Abstract
Microfinance as a term subsumes the concept of micro-lending, micro-insurance, micro-deposits and all the financial services in terms of small transactions. The term is often used for micro-lending, financial inclusion, poverty eradication, microenterprises, etc. Most of the books written on the microfinance issue focus on borrower side or employment side. However, Tamal Bandyopadhyay in his new book has given a new perspective to this subject and encapsulated the idea of organisation and leadership of the whole affair.
‘A fascinating story’ as rightly said by Vinod Rai, is of a team with a dynamic leader written by a lucid story teller. It is a very interesting story in a tone of excitement from an eye witness’ account of the whole episode. D. Subbarao has aptly commented on the book that Bandhan’s transformation is as unique as Tamal’s transition from a business journalist to an author.
‘Bandhan, The Making of a Bank’ presents the birth, the childhood and the youth of an organisation that begets a bank of its own kind having a clear objective and target before each member of the organisation.
Kaushik Basu in the foreword of the book has beautifully charted out the eclecticism that the book is capable of. He avers that the book is primarily about finance, banking and poverty eradication and development.
This book primarily focuses on how a microfinance institution (MFI) is built, and about entrepreneurship development. It projects Bandhan founder Chandra Shekhar Ghosh not as a crusader against the poverty, or as an agent for social change, but as an entrepreneur who seems to have hit upon a magic formula—running a profitable business and at the same time doing good for the poor.
Bandhan—The Making of a Bank by Tamal Badyopadhyay is unique at its range and theme. The book describes the saga of an Indian MFI and how does it eventually get transformed as a bank. The book narrates how Bandhan evolves by giving loans of ₹1,000 to women SHG. It is a fascinating and inspiring story that depicts how branch by branch, member by member, Bandhan turns out to be the largest MFI in India and eventually get a Universal Banking License. The author pours in his vast experience in explaining how the MFI industry works, its differences from the banking sector and so on. It is about how a microfinance structure is built, and how entrepreneurship acumen is harnessed.
This book at times foregrounds the vision of the founder Chandra Shekhar Ghosh and lay emphasis on his mission of making an efficient bank.
The book consists of 12 chapters and there remains a organic cohesiveness and interlinking among them.
Chapter one, ‘In the Beginning, There Was Only Chaos’, a dramatic opening of the book with the reference to the launching ceremony of the bank, the reason to celebrate is 550,000 applications received by the bank in the first week of its launching and the concern of Ghosh on the rate of rejection. There is a very interesting heading about the status of VSAT in UP and Uttarakhand where monkeys play spoilsport by chewing up the VSAT connections.
This chapter also alludes to West Bengal’s status in finance and especially financial inclusion as it being the lowest in the country.
Chapter two, ‘A Bottle of Mustard Oil, for Training NGOs’, gives a picture of early days of Ghosh’s struggle. He saw a moneylender distributing ₹500 to women vegetable vendors and taking ₹5 on it and collecting the same in the evening. As per his calculation the rate of interest was exorbitant yet the women were satisfied. According to the women the bank would not provide the loan without documents or a guarantor and at their doorstep as the services this gentleman (moneylender) is providing. This was a eureka moment for him. He joined the Village Welfare Society and in due course he registered an NGO, namely Bandhan Konnagar, in 2001 and which led to the conception of a bank. With initial collaboration with ASA and help from SIDBI the bank started its operation. This chapter also elaborates the three models of microfinance.
The third chapter ‘The Big Bang’ details the expansion of the bank with an exceptional speed. In 2002 it started with two branches, 512 borrowers and loan worth of 3.5 lakh and in just 13 years in 2015 there were 2022 branches, 6.7 million borrowers and loans worth of ₹10,500 crore. The expansion crossed the state borders and reached many states including Delhi, Maharashtra and Tripura etc. It was also a journey from non-profit NGO to a for-profit company which became essential for further viable and sustainable expansion.
The fourth chapter ‘How to Jump the Humps, Move Past the Roadblocks’ contains interesting details and instances of initial hiccups, local issues of expansion, perception and organisation. There was a constant struggle to get distinct and different identity, image and perception from that of deposit mobilising chit fund organisations operating in the locality. There were income tax raids on the bank due to orthodox perception of the income-tax officials. In addition to this, there were issues of local political interference and criminal infiltration in the organisation. Bandhan also witnessed the shock of separation from ASA. Despite all these turbulence Bandhan was able to sail out of troubled waters smoothly due to the love and warmth of relationship the bank had with its borrowers.
Biographies of 11 tall figures, the pillars of Bandhan’s foundation, are justifiably depicted in the fifth chapter, ‘The Ten Commanders and the Girl from Basirhat’. This chapter primarily discusses the 11 stalwarts of Bandhan, their socio-economic background, how they entered in Bandhan and the journey so on.
It was observed that most of the commanders (Bandhan employees who initially joined) were from poor economic background. At the time of joining Bandhan they were hardly getting ₹2,000 except for few. The people who initially joined the MFI from 2001 to 2003 were basically from commerce and science background. A few of them were fresh graduates and the rest were having an experience of 2 to 4 years in development sectors.
Initially, the salary of the employees at Bandan ranged from ₹1,500 to 2,500. They were given the responsibilities of zonal head, manager of micro banking division, IT-division, insurance division, audit and accounts division.
The 10 commanders are Partha Pratim Samanta, Zonal head, microbanking division; Fatik Bera, Cluster in-charge audit; Satyajit Ghosh, Zonal head, microbanking; Amlesh Sharma, Member of Account Division; Debashish Mandal; Sudhanya Nopti; Mrinmoy Mondal; Kalyan Kundu; Sanjib Kumar Das; Kalyan Das; and the first female senior divisional manager Runa Parven.
Chapter six ‘The Bandhan Pathshala’ is all about Bandhan’s working manual. It is believed that the key to Bandhan’s success as an MFI was its 2003 manual published in Bangali language, which was the bedrock of its operations. The first edition of the manual was called Programme Strategy and Operational Guidelines.
This manual discusses at length all the aspects of operation of MFI ranging from the tiny details of kinds and cost of furniture for a branch to the process of loaning to the members. There were picnics not for enjoyment rather a session for employee training. Ghosh often encouraged his employees, ‘Give me your Sundays, I’ll give you future’.
A detail manual was developed for furniture, stationeries, interest free loans for bicycle, raincoat, calculator, with HR issues including maternity leave etc.
Chapter seven ‘On the Way of Becoming a Bank’: On 2 April 2014 Bandhan got licence in principle for a bank. That involved a series of process and applications, rounds of meeting with different stakeholders to generate 51 per cent public shareholding in Bandhan under RBI norms. RBI gave Bandhan 18 months time to start a bank called Bandhan Bank.
On 24 November 2014 Registrar of the Companies granted the name ‘Bandhan Bank’. The biggest challenge was to increase the public shareholding. This was done very smartly by the Bandhan team of experts and external experts who were outsourced for this purpose. A number of banking and legal experts were hired by Bandhan to complete this job. On 8 May 2015, a board meeting was called in which all stakeholders participated and shares were allotted. On 17 June 2015, RBI issued banking licence to Bandhan under Section 22 of the Banking Regulation Act 1949.
Chapter eight ‘Building the Backbone’: On the very first day when Bandhan bank started its operation with 501 branches, it created an unsurpassed record in the banking history. Even after transforming it into a bank the business of giving small loans continued and the cash of the microfinance branches was kept in the branches of Bandhan Bank. The plan was to adopt a hub-and-spoke model where every branch (hub) would be linked to four to five Door-step Service Centre (DSCs) (spokes).
In order to implement this model practically, core banking solutions (CBS) was required to be in place in the bank. It was very tough for the Bandhan to implement CBS because only some few executives at that time were tech-savvy in Bandhan. Finally, after a number of bids and rounds of meeting, a US-based software provider company called FIS was selected to implement CBS model.
After all the hurdles, finally on 23 August 2015 Bandhan Bank started its CBS operations, full networking of 501 bank branches, 2,022 DSCs and 30 ATMs, remittance facility through RTGS/NEFT and image-based cheque-clearing facility were made available at the branches.
‘A Man with Uncommon Sense’, the ninth chapter, is a biographical profile of Ghosh. Ghosh—‘an entrepreneur who believes in action, more a doer than a thinker-doer, driven by a strong, earthy common sense’. The struggle of the early life, attachment with BRAC and the story of his marriage are very interesting and motivating. He has been described as a man with uncommon common sense. ‘He looks very simple, but he is very sharp.’ Some of his senior colleagues termed him as ‘benevolent dictator’.
He has the ability of turning adversities into opportunities. Many of his habits and nature have been described with plausible and interesting anecdotes.
The 10th chapter is ‘The Way Forward: A Universal Small Bank?’ It begins with a very motivating story of Einstein in which he says ‘I too know who I am but I don’t know where I am going’ in reply to conductor on a train. ‘Bhaskar Sen, Former Chairman And Managing Director Of United Bank Of India, wanted to send a message that Bandhan Bank should know what it wants to be in the Indian financial system; it should know where it wants to go … its destination’. The destination of Bandhan Bank is unique, different and contrary to a commercial bank, it targets to get deposits from urban area and lending to rural poor. It is very close to Bank Rakyat Indonesia which focusses on micro-, small- and medium-sized enterprises. It explains in details about two parallel systems of banking under one umbrella. The HR issues, the infrastructure, IT connectivity and other issues are taken up in finer details to set a tune for the future.
The 11th and 12th chapters are dedicated on two legends and two great experiments carried out in parallel to that of Bandhan in the capital of the microfinance business, that is, Andhra Pradesh, ‘Vijay Mahajan: A tragic Hero’ and ‘Vikram Akula: A fallen Angel or a Prodigal Son’ respectively. The story of birth, growth and ‘so-called’ downfall of Basics, as per VM (Vijay Mahajan) it is the only one subsidiary of Baisx which felt the tremor and suffered huge loss and downfall but all other subsidiaries had registered growth and profit. The story of origin and scaling of SKS with its founder Vikram Akula is also informative and interesting. The discussion on these two MFIs at the conclusion of the book, gives an insightful and comparative understanding of the three major initiatives of microfinance. It also highlights the personality, objective, approach, attitude, nature and methodology and processes behind the movements.
Tamal’s clarity on the subject, his knowledge of the history of the banking sector, his close commentary on the ups and downs of the financial sectors in India are unique and made a dry subject lucid and interesting. The book aptly highlights the clarity of objectives and gives a mind-scope of the leader of the organisation or one can also say a mission. The success of the mission, the organisation, the company or society just depends on how the leader is steering the boat, with level-headedness, team work, commitment, enthusiasm and confidence towards success or achieving the target. The book is worth reading for the beginners in microfinance as well as for avid practitioners, social entrepreneurs, policy makers and research scholars of this subject. The way the technicality of microfinance has been dealt with in colloquial language makes it a perfectly understandable text.