By Prasenjit Das

Kolkata-based Bandhan is one of the reputed names in the micro-finance sector in India. The organisation, which started with only three professionals and a branch office in 2002, is today operational in 17 Indian states through a network of 1,550 branches and with more than 3 million clients. In 2007, Bandhan was hailed as the best performing micro-finance institution (MFI) in India and globally the second best by the Forbes magazine. The MFI has also been felicitated with the ‘Pro Poor Innovation Challenge Award’ in 2006, the ‘Skoch Challenger Award’ for financial inclusion in 2008 and the ‘Microfinance India Award 2009’ in the category ‘Institution of the year.’

Following are excerpts of the Bizxchange interview with Chandra Shekhar Ghosh, chairman and managing director of Bandhan:

Tell us about your inspiration that led to the birth of Bandhan.

Poverty, especially in rural areas, is a major issue in India. The urge to help the poor stimulated me to set up Bandhan. Providing food and security to children and women is of prime importance to ensure that they lead a decent life. When it comes to individuals, most of our borrowers are women, who are someway or the other deprived by the society. With the help of micro-credit, these women are able to look after their family and children.

Bandhan started as a three-member outfit in 2002. What challenges did you face during the initial years and how did you overcome them?

As an NGO, getting funds was the biggest challenge we faced in the initial days. With not much financial support from external sources, I exhausted all my personal sources to create a corpus for setting up the organisation. Later, we received funds from the Small Industries Development Bank of India, Ahmedabad-based Friends of Women’s World Banking and HDFC Bank, among others.

Secondly, getting adequate workforce was a problem, as earlier not many people were interested to work with an NGO. Even after publishing advertisements about job openings we received very few applications. Now, we have decided to recruit our staff from poor families and train them rigorously to help them become professionally capable. We approach them directly and brief them about the job offer.

Around the time we emerged in the Indian business scene, there were many chit fund organisations operating. As some of them turned out to be fraudulent, people initially suspected that we might have the same intention. But they soon realised that we are a genuine entity, as we do not take any deposits. There is only lending facility available at Bandhan. We have helped our customers to build the habit of repaying their loans, which has further built our credibility.

What do you think has led to Bandhan’s huge success in the field of micro-finance?

There are a few factors that we had decided not to compromise with from day one, which I think has made us what we are today. The factors are as follows:

a) Capacity building of staff
b) Work as a team with decisions being taken by the team
c) Ensuring good behaviour and conduct
d) Emphasising that we are working for social bonding, not for money
e) Our gradual reduction of interest rates every 2-3 years since our inception.

Besides lending to individuals, Bandhan also extends credit to MSMEs. Elaborate with an example how Bandhan’s lending facilities have helped one of your MSME clients to improve its business.

Back in 2002, budding entrepreneurs approached us with loan requirements of Rs 1,000-2,000. Now, capacity of small enterprises has grown, but most of them do not get adequate loans from banks or do not have access to banks, so they approach us. There was one such borrower, who started taking loans from us 6 years ago with an initial credit of Rs 3,000. Presently, her loan outstanding stands at Rs 35,000 and she is in need for more credit, as today she runs a pharma business with two MBA professionals working under her!

With MSMEs developing, we are also extending necessary support to them. Apart from credit support, we also educate them about the appropriate business strategy they should adopt to make their business a success.

What would be your five advices to a start-up entrepreneur?

a) Willingness in the positive sense – to overcome obstacles and negate discouragements
b) Not to have an authoritarian attitude with the staff. The leader must set an example for others to follow   
c) Collective decision-making
d) Transparency should be ascertained
e) Ensuring cost-cutting right from the beginning.

Where do you want to see your company 5 years from now?

In the next 5 years, we aim to reach out to eight million families with our micro-credit offerings from the present three million. Also, we intend to provide numerous social service programmes such as free food, health care and the like. We expect more people to join our ‘Unemployed youth programme’, under which we provide job placements to youngsters in different companies. Besides, we have been providing driving training to many poor women, which has helped them get jobs as drivers in cars run by travel agencies. We also impart spoken English and karate training for the purpose of security of these women drivers.