THE$JOURNEY$OF$BANDHAN$

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The Journey of Bandhan

From Micro Finance to a Bank
This project explores the remarkable journey of Bandhan, which
started as a microfinance company with a capital of two lakh
rupees in 2001 and has now emerged as the first microfinance
institution to receive a banking license in India with a loan book
that stands at over rupees 15,200 crores within a year of operations.
However, what truly set Bandhan apart is its deep-rooted
commitment to the rural poor. More than 90% of the customers of
Bandhan Bank consist of the rural poor.

Devishi Sarda
Modern High School for Girls
(July- September 2016)

THE JOURNEY OF BANDHAN

INDEX

SL NO.

CONTENTS

PAGE NO.

1.

BACKGROUND

2.

INTRODUCTION

3.

OBSERVATION

4.

APPENDIX

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1. BACKGROUND
Ever since my first Economics class in Grade 9, I had been taught that a firm can have three goals- profit
maximization, sales maximization or risk minimization. All the actions and decisions of the firm are guided
by these goals. I often wondered why couldnt a firm have social welfare as its goal. My teachers explained
to me that in the 21st Century social welfare couldnt be the primary goal of a firm because profit would
always come before social welfare for any entrepreneur. However, I believed that social welfare and profit
could go hand in hand.

This is the primary reason why something about Bandhan Bank struck me. It is one of the few organizations
that truly stands for what it believes in. The motto of Bandhan Bank is Aapka Bhala, Sabki Bhalai which
means that an individuals well being leads to societys welfare. According to the founder and Chairman
Managing Director of Bandhan, Chandra Shekhar Ghosh, "Bandhan is about togetherness, we work for
inclusive growth.

Intrigued by how it all began for Chandra Shekhar Ghosh and Bandhan Bank, I began to do some research.
In the process, I came across a truly remarkable story that not only captivated me but also inspired me.

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2. INTRODUCTION
Chandra Shekhar Ghosh, the son of a small sweet-shop owner from Bengal, was moved by the plight of
poverty-stricken women in the villages of West Bengal. Seeking to empower them, he decided to start a
small business. He started a microfinance company with a capital of merely rupees two lakhs in 2001.

Fifteen years later, he heads Bandhan Bank, the first private bank founded post-Independence in eastern
India. This bank, with a whopping Rs 12,500 crore in deposit has set a record as the first microfinance
institution to receive a banking license in India.

However despite the tremendous growth, the bank works on the same core values. "My commitment to the
poor remains," said Ghosh. "They continue to be my focus and the bank would offer more services to them."
Ghosh made it a point to stress that even after becoming a bank, Bandhans business philosophy would
not change. We are here to make a difference in the lives of millions of people, and with that objective we
are starting this banka bank with a heart, he said.

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3. OBSERVATION
Since 2006, Bandhan Bank has been successful in reaching out to the poorest section of society through
their Hard Core Poor programme. It targets the extremely destitute women having no asset base or
alternative sources of income, are highly vulnerable to shocks, deserted by husbands and mainly dependent
on begging, wage labour etc. I learnt about one of the many success stories of this programme in an
interview (Appendix) with Mr. Debasish Karmakar, the head of the Gariahat Branch of Bandhan Bank in
Kolkata.

Bandhan Bank tracked the hard core poor through Participatory Rural Appraisal (PRA), wherein the
village community collectively select the needy woman for Bandhans Bank development initiative.
Thereafter, Bandhan Bank worked with the village community to identify a feasible task for her. She not
only received training from Bandhan Bank but was also provided with the necessary funds to start the
business. In this particular case, she was taught how to make brooms. Bandhan Bank worked closely with
her until the business started generating surplus. Today, the woman from the outskirts of Bihar, supplies
brooms to three state governments and has provided employment to 48 other women in her village. This is
not just a development programme or corporate social responsibility project of Bandhan Bank. Over 90% of
the customers of Bandhan Bank are rural women.

Over the years, THP or the Targeting the Hard Core Poor has grown considerably.

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Number of families covered under THP

50000

45334

45000

No. of families

40000
35000

31256

30000
25000

22654

20000
15000
10000
5000
0
2013-14

2014-15

2015-16

Number of branches covered under THP

350
294

No. of branches

300
231

250
200
151
150
100
50
0
2013-14

2014-15

2015-16

THE JOURNEY OF BANDHAN

There are a number of factors that set Bandhan Bank apart from other banks that function in India. In India
only 30% of the population is banked. While most banks try to increase their customer base within this 30%,
Bandhan Bank seeks to increase the banking penetration in the country and their main focus is on the 70%
of the Indian population that is still unbanked.
Bandhan Bank has branches in all states of India within one year of operations. They have reached the
remotest of villages in India where even nationalized bank have not been able to set up branches. They have
also managed to set up a branch in Jammu and Kashmir, despite the political tension. It is their commitment
to social welfare that has enabled them to make all of this possible within a year.

During the interview, I learnt that despite the challenges that come with working with the rural poor, there
were practical advantages as well. The rural poor seldom default. They develop an emotional attachment
with the bank because Bandhan helps in uplifting them and alleviating their poverty. According to Mr
Debashish, Most of the rural poor have a deep-rooted loyalty because of all that Bandhan has done for
them. They can never think of cheating the bank and they do not default.

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4. APPENDIX

Debashish Karmakar, Branch Head of Bandhan Bank Gariahat Branch: Personal Interview.

What were the challenges you faced to start a microfinance institution, and grow it to a private bank?
Our main challenges were staff-related. We retained most of our staff from the microfinance company when
we got our banking license. It was very challenging for us to train them because working for a bank requires
proper training.
We also faced challenges in setting up branches in the large scale. Our goal was to launch the bank with 501
branches on day one of operations so it was a tedious task to set up these branches. What is unique about us
is that most of our branches are located in rural areas because we are committed to serving the rural poor.
This poses a challenge because these remote areas lack basic infrastructure so we had to start from scratch.
Another challenge we faced was software related. We wanted to adopt the latest technology right from the
beginning. We use the FIS Global software and developing it and testing it was challenging.

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Along with challenges, there must also have been advantages because youve been a microfinance
company?
Our main advantage was our huge customer base. Theyve been with Bandhan throughout this journey.
They have developed trust in us. All our microfinance customer now bank with us. This gave us a major
edge.
Apart from this, the rural population is our major strength. They had a deep-rooted loyalty to us, as we have
played a role in their uplifting them and helped them on every step along the way. Thus, they never default
in payment of their dues. We have a repayment rate of over 99%.

As a microfinance institution, your primary focus was uplifting the poor, since youve become a bank,
how are you still committed to the poor?
Our commitment and involvement with the rural population makes us who we are. Aapka Bhala, Sabki
Bhalai is what we stand for. Every year we have spent much more that the norm on corporate social
responsibility.
Apart from this, our Hard Core Poor initiative has been a huge success. We choose the poorest people
from the remotest places and teach them business. We taught a woman in the outskirts of Bihar how to make
a broom. The transformation in her life is unbelievable. She was almost dying of hunger and poverty and
now she supplies brooms to three state governments and has 48 women working under her. Bandhan had
started to help distressed women create a better life for themselves and that continues to be our objective,
even after turning into a bank.

What sets you apart from other banks?

What is really unique about India is that over 70% of India is unbanked. While most other banks try to
increase their customer base within the 30% that is banked, Bandhan primarily targets the 70% unbanked
section of the country.

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We also are different because of our core values. No other bank has similar initiatives. We have built over
3000 schools that provide free education for the underprivileged.
What weve been able to accomplish in one year, would probably take any other bank at least 5 years to
accomplish. Although we were initially hesitant about how well Bandhan will be received in the
metropolitan cities because we have been a bank mainly for the rural people, our success has been
overwhelming. Now, even the Government has started banking with, both the state and center. The
acceptance we have received by all kinds of people is what sets us apart.

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