development Authority, Ministry of Finance, government of India.

The scheme facilitates enrollment of poor people through 'aggregators' identified by PFRDA.

Bandhan is one of the aggregators.

In October 2010, at a ceremony at Kirnahar, West Bengal, Pranab Mukherjee, then Union Minister, distributed Permanent Retirement Account number Cards to Bandhan's borrowers.

2. Insurance -- Bandhan provides insurance to all borrowers and their spouses.

3. Remittance -- Bandhan has teamed up with Western Union to facilitate international money transfer.

...

Success stories

Saberin Khatoon (left), a resident of Salkia, Howrah, owns a flourishing tailoring business today.

Her tailoring shop now has three machines, three employees and earns for her a monthly income of Rs 12,000.

Earlier, this unit barely survived and her husband had to work in a manufacturing unit in the morning and sell fruits in the evening.

But with a bandhan loan, Saberin’s family is now leading a much better life.

She is one of the oldest clients of Bandhan and her third loan for Rs 15,000 is under process.

From a rented house, Saberin’s family have moved in to their own home.

She managed to get her son admitted to an English medium school in the vicinity.

Saberin now can afford to dream a bright future.

Same is the case with Tumpa Makal (below) of Ultadanga.

A few years back, she was a non-descript housewife who could barely manage to cook two square meals a day for her family.

Her husband was the sole earning member.

She could not even imagine sending her two daughters to school.

Nudged by her neighbour, she took a Suchana loan of Rs 5,000 from Bandhan and started a business of selling fish at the Ultadanga market.

Soon her trade started giving returns.

Bandhan thereafter gave Tumpa three loans of Rs 8,000, 12,000 and 15,000 and with her business fetching profits, she managed to set up a meat shop as well.

Recently, Tumpa was granted a loan of Rs 20,000 by Bandhan.

She now works round the clock, is a major decision maker at home, sends her daughters to school and plans meticulously to expand her business.

. . .

Photographs of Saberin Khatoon, Tumpa Makal by Bandhan

Bandhan’s USP

What sets Bandhan apart is its firm belief in the loyalty of the poor.

“Having worked with poor women for years, I have learnt to trust them. They are generally prudent with money and are always eager to pay up their loans,” Bandhan CMD told rediff.com.

Though Bandhan’s growth has been enormous in the past few years, it has its feet firmly on the ground and still puts great stress on clients’ visits on a daily basis.

“Every day, our field staff meet 1 million people across India,” Ghosh said.

Moreover, Bandhan believes in frugality.

Its field staff stay in little dormitories tagged on to Bandhan offices across India.

“This helps us achieve a cost structure which hardly any other large microfinance organisation can match,” the CMD said.

“A rupee saved is a rupee earned,” he added.

“If we could build a dream business of Rs 5,000 crore (Rs 50 billion) starting with Rs 200,000, why can’t others?

“Our mission is to help the poor realise their dreams. Our bandhan (relation) with the people can never be severed.”

. . .