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BANDHAN MICROFINANCE: IS TRANSFORMATION TO BANK
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STATUS REQUIRED?
Sujit Raghunathrao Jagadale and Debasish Maitra wrote this case solely to provide material for class discussion. The authors do
not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain
names and other identifying information to protect confidentiality.
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Copyright © 2014, Richard Ivey School of Business Foundation Version: 2014-07-16
Even as the monsoonal rains continued to drown the city of Kolkata in mid-September 2013, the Kolkata
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head office of Bandhan Financial Services Pvt. Ltd (Bandhan), one of the largest and most profitable 1
microfinance institutions (MFIs) in India, remained calm. Founder chairman and managing director
Chandra Shekhar Ghosh was busy in discussions with his management team. “Small is beautiful, but big
is necessary,” said Ghosh, revealing the rationale behind the creation of Bandhan. Taking a look at
Banker to the Poor, a book by Nobel Laureate and his Grameen Bank counterpart Dr. Muhammad Yunus,
he spoke with customary cheer, “I understand we are the largest microfinance institution in India, but… is
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it enough to be number one in the microfinance space?” He had reason to express pride in his
organization rising from nowhere to being the largest in India. Yet he was not content.
The entire discussion centered on Andhra Pradesh (a province in India) and the crisis involving Indian
microfinance. A phone call received by Ronendra Chowdhury, general manager of operations, interrupted
the meeting. The content of the conversation set the entire team rethinking. Was the cost of borrowed
funds for fuelling the business growth by the current business model sustainable? Could one become
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overly dependent on the market for funds? Was the present business growth sustainable? Was there a way
to eliminate the vulnerabilities associated with the present business model? “We cannot address the issues
with the help of traditional business models,” said Ghosh. Turning towards the team, he asked, “Do you
people remember the then-finance minister’s declaration a couple of years back regarding the issuance of
banking licence policy?” Even as the team visibly struggled to comprehend the import of his question, he
said, “No worries, we need to strike the right balance between financial independence, growth,
profitability and the vision of Bandhan; we need to think differently.” Were they preparing for a
revolutionary business transformation?
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MICROFINANCE: GLOBAL LANDSCAPE
Worldwide, microfinance institutions were organized into five categories: cooperatives, not-for-profit
non-government organizations (NGOs), government banks, non-banking financial institutions (NBFIs) 2
and microfinance banks. It was NBFIs that mainly dominated the microfinance landscape. NGOs had
upgraded their status to banking or non-banking financial institutions in order to be able to tap different
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sources of funding (e.g., banks could take deposits) and distribute profits. BancoSol in Bolivia was among
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the first to pursue such upgrading in 1992. 3 Sources of funding for these different kinds of organizations
were contingent on their legal form and included mainly donations, equity capital, borrowings and
deposits. In the global context, the commercialization of the microfinance industry had led to an increase
in NBFI-type MFIs’ leverage, as was evident in their debt-to-equity ratio tripling from 2002 to 2010. 4 In
global terms, the legal impediments encountered when accepting deposits caused the vulnerability of
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NBFIs.
MICROFINANCE: INDIAN LANDSCAPE
The Indian microfinance landscape was a multi-organizational montage of cooperatives, NGO-MFIs,

non-banking finance company (NBFC)-MFIs and Self Help Group 5-bank linkage programs. From 2005
onwards, NBFC-MFIs had started dominating the commercial microfinance space in India. However, it
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had never been smooth sailing for this fledgling sector. The loan crisis in Andhra Pradesh (AP) province
dominated the Indian microfinance market in fiscal year 2010. The crisis started late in 2010 with reports
of MFI loan officers harassing borrowers to repay loans. It culminated with an AP state ordinance
effectively halting loan repayments in India’s largest microfinance market. 6 With recoveries dipping to an
all-time low of 10 per cent, the sector, which boasted a portfolio at risk (PAR) of less than one per cent,
came to a grinding halt. What was more, the banks refused to pump in fresh debt. 7 The largest funders of
MFIs, the banks, became selective and indulged in cherry-picking. Bank lending to the sector, close to
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INR 220 billion before the crisis, dropped to INR 130–140 billion after. 8 The visible effects of fresh
capital squeezing included client outreach dropping from 31.8 million in 2010–2011 to 20.8 million in
2011–2012. The loan portfolio also came down from INR 215.56 billion in 2011 to INR 209.13 billion in
2012 9 (see Exhibits 1 and 2). Coping behaviours included shutting down operations, scaling down
businesses, diversifying into other businesses (such as gold loans, small and medium enterprise finance,
vehicle finance, etc.), merging and consolidating. A series of measures followed the ordinance, including
setting up the Malegam Committee 10 and its report along with the Reserve Bank of India (RBI, the central
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bank of the country), and interventions to effectively regularize and govern the struggling sector. In the
aftermath of the global financial crisis, microfinance began to enter a more mature and sustainable growth
phase. 11 Indian microfinance showed mild signs of recovery on account of an improving regulatory
environment and improvement in governance. 12 According to Microfinance India’s “State of the Sector
Report 2012,” India still remained one of the largest and most promising markets for financial inclusion
in the world. 13
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BEGINNING OF THE BUSINESS
Regarding the genesis of Bandhan, Ghosh articulated:
Bandhan was a quintessence of organizational evolution. Its journey had been eventful but
nonetheless very challenging. I started the NGO in 2001; the activities of the NGO were
charitable and issue-based. Sustainability was a big challenge as mere charitable activities were
insufficient to haul people out of poverty. Honing entrepreneurial capabilities of the poor was the
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best possible option to help them break the shackles of poverty. I decided to venture into
microfinancing activities, the rarest resource that the entrepreneurial poor would get. That was the
time when the buzz that the poor were ‘unbankable’ was loud. I wanted to prove the contrary. If
neighbouring Bangladesh 14 can do it, why can’t we? So, with the help of INR 0.2 million, I
opened the first branch at Konnagar.
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Bandhan Financial Services Pvt. Ltd. (BFSPL termed as Bandhan) was the current name of the former
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Ganga Niryat Pvt. Ltd. (GNPL), a registered NBFC set up in 1995. The current promoters of Bandhan
took over the NBFC in May 2006 and commenced microcredit activities in the northeastern states of India
in June 2006. In April 2007, GNPL was renamed Bandhan. In April 2009, the microcredit portfolio of the
related entity of the group — Bandhan Konnagar — was transferred to Bandhan. Bandhan Konnagar, a
society registered under the West Bengal Societies Registration Act 1961, had been set up in 2001 and
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had worked both as an NGO and an MFI prior to the transfer of MFI activities to Bandhan.15
PRESENT STATUS
Bandhan was registered with the Reserve Bank of India as a non-deposit-taking NBFC. Promoters and
associates, public charitable trusts and institutional investors (SIDBI and IFC) held around 23.73 per cent,
55.71 per cent and 20.56 per cent of total shares, respectively. 16 Bandhan had managed to reach out to
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rural and urban spaces throughout India. It was operating in 2,016 branches in 22 states and union
territories (see Exhibit 3). Of the 245 districts in which Bandhan had a portfolio, 146 were under-
banked, 17 meaning 90 per cent of the clientele did not have bank accounts.18 However, these districts were
mostly concentrated in West Bengal, which accounted for 49 per cent of outstanding loans. 19 Bandhan
had grown by leaps and bounds in the context of branch numbers and the amount of loans disbursed and
outstanding (see Exhibits 4 and 5). It had grown from an organization of 12 staff and 1,143 borrowers to
currently around 13,000 staff, 5.2 million borrowers, 9.3 million insurance subscribers and 0.2 million
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pension scheme subscribers in 2012–2013. 20 Bandhan’s funding portfolio (see Exhibit 6) included a
number of different sources from the private and public sector 21 and reflected the financial cost that it
incurred every year. Nationalized banks funded 69 per cent of its portfolio (see Exhibit 6).
BUSINESS MODEL
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Bandhan functioned with a mission “to reduce socio-economic poverty sustainably and create
employment by targeting low-income households across the country through providing cost-effective
sustainable financial and non-financial services emphasizing on social securities.” 22 It provided loans and
other financial services to individual members of groups for undertaking various income-generating
activities and thereby ensuring their financial security. Bandhan had distinct functional business units
with clearly demarcated roles and responsibilities to look after its operational needs (see Exhibit 7).
Nonetheless, the branch office/unit formed the backbone of service delivery. To deliver microfinance
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services, the “individual lending through group formation” model had been adopted. While loans were
disbursed at the branch office, the repayment of installments occurred at group meetings. Typically, a
branch comprised five credit officers, 125 groups and 3,000 borrowers. Six to seven branches formed a
region, which was headed by a regional manager. A division, headed by a divisional manager, comprised
seven to eight regions. The organization followed the circle office concept and there were four in
Mumbai, Delhi, Patna and Guwahati. Each worked similar to a local head office. A circle office
comprised five to six divisions and was headed by senior operational personnel. Branches were
empowered to handle multiple functions such as field verification, appraisal, disbursement, collection and
delinquency management. 23
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Functioning of the Branches
Bandhan followed a group-based approach for extending financial services. The loans provided to
customers were unsecured loans and were not backed by any collateral. Therefore, the involvement of a
co-borrower reduced the risk for Bandhan because the co-borrower put peer pressure on the borrower,
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which encouraged them to pay on time. The loans were repaid on a weekly, fortnightly or monthly basis.
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A branch was managed by a branch manager, five credit officers (CO) and a cashier. The branches
followed a well-defined process from area selection to cash reconciliation (see Exhibit 8).
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Customer Evaluation and Disbursement, Loan Collection and Overdue Management Process
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Appraisal was done by the field CO to check the borrower’s eligibility. Credit officers were privy to
requisite local knowledge and were not recruited from the same region in order to avoid bias. Individual
borrowers were screened by existing borrowers, then by the credit officer and finally by the branch loan
committee of Bandhan. Once a favourable appraisal was done, the loan was disbursed at the branch, not at
the group meeting venue. It was mandatory for borrowers to give out a receipt at the time of
disbursement. Loan books were provided to borrowers and a loan register was maintained at the group
level. Loan repayment commenced the following week on a day and time predetermined by members as
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per their convenience. The primary responsibility of collecting repayment installments from borrowers
was with the CO. They collected repayment installments with the help of a demand collection sheet and
cross-entered the amount into a record book with the borrowers. The CO gave the money to the cashier,
who, in turn, conducted cash reconciliation according to the weekly collection sheet submitted by each
CO. The branch manager did the verification at the end of the day by tallying collections and the demand
sheet. To collect overdue loans, a set process was followed depending on the duration of the loans
overdue.
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Bandhan had institutionalized mechanisms to avoid multiple lending and thereby avoid excess
indebtedness among customers. The end use of a loan was verified by independent departments such as
internal audit and research and development.
Customer Offerings
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Bandhan had an array of products on offer for its customers. Its product offering went beyond
microcredit. Loan products could be categorized as business and other loans. Six types of loan products
were offered by Bandhan (see Exhibit 9). Bandhan had tied up with Life Insurance Corporation of India
to cover all its existing clients and spouses for life insurance coverage. Bandhan’s tie-up with Western
Union, a global leader in money transfer services, had helped borrowers avail of the latter’s money
remittance services at affordable costs. Pension services were offered to its borrowers working in the
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unorganized sector in association with the Pension Fund Regulatory and Development Authority
(PFRDA) of India’s Ministry of Finance. Bandhan worked as an intermediary and helped the PFRDA
take the National Pension Scheme (NPS) to its borrowers.
While interacting with Rashima Banosa, one of the borrowers, during field work in September 2013, it
was revealed to the case authors that microfinance customers had diverse needs in financial products.
Banosa stressed the need for savings products. She admitted that microfinance customers did not have the
resources to save money or the incentives for doing so. Interest earned on savings would help them
indirectly reduce their borrowing cost. Also, having no access to banks made it difficult for them to
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access health insurance and other insurance products.
Management Information System
Bandhan had a well-built IT infrastructure in place with accounts and loan portfolio information
maintained at the branch, regional and head office levels. All branches were computerized and had been
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moved to MFSOL, microfinance solution software built in-house. The software was used in an offline
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mode (see Exhibit 10) and Bandhan envisioned a web-based IT system in the near future. 26
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Managing Risks
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To manage cash, each branch maintained its bank account. Fund demand statements were prepared on a
daily, weekly, monthly and six-monthly basis by the branch manager. The regional office made a
consolidated statement before sending it to the head office for final approval. It was mandatory for branch
staff to maintain a cash balance of zero at the branch. Differences in the amount between the daily loan
disbursement and collection plan were deposited in the bank branch by the branch manager. This cash in
transit to the bank branch was insured against theft and other exigencies. The other aspect of risk
management was the functioning of internal controls. Bandhan had a strong audit team in place for
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overseeing the functioning of internal controls. The risk management team was headed by the general
manager (risk and internal audit) and reported directly to the audit subcommittee. Besides this, Bandhan
had a risk management committee, which met on the last Saturday of every month to look into crucial
matters and frame proactive policies to manage potential risks. 28 In July 2011, Bandhan established a
vigilance department headed by a chief vigilance officer (CVO) to play a proactive role in combating and
managing risks of various kinds. By September 2013, three vigilance cells had been established in the
different provinces and a fourth was in process. 29
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BANDHAN’S DIFFERENTIATORS AND COMPETITION
“We are a country of paradoxes,” said Ghosh in his deep voice, pointing towards the book An Uncertain
Glory 31 on his shelf. He was commenting on the question of defining Bandhan’s differentiators. He
continued, “Microfinance is not a mechanical business, it is from the soul; customers are needed to be
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given time. Our entire model is based on ‘simplicity’ and ‘customer centricity…A borrower does not
come just for a lower interest rate, they come for the relationship,” he said, summarizing Bandhan’s
differentiators.
Human Capital
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Training was the mainstay of human capital. Bandhan had a robust training infrastructure in place through
which human resources were trained for skills and to develop sensitivities towards customers. “Most of
our field staff were first-generation secure bread earners for their families,” confided the deputy general
manager of human resources (HR). Features of the Bandhan HR model included the following:
• Staff members were recruited from the same socio-economic background as customers.
• Residential model: Staff stayed in the branch premises, where they were provided with quasi-
furnished accommodation. Staff members were not posted in their home districts, but were placed at a
distance of around two hours by bus so that they could visit their homes every week.
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• Bandhan was entirely a field-based organization with just 165 staff manning the head office’s
operations.
• Bandhan’s differentiation was also reflected in its attrition rate, which was 12.76 per cent as against
the industry standard of 35 per cent. 32
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Organic Cells
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“Each Bandhan branch is a living cell — autonomous, independent, but organic; coming together, they
form an organization,” said Naveen Awatramani, the additional general manager of operations, insurance
and NPS-Lite. 33 These organic cells gave an unparalleled reach to Bandhan; 40 per cent of its branches
were located in unbanked areas.
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Building Customer Relationships
Referring to Bandhan’s illiterate and semi-literate customers, Awatramani said emotionally, “We give
them time and respect; they are called Didi (the elder sister). This helps us build our brand; our staff is
called ‘Bandhan Sir’ by our customers. The word Bandhan has become a synonym for microfinance;
other MFIs are called ‘Onno Bandhan’ (other).” “Bandhan Sir visiting us in a boat during monsoon floods
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is normal for us,” said a Bandhan client, of one of the branches of North 24 Parganas of West Bengal, to
one of the case authors. Bandhan was also known as “the organization on a bicycle.” Partha Sarathi Basu,
deputy general manager of HR, made the point that, “Providing loans to our credit officers for purchasing
bicycles instead of motorcycles, which is something our competitors do, underscores a conscious decision
based on the company’s ethos of maintaining human relations with the ground-level clients of Bandhan.
Credit officers use bicycles in the field with the intention of keeping costs low and tired COs sit with the
members for a longer time, which in turn helps to build the affinity with the borrowers.”
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Development Activities
“Culturally, we are a very different organization. Our positive engagement in the developmental space
with the communities we work with makes us stand different,” said Ghosh. Bandhan-Konnagar
(Bandhan), a not-for-profit arm of Bandhan, was registered under the West Bengal Societies Registration
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Act 1961. It was set up as an organization to assist the development of the poor, where five per cent of the
profit from microfinance activities was channelled to bring the poorest of the poor into the mainstream. It
organized an array of programs for targeting the hardcore poor. As of January 2014, developmental
programs were active in 41 states from nine states, covering 263 branches serving 3,991 villages and
1,213 towns. The total number of beneficiaries of these programs was 467,847. A dedicated staff of 695
personnel handled these programs. 34 For different programs run by Bandhan Konnagar, see Exhibit 11.
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Competition
Regarding present and future competition, Ghosh noted, “Traditional banks have a banking attitude,
Bandhan has a microfinance attitude, and our competition will be with banks in the microfinance business
and not with the banks with a traditional business outlook.” Bandhan had outperformed all other MFIs in
the industry (see Exhibit 12). In a newspaper interview, 35 Ghosh was reported to have said that his
organization was catering to the difficult unbanked segment and that for existing banks or other
companies to reach out to this populace was going to be a challenge. As far as offering banking services
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was concerned, the MFIs had already had a hands-on experience in conducting due diligence before
sanctioning credit and henceforth ensuring repayment from these loans. “Mobilizing deposits is going to
be a new area of work,” said Ghosh, who went on to say, “But I am sure the MFIs will pick up the
deposit-mobilizing abilities soon. MFIs are already planning to move towards the formal banking sector;
therefore, MFI growth cannot be hampered by banking activities.”
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PERFORMANCE AND FUTURE PLANS
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Bandhan had remained not only profitable but also scalable. It increased its net interest income from INR
60.9 million in 2007–2008 to INR 5.127 billion in 2012–2013. Profits also went up from INR 15.1
million in 2007–2008 to more than INR 2 billion in 2012–2013. The cost of funds that Bandhan incurred
throughout the years of its operations formed a significant proportion of its income (see Exhibit 13). Its
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total asset size also expanded from INR 558 million in 2007–2008 to over INR 50 billion in 2012–2013
(see Exhibit 14). The PAR (Portfolio at Risk > 30 days) showed that a smaller amount of the loan
installment was overdue after 30 days. Additionally, more than 99 per cent of loan advances were paid at
one time whenever it was extended (see Exhibit 15).
Bandhan’s performance was contingent on the external regulatory environment, as shown by the drop
Bandhan witnessed in its loan portfolio from May to June 2013 (see Exhibit 16). The drop in the growth
of its loan portfolio was the result of the recent guidelines by the central bank that NBFC-MFIs had to
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lengthen the repayment period for loans above INR 15,000 to 24 months. Prior to this, they used a 12
month period. This eventually led to a smaller ticket size of the loans. Additionally, existing borrowers
with loans of more than INR 15,000 were not permitted to take on new loans before 24 months.
Regarding the future plans of Bandhan, Ghosh said that his organization envisioned becoming a bank for
the unbanked. “As an NBFC-MFI, Bandhan is perennially dependent on banks for funds. Banks have the
advantage of accepting deposits from customers, which an NBFC-MFI does not have. This permanent
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source of funds lowers the financial cost of banks. Currently, on the other hand, MFIs have high interest
rates as their loan size is small and loans are unsecured; moreover, MFIs also provide doorstep service,
adding to the operational cost.” He extended his argument further, explaining that the cost of delivering
100 grams of brinjal, or eggplant, was always more than 100 kilograms of brinjal. “Our cost of borrowing
as an MFI is high,” he clarified. MFIs borrowed at around 13 to 16 per cent, whereas banks accepted
deposits at five per cent and even if five per cent operational costs were added then the interest rates of
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banks became very low. This lowered interest rate should uplift the poor earlier than expected. Ghosh
explained that there were four aspects to financial inclusion: credit, savings, insurance and remittances.
“Currently, we have credit, insurance and remittances services. Banking licences would help us provide
the savings services as well,” he said. Awatramani complemented the words of Ghosh by saying, “The
magic of Bandhan is in its volume; we have already achieved the critical mass and the next logical step is
a ‘barefoot bank’ for the unbanked.”
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CHALLENGES
Bandhan had been preparing to enter the banking sector. Recently, some bankers had been inducted into
the senior management team. Bandhan also had a chief vigilance officer (CVO) in place for fraud
management and control. Most importantly, Bandhan had developed a robust leadership development
program for mid-management professionals. The purpose of the program was to develop the field-based,
middle-level management staff of Bandhan for the leadership position. The intellectual resources for the
program were derived from the leading management schools and universities of India. Moreover, the case
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authors’ discussions with various management personnel brought forth various issues that could pose a
challenge for Bandhan in its quest to become a bank.
Bandhan field staff members were trained in microcredit activities but lacked the experience of savings
mobilization. The challenge was in converting them to “barefoot bankers.” Also, the integration of the
existing field staff with highly skilled bank branch employees was likely to be a tough task.
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Bandhan operated in remote locations, with 80 per cent of its operations in rural areas and 45 per cent in
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unbanked areas. 36 Rural India still happened to be largely under-connected and suffered huge power
shortages.
Giving Bandhan’s business an online capability could be a challenge. With Bandhan currently working in
an offline mode, data transfer and migration to the core banking system (CBS) would be a challenging
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task. On a more optimistic note, it had the option of outsourcing, which was low in cost (around INR
20,000 per month per branch, irrespective of the number of transactions). If Bandhan decided to go for in-
house CBS, it would have to incur a fixed and recurring cost, adding on to its total operational cost.37
The initial set-up cost for a branch was around INR 4 million in metros, INR 3 million in Tier I cities,
INR 2 million in Tier II cities, and INR 1 million in rural areas, with each branch taking 18 months on
average to break even. 38 In this situation, a bank branch would incur higher fixed and operational costs
compared to an MFI branch. Sustaining a high-cost banking model by banking with the unbanked could
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be a tough task, given that Bandhan had the lowest operational cost, at six to seven per cent, in the
microfinance industry. 39 A public-sector bank incurred an optimized cost of 41.53 per cent to reach its
rural customers through its own branch, for whom the observed cost was 11.25 per cent. A private-sector
bank, on the other hand, incurred an optimized cost of 32.07 per cent to reach its rural customers for
whom the observed cost was 14 per cent (see Exhibit 17).
Compliance with prudential banking norms to maintain a statutory liquidity ratio 40 (SLR) and cash
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reserve ratio 41 (CRR) would squeeze the expected capital funds out of deposits. Also, for a bank to
comply with the prudential norms of minimizing unsecured loan portfolios was a big challenge. Banks
were required to follow stringent regulations regarding opening branches in Tier I to III cities, whereas
the NBFCs were free to open branches anywhere. For major differences in banks and NBFCs, see Exhibit
18.
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NEW BANKING LICENCE POLICY
It was an established fact that the existing banking structure in India was elaborate and had been serving
the credit and banking services’ needs.42 However, there was now a need and scope for further growth in
the size and strength of the existing banking structure to cope with multiple objectives and demands
generated by various segments of the economy. In alignment with this, the Reserve Bank of India had
issued guidelines on new banking policy on February 22, 2013. The rationale behind granting licences to
new banks was to promote financial inclusion, support inclusive economic growth, and foster greater
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competition in the banking sector. 43
The new banking licence policy declared by the regulator did not receive an altogether favourable
response from the industry. Major players in the financial industry such as Mahindra & Mahindra
Financial Services decided to not apply for a bank licence, 44 while some players such as Tata Sons pulled
out of the banking licence race after initially applying one. 45 The primary factor for these adverse
reactions appeared to be the higher capital requirement in the form of the SLR and CRR, 46 as well as the
fact that they were also in the initial two to three years of beginning their operations. The fear was that the
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insistence of these two requirements could lock up sorely needed funds of NBFCs, which were now not
allowed to raise deposits from the public. 47 This would result in little room for margins and return on
equity. 48 The mobilization of deposits was expected to take time. New banks would also have to comply
with priority-sector lending, under which 40 per cent of the money loaned by banks had to go to certain
segments such as agriculture, small businesses, retail traders, professionals and self-employed individuals.
This was difficult to achieve for an NBFC with a large balance sheet. 49 Mahindra Finance, on the other
hand, was reported to have said that it was abandoning plans because the RBI guidelines “did not provide
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any flexibility for an NBFC and a bank to co-exist for a reasonable period of time.” 50 Some applicants
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also felt that the norm of compulsory listing in the first three years would be difficult for many of them to
meet. 51
A counterintuitive argument was put forward by SKS, India’s only listed microfinance company, for not
applying for the banking license. As per SKS, “It is heartening to see financial inclusion as the focus of
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the new bank licensing program. But we believe that to benefit from this opportunity, it is not necessary
to get converted into a bank.…Besides, the priority-sector lending target for new banks is kept at 40 per
cent from the very beginning. So, suddenly there will be a huge demand for priority-sector loans. We
believe this is the real opportunity and we can exploit it without being a bank. This is why we did not
apply for a banking license,” said a top SKS functionary. 52
An industry expert questioned whether MFIs had the wherewithal to function as banks. He confided,
“Merely being an MFI doesn’t qualify you for a bank. It doesn’t matter how big or small you are, because
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an MFI, by definition, deals with only one market segment. And when you are a bank, you will have to
deal with all segments of the economy. So, even if you are an INR 30,000 million MFI, you don’t have
any experience of dealing with me, leave alone corporate or larger clients. Therefore, being an MFI is no
big qualification.” 53
SHOULD BANDHAN GO FORWARD?

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“The microfinance industry worldwide is fraught with crises and the Indian microfinance industry is no
exception. To remain sustainably afloat requires the reinvention of the wheel,” maintained Ghosh. A
borrower by the name of Fatima Bibi commented on the flexibility of the present business model with
regard to its ease in providing doorstep services, yet she had some reservations about Bandhan becoming
a bank, fearing that Bandhan could stand to lose the flexibility of its service. In her words, “If Bandhan
becomes a bank, they will become a large entity; will they remember us? Will we keep getting microloan
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services at doorstep and other developmental support, seamlessly?” This discussion with Ghosh and the
senior management of Bandhan ended with some unanswered dilemmas, including the one mentioned by
Fatima Bibi. Other questions included: Did the present business require any change? Was Bandhan ready
to be a bank? How would it meet the various challenges for achieving business transformation?
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The authors are highly indebted to the CMD, the GM Operations, Finance head, the IT head and the HR head of
Bandhan for extending their time and support to write this case. The authors also thank Poulami Datta for her
painstaking co-ordination and guidance.
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EXHIBIT 1: LOAN PORTFOLIO OF MFIS
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Year Loan Portfolio
(in INR Billions)
2007 34.56
2008 59.54
2009 117.34
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2010 183.44
2011 215.56
2012 209.13
Source: “State of the Sector Report 2012,” Microfinance India,

www.microfinanceindia.org/uploads/news_attachments/20130724120608_state-of-the-sector-report-2012.pdf, accessed
December 15, 2013.
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EXHIBIT 2: MFI CLIENT OUTREACH (BORROWERS WITH OUTSTANDING ACCOUNTS IN
MILLIONS)
Year Client Outreach

2006–07 10
2007–08 14.1
2008–09 22.6
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2009–10 26.7
2010–11 31.8
2011–12 26.8
Source: “State of the Sector Report 2012,” Microfinance India,

December 15, 2013.
tC
EXHIBIT 3: GEOGRAPHICAL SPREAD OF BANDHAN’S BRANCHES AS OF FEBRUARY 2014
Number of Branches as on February, 2014

No
802
285
257
106 91 82 73 52 51 50 50 42 22
16 11 7 6 6 2 1 1 1 Number of Branches
Dadra and…
Himachal…
Madhya…
Maharashtra
Gujarat
Mizoram
Jharkhand
Punjab
West Bengal
Tripura
Rajasthan
Delhi
Odisha
Sikkim
Manipur
Assam
Uttar Pradesh
Uttarakhand
Chhattisgarh
Haryana
Meghalaya
Bihar
Do
Source: Figures as provided by the Bandhan Staff
Page 11 9B14N019
t
EXHIBIT 4: ANNUAL GROWTH IN NUMBER OF BANDHAN’S BRANCHES
os
2000 1803
1816
1553
1500 1553
rP
1000 1050
Number of Branches
675
500 502
318
155
0 2 10 54
yo
Source: Samar Datta et al., Assessing Impacts of Bandhan’s Micro-credit and related Development Interventions, accessed
at www.bandhan.org/report/Bandhans_micro_credit_report_2013.pdf, accessed December 20, 2013.
EXHIBIT 5: BANDHAN’S LOANS DISBURSED OVER THE YEARS

op
Year Cumulative Loans Loans Disbursed During the
Disbursed Year (in INR Millions)
(in INR Millions)
2002–03 2.75 2.4
2003–04 19.64 16.89
2004–05 147.16 127.52
2005–06 755.63 608.47
tC
2006–07 3,063.2 2,307.57

2007–08 9,130.77 6,067.57
2008–09 22,119.05 12,988.28
2009–10 49,299.05 27,180
2010–11 99,159.55 49,860.5
2011–12 161,707.35 62,547.8
2012–13 219,494.25 57,786.772
No
EXHIBIT 6: FUNDING PORTFOLIO OF BANDHAN
Entity Share in Bandhan’s Funding Portfolio (%)

Nationalized Banks 69
Private Banks 6
Do
Foreign Banks 5
Financial Institutions 2
Bandhan Financial Services Pvt. Ltd (Bandhan) 18
Page 12 9B14N019
t
EXHIBIT 7: BANDHAN’S ORGANOGRAM
os
rP
yo
op
tC
EXHIBIT 8: BRANCH FUNCTIONING OF BANDHAN

No
Do
Source: Prepared by case authors after discussion with branch staff on September 18, 2013.
Page 13 9B14N019
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EXHIBIT 9: LOAN PRODUCTS OF BANDHAN ON OFFER
os
Rate of Interest
Type of Offering in
Product Purpose Tenure (%) (Reducing Rationale
Loans INR
Balance Method)
Build income
1,000–
Suchana Microloan 12 months 22.9 base of poor
15,000
rP
women
Micro enterprise Help meet
16,000– loan (does not growing
Business Srishti 24 months 22.9
50,000 exceed INR 35,000 business
Loans
in first loan cycle) needs
Help meet
Micro small and
51,000– 12/18/24 growing
Samriddhi medium enterprise 22.9
500,000 months working
loan
capital needs
yo
Meet
1,000–
Suraksha Micro health loan 12 months 12 emergency
10,000
health needs
Meeting
Other education
1,000–
Loans Sushiksha Education loan 12 months 12 needs of
10,000
children of
borrowers
op
10,000– 12/24 For freshwater
Fisheries Pisciculture 22.9
100,000 months fish rearing
Source: “Loan,” Bandhan, www.bandhanmf.com/loan.aspx, accessed November 12, 2013.
EXHIBIT 10: FLOW OF INFORMATION TO HEAD OFFICE THROUGH MFSOL

tC
No
Do
at http://www.bandhan.org/report/Bandhans_micro_credit_report_2013.pdf, accessed December 20, 2013.
Page 14 9B14N019
t
EXHIBIT 11: DEVELOPMENTAL PROGRAMS OF BANDHAN KONNAGAR
os
Program Number of Beneficiaries as of January
2014
7,654
Targeting the Hardcore Poor (THP)
Bandhan Education Program Pre-primary school 9,151
rP
Non-normal primary schools 17,105
Bandhan Health Program (BHP) Health education 412,500
Kitchen gardening 233,000
Water and sanitation 1,083
Employing the Unemployed Program 3,317
Enterprise Development and Financial Literacy (six-month project) 2,000
Source: Table prepared by case authors from information derived from various development programs from
yo
www.bandhan.org/#, accessed February 28, 2014.
EXHIBIT 12: BANDHAN AND ITS COMPETITORS’ MARKET SHARE PERCENTAGES
Name of MFI Gross Loan Portfolio Amount of Loans Number of Clients

Disbursed
2011–12 2012–13 2011–12 2012–13 2011–12 2012–13
Bandhan 22 21 31 24 16 18
op
Spandana 16 14 7 7 15 14
Share 12 9 8 5 9 9
SKS 10 11 13 14 20 18
Equitas 4 5 3 5 5 6
Ujjivan 4 5 5 7 4 4
Asmitha 7 5 4 3 5 4
Janalakshmi 2 4 - 5 - 3
tC
Grama Vidiyal 3 3 5 5 4 3
Satin 2 3 - 3 - 2
Other 18 20 19 22 20 19
Note: Figures left blank were not provided in the source document.
Source: “MFIN micrometer,” Issue 5, http://mfinindia.org/wp-content/themes/twentyten/pdf/MicroMeter_Issue-
05_22_May_2013.pdf, accessed January 10, 2014.
No
Do
Page 15 9B14N019
t
EXHIBIT 13: FINANCIAL PERFORMANCE (INR MILLIONS)
os
Item 2007 2008– 2009– 2010– 2011– 2012– 2013– 2014–
–08 09 10 11 12 13 14 15
Audited Projected
Revenue from Operations 74.3 367.7 2,697.2 5,012.3 7,664.4 8,769.2 12,702 16,197
Other Income 0.2 2.6 43.6 197.8 222.4 603.6 1078 965
rP
Total Income 74.5 370.3 2,740.7 5,210.1 7,886.8 9,372.8 13,780 17,162
Financial Cost 13.6 90.1 946.3 1966 2786 4,245.8 6111 7953
Net Interest Income 60.9 280.2 1,794.4 3244.1 5,100.8 5127 7669 9209
Personnel Expenses 17.4 85 351.3 692.5 924.1 1270 2,708 3,709
Administrative and Other 11.5 38.1 184.3 403.3 452.2 340.9 - -
Expenses
Depreciation and Amortization 1 78 174 366 112 36 46
Expenses
yo
Total Operating Expenses 29.9 124.2 613.8 1270 1,741.31 1,723.5 2,744 3,755
Social Development/Donation - - 36.9 58.8 94.1 104.4 0 0
Provisions and Write-offs 5.6 - 4.9 135.7 374.8 208.8 526 439
Total Expenses 48.3 214.3 1,601.9 3,430.5 4,996.21 6,282.5 - -
Tax (Inclusive of all Taxes) 11.1 53.8 402.7 603.5 1,008.2 1,004.9 - -
Profit 15.1 102.2 736.1 1176.1 1882.39 2085.4 4268 4863
EPS 21.7 88.3 129.1 137.6 203.2 215.2 0 0
Note: The figures not provided in the financial statements and rating reports are left blank.
op
Source: Profit and Loss Statements of Bandhan, 2012–13, 2011–12, 2010–11, 2009–10 and 2008–09, and Rating Reports
2010, 2011 and 2012.
EXHIBIT 14: MOBILIZATION AND DEPLOYMENT OF FUNDS (INR MILLIONS)

Item 2007– 2008–09 2009–10 2010–11 2011–12 2012–13 2013– 2014–
08 14 15
tC
Equity and Liabilities Audited Projected

Share Capital 83.7 240 763.3 863.3 969.3 969.3 2,469 2,469
Reserves and Surplus 17.8 77.6 1,230.4 2,906.5 6,031.7 8,026.4 10,858 13,909
Deferred Tax Liability (Net) - - 26.5 - - - - -
Loan Funds and Other Long- 224.6 2,180.9 13,378.3 18,476.4 19,809.2 24,278.4 54,325 68,495
term Borrowings
Current Liabilities 231.9 433.8 3,247.8 5,174 15,947 20,515.7 2,046 2,668
Total Liabilities 558 2,932.3 18,646.3 27,420.2 42,757.2 53,789.8 69,698 87,541
Assets
No
Tangible, Intangible and 1.4 8.3 577.9** 499.8** 163.7 97.1 98 88

Other Long-term Fixed
Assets
Investments - - 2 2 2 2 2 2
Long-term Loans and - - - - 5,267.7 3,828.3 - -
Advances
Other Non-current Assets - 0.3* - 5.8* 425.9 519.3 - -
Current Assets
Cash and Bank Balances 14.7 1,319.1 5,854.8 5,385.1 11,018.7 12,033 7,062 7,453
Short-term Loans and 528.8 1,497.9 12,149.3 21,306.7 25,762.9 37,137.2 62,536 79,998
Advances
Do
Other Current Assets 12.7 106 61.8 220.8 116.3 172.9 - -

Miscellaneous Expenses 0.4 0.7 0.5 - - - - -
(not written off or adjusted)
Total Assets 558 2,932.3 18,646.3 27,420.2 42,757.2 53,789.8 69,698 87,541
* Including deferred tax.

** Including long-term loans and advances that were not mentioned separately.
Note: The figures not provided/found in the financial statements are not included and hence are left blank.
Source: Annual Statements of Bandhan, 2012–13, 2011–12, 2010–11, 2009–10 and 2008–09.
Page 16 9B14N019
t
EXHIBIT 15: RISK MANAGEMENT (%)
os
Particulars 2008–09 2009–10 2010–11 2011–12 2012–13
CAR* 25.44 19.21 21.99 22.63 21.81
PAR**>30 days 0.09 0.15 0.71 0.17 0.19
OTR*** 99.97 99.92 99.53 99.84 99.61
rP
*
CAR is Capital Adequacy Ratio, which is estimated by calculating the total equity capital divided by the total risk, such as
weighted assets.
**
PAR is Portfolio at Risk, which indicates the percentage of total loans outstanding that have one or more installments past
due for more than 30 days.
***
OTR is One-Time Repayment. This refers to the percentage of the total loan that is repaid at one time without any default.
Source: Data collected from the risk management division of Bandhan on September 20, 2013.
EXHIBIT 16: SEASONALITY OF BANDHAN’S LOAN DISBURSEMENT
yo
Month Amount of Loans Number of Loans
Disbursed (INR Billions) Disbursed (Millions)
April 4.3386 0.2941
May 3.2523 0.2274
June 2.1317 0.1632
July 3.3623 0.2576
Aug. 3.7378 0.2830
Sept. 4.4887 0.3379
op
Oct. 4.6319 0.3324
Source: The data on trend analysis of disbursement was obtained from the head office of Bandhan.
EXHIBIT 17: COST OF DELIVERING RURAL CREDIT IN INDIA (%)

tC
Source Channel Cost of Debt Total Optimized Observed Price to

Cost Customers
Public-sector Bank Branch 4 41.53 11.25
Bank (PSB)
SHG Linkage 4 28.93 24
Bank Branch 4 17.29 27
MFI (rated A) 4 14.71 27
MFI (rated AA) 4 13.75 27
Private- Bank Branch 4 32.07 14
No
sector Bank
Bank Branch 4 17.29 27
Source: Anand Sahasranaman and Deepti George, “Cost of Delivering Rural Credit in India,” IFMR Finance Foundation,
April 2013, http://foundation.ifmr.co.in/wp-content/uploads/2013/04/Cost-of-Delivering-Rural-Credit-in-India.pdf, accessed
December 10, 2013.
Do
Page 17 9B14N019
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EXHIBIT 18: DIFFERENCE BETWEEN BANKS AND NBFCS
os
Criterion Banks NBFCs
Regulatory Framework Banks are registered under A non-banking financial company (NBFC) is a
Banking Regulation Act, company registered under the Companies Act,
1949, and registered with the 1956, and registered with the RBI in terms of
RBI Section 45-IA of the RBI Act, 1934
rP
Acceptance of Demand Banks can accept demand NBFCs cannot accept demand deposits
Deposit deposits
Opening of Branches Stringent regulation by the No restrictions to open a branch anywhere in the
RBI in Tier I to Tier III cities country
SLR/CRR Banks are covered by No such requirements for non-depository NBFCs
Requirements SLR/CRR requirements
Capital Adequacy 9% of the risk weighted 15% of aggregate qualifying assets
assets
Withdrawal Banks form part of the NBFCs do not form part of the payment and
yo
payment and settlement settlement system and cannot issue cheques
system and can issue drawn on it
cheques drawn on it
54
Recovery of Loans SARFAESI Act, 2002 No such act
Pricing of Credit Based on prime lending rate Interest cap to be fixed at 26% (annual), which
plus the rates decided by should not exceed the average borrowing cost and
banks the margin. Margin for large NBFC-MFIs (asset
size at or above INR 1 billion) cannot exceed 10%
op
and for others 12%
Lending Criteria Banks have to comply with 70% of total loans should be given for income
the norm of priority-sector generation. Rural and urban households with
lending as laid down by the annual income of INR 60,000 and INR 120,000,
RBI respectively, should not have more than INR
50,000 of indebtedness
Business Restrictions Banks can advance loans as NBFC-MFIs have restrictions to advance loans
per their business policy beyond stipulated segment
tC
Source: Nidhi Bothra and Kamil Sayeed, “An Overview of the Indian NBFC Sector Performance in 2010, prospects in 2011,”
http://india-financing.com/An%20overview%20of%20the%20Indian%20NBFC%20Sector-%20Nidhi%20&%20Kamil.pdf,
accessed January 20, 2014; “‘Non-Banking Financial Company-Micro Finance Institutions’ (NBFC-MFIs) – Directions –
Modifications,” Reserve Bank of India, http://rbidocs.rbi.org.in/rdocs/notification/PDFs/CCNOI030812FM.pdf, accessed
January 20, 2014.
No
Do
Page 18 9B14N019
t
ENDNOTES
os
1
Namrata Acharya, “We Will Continue With Doorstep Banking Services”. Business Standard, July 17, 2013, www.business-
standard.com/article/finance/we-will-continue-with-doorstep-banking-services-c-s-ghosh-113071300215_1.html, accessed
January 24, 2014.
2
A non-banking financial institution (NBFI) and a non-banking finance company (NBFC) refer to the same concept; however,
NBFI is the preferred term when used in a global context and NBFC is the preferred term when used in an Indian context.
3
“Microfinance In Evolution: An Industry Between Crisis And Advancement,” Deutsche Bank, September 13, 2012,
rP
www.db.com/cr/en/docs/Microfinance-in-evolution.pdf, accessed January 24, 2014
4
Ibid.
5
Self Help Group is a homogeneous group of micro entrepreneurs with affinity among themselves, voluntarily formed to
save whatever amount they can conveniently save out of their earnings and mutually agree to contribute to a common fund
of the group from which small loans are given to the members for meeting their productive and emergent credit needs at
such rate of interest, period of loan and other terms as the group may decide.
www.unionbankofindia.co.in/RABD_Other_SelfHelpGroups.aspx , accessed June 26, 2014
6
“India Market Profile: 2011 - Country Briefing,” Mix Market, www.mixmarket.org/es/node/38216, accessed December 15,
2013.
yo
7
Microfinance India: State Of The Sector Report-2011, www.accessdev.org/downloads/state_of_the_sector_2011.pdf,
accessed January 14, 2014
8
S. Roy, “Bank Lending To MFIs Rises Slowly,” Business Line, December 24, 2012,
www.thehindubusinessline.com/industry-and-economy/banking/bank-lending-to-mfis-rises-slowly/article4235605.ece,
accessed January 23, 2014.
9
S. Roy, “AP Microfinance Crisis Helped Bandhan Grow By Over 50%,” Business Line, December 27, 2012
www.thehindubusinessline.com/industry-and-economy/banking/ap-microfinance-crisis-helped-bandhan-grow-by-over-
50/article4245587.ece, accessed January 24, 2014
10
A committee set up by the Central Bank of India to look into issues of the microfinance industry after the Andhra Pradesh
op
crisis.
11
“Global Microscope On The Microfinance Business Environment 2011,”
http://idbdocs.iadb.org/wsdocs/getDocument.aspx?DOCNUM=36453519 , accessed December 20, 2013.
12
“State of the Sector Report 2012,” Microfinance India,
December 15, 2013.
13
Ibid.
14
Bangladesh was home to the Grameen Bank movement. The Grameen Bank was a Nobel Peace Prize-winning
microfinance organization and community development bank founded in Bangladesh. It made small loans to the
tC
impoverished without requiring collateral.

15
Adapted and modified from “Bandhan Financial Services Pvt. Ltd.,” Care Ratings,
www.bandhanmf.com/report/MFI_Grading_Report_2011_2012.pdf, accessed September 15, 2013.
16
Ibid.
17
An under-banked district was a district where the average population per branch office was more than the national
average. As of December 3, 2011, the average population per bank branch office in India was 13,503. Adapted from
“Financial Inclusion,” http://financialservices.gov.in/banking/banking_financialincl.pdf, accessed September 22, 2013.
18
A. Ray, “Deloitte To Help Bandhan Seek Banking Licence” , The Economic Times, April 5, 2013,
http://lite.epaper.timesofindia.com/mobile.aspx?article=yes&pageid=15&edlabel=ETKM&mydateHid=05-04-
No
2013&pubname=&edname=&articleid=Ar01503&format=&publabel=ET accessed December 20, 2013

19
Discussion with the Bandhan team, during field work at Kolkata in September 2013.
20
Bandhan Financial Services Pvt. Ltd Annual Report, 2012–13.
21
S. Datta et al., “Assessing Impacts of Bandhan’s Micro-credit And Related Development Interventions,” at
www.bandhan.org/report/Bandhans_micro_credit_report_2013.pdf, accessed December 20, 2013.
22
Bandhan Philosophy, www.bandhanmf.com/philosophy.aspx accessed September 30, 2013.
23
Reports and interviews at Bandhan’s head office during September 16–20, 2013.
24
Discussion with branch staff in North 24 Parganas district of West Bengal on September 17, 2013.
25
Ibid.
26
Discussions with Bandhan’s IT head at the head office in Kolkata on September 20, 2013.
27
Reports and interviews at Bandhan’s head office during September 16–20, 2013.
Do
28
Bandhan Fair Practice Code, www.bandhanmf.com/fair_practice_code.aspx, accessed February 15, 2014.
29
As discussed with the CVO on September 17, 2013, at Bandhan’s head office in Kolkata.
30
The information was a result of discussions with various stakeholders at various levels during the case authors’ visit to
Bandhan’s head office in September 2013 and the continued dialogue with Bandhan thereafter.
31
From two of India’s leading economists, Jean Drèze (Hunger and Public Action) and Nobel Prize-winner Amartya Sen
(The Idea of Justice), An Uncertain Glory is a passionate, considered argument for the need for a greater understanding of
inequalities in India, despite economic development; see J. Drèze and A. Sen, An Uncertain Glory: India And Its
Contradictions, Princeton University Press, Princeton, New Jersey, 2013.
Page 19 9B14N019
t
os
32
As discussed with various functionaries of Bandhan by case writers during the Field work in period September 16–20,
2013.
33
The New Pension System or NPS-Lite System was launched by Pension Fund Regulatory & Development Authority
(PFRDA), the Ministry of Finance, Government of India to reach out to the economically disadvantaged section of the
society to extend old age security, www.bandhanmf.com/pension.aspx, accessed June 26, 2014
34
Bandhan, www.bandhan.org/#, accessed February 28, 2013.
35
“Bank For The Unbanked,” Financial Chronicle, January 25, 2013, www.mydigitalfc.com/news/bank-unbanked-114,
rP
accessed December 20, 2013.
36
“We Will Continue With Doorstep Banking Services” op. cit.
37
Discussions with Bandhan’s IT head at the head office in Kolkata on September 20, 2013.
38
N. Shankar, “Banks Bank On Low Cost Branch Model,” Rupee Times, June 9, 2010,
www.rupeetimes.com/news/fixed_deposits/banks_bank_on_low_cost_branch_models_3730.html, accessed January 22,
2014.
39
S. Roy, “AP Microfinance Crisis Help Bandhan Grow by 50%,” op. cit.
40
SLR refers to the amount of funds to be kept with the RBI in the form of gold and government-approved securities before
lending to borrowers.
yo
41
CRR refers to the amount of deposits that the banks were required keep with the RBI as cash reserves. Both the SLR and
CRR were instruments to control the money supply.
42
“Perspectives on the Indian Banking Sector,” Report on Trend and Progress of Banking in India 2011-12,
http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/01CP_RTP031112_F.pdf, accessed December 10, 2013.
43
“Policy Environment,” Reserve Bank of India, www.rbi.org.in/scripts/PublicationsView.aspx?id=15439, accessed
December 15, 2013.
44
“Mahindra Finance Says Not Applying For Bank Licence,” The Economic Times, June 24, 2013,
http://articles.economictimes.indiatimes.com/2013-06-24/news/40166684_1_clarifications-nbfc-bank-licence, accessed
February 19, 2014.
45
“Now, Tata Sons Pulls Out Of Banking Licence Race,” DNA, November 28, 2013, www.dnaindia.com/money/report-now-
op
tata-sons-pulls-out-of-banking-licence-race-1926043, accessed February 19, 2014.
46
Banks needed to maintain a CRR of four per cent of deposits, while the needed SLR was 23 per cent.
47
“Mahindras Opt Out Of Bank Race,” The Telegraph, June 25, 2013,
www.telegraphindia.com/1130625/jsp/business/story_17044917.jsp#.UwQ3N2KSzlI, accessed February 19, 2014.
48
Prasanna Bidkar, “New Banking Licenses - Why Are Applicants Opting Out?” Dalal Street, www.dsij.in/article-
details/articleid/8971/new-banking-licenses-why-are-applicants-opting-out.aspx, accessed February 19, 2014.
49
“Tata Sons Pulls Out Of Bank Licence Fray,” Live Mint, November 27, 2013,
www.livemint.com/Industry/lDxyaF2bypD4bnz8NN7t4N/Tata-Sons-withdraws-new-bank-licence-application-RBI.html,
tC
accessed February 19, 2014.

50
“Mahindras Opt Out Of Bank Race,” op. cit.
51
Prasanna Bidkar, op. cit.
52
S. Chakraborty, “Bullish On Micro-Lending Options, SKS Opted Out Of Race,” Business Standard, July 17, 2013,
www.business-standard.com/article/finance/bullish-on-micro-lending-options-sks-opted-out-of-race-113071600861_1.html,
accessed March 18, 2014.
53
G. Gopakumar, “Can Micro Finance Institutions Succeed In Banking World?” moneycontrol.com, March 6, 2013,
www.moneycontrol.com/news/cnbc-tv18-comments/can-micro-finance-institutions-succeedbanking-world_834967.html,
accessed March 18, 2014.
No
54
The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002,
enabled banks and financial institutions to sell residential and commercial properties of borrowers upon the borrowers failing
to repay loans. This helped banks recover their loans and liquidate non-performing assets.
Do

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BANDHAN MICROFINANCE: IS TRANSFORMATION TO BANK

Copyright © 2014, Richard Ivey School of Business Foundation Version: 2014-07-16

MICROFINANCE: GLOBAL LANDSCAPE

MICROFINANCE: INDIAN LANDSCAPE

The Indian microfinance landscape was a multi-organizational montage of cooperatives, NGO-MFIs,

BEGINNING OF THE BUSINESS

Regarding the genesis of Bandhan, Ghosh articulated:

Functioning of the Branches

access health insurance and other insurance products.

Management Information System

NEW BANKING LICENCE POLICY

competition in the banking sector. 43

SHOULD BANDHAN GO FORWARD?

Source: “State of the Sector Report 2012,” Microfinance India,

Year Client Outreach

Source: “State of the Sector Report 2012,” Microfinance India,

EXHIBIT 3: GEOGRAPHICAL SPREAD OF BANDHAN’S BRANCHES AS OF FEBRUARY 2014

Number of Branches as on February, 2014

Source: Figures as provided by the Bandhan Staff

EXHIBIT 5: BANDHAN’S LOANS DISBURSED OVER THE YEARS

2006–07 3,063.2 2,307.57

EXHIBIT 6: FUNDING PORTFOLIO OF BANDHAN

Entity Share in Bandhan’s Funding Portfolio (%)

at www.bandhan.org/report/Bandhans_micro_credit_report_2013.pdf, accessed December 20, 2013.

EXHIBIT 8: BRANCH FUNCTIONING OF BANDHAN

Source: “Loan,” Bandhan, www.bandhanmf.com/loan.aspx, accessed November 12, 2013.

EXHIBIT 10: FLOW OF INFORMATION TO HEAD OFFICE THROUGH MFSOL

at http://www.bandhan.org/report/Bandhans_micro_credit_report_2013.pdf, accessed December 20, 2013.

EXHIBIT 12: BANDHAN AND ITS COMPETITORS’ MARKET SHARE PERCENTAGES

Name of MFI Gross Loan Portfolio Amount of Loans Number of Clients

EXHIBIT 14: MOBILIZATION AND DEPLOYMENT OF FUNDS (INR MILLIONS)

Equity and Liabilities Audited Projected

Tangible, Intangible and 1.4 8.3 577.9** 499.8** 163.7 97.1 98 88

Other Current Assets 12.7 106 61.8 220.8 116.3 172.9 - -

* Including deferred tax.

EXHIBIT 16: SEASONALITY OF BANDHAN’S LOAN DISBURSEMENT

EXHIBIT 17: COST OF DELIVERING RURAL CREDIT IN INDIA (%)

Source Channel Cost of Debt Total Optimized Observed Price to

impoverished without requiring collateral.

2013&pubname=&edname=&articleid=Ar01503&format=&publabel=ET accessed December 20, 2013

accessed February 19, 2014.

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Tangible, Intangible and 1.4 8.3 577.9 499.8 163.7 97.1 98 88