The Men Who Made Microfinance Work
Image: Goutam Roy for Forbes India
Chandra Shekhar Ghosh
Profile: Founder of Bandhan
Education: Son of a sweet vendor, went to Dhaka University, studied statistics, got into an NGO purely to make a living
Quote: Give me a day, and I will give you the future
It would seem there is nothing common between Chandra Shekhar Ghosh, founder of Bandhan, and Samit Ghosh, founder of Ujjivan—two microfinance institutions (MFI)—other than their second names.
Chandra is slightly built, walks with urgency and is almost always seen in pants and shirts. Son of a sweet vendor, he went to Dhaka University, studied statistics, got into an NGO purely to make a living. His English is a bit halting. His office looks tidy and professional, as if it was designed by an architect who likes to go by the book. All these qualities evoke a deep sense of loyalty, and even reverence among his colleagues.
Samit likes food—and his fish—and it shows. He looks like a person who feels most comfortable in a kurta. Son of doctor, he went to Wharton for his MBA, worked in Citibank and Standard Chartered, and had a long stint outside India. When he speaks to his friends, he is self-deprecating, and uses the word ‘yaar’ often. The office he sits in used to be a garment factory, with high ceilings and wide doors. His wife redecorated it. (“And so, we didn’t spend anything on an interior designer,” he says). When he walks around, junior colleagues think nothing of stopping him to exchange a word about this or that.
The businesses these two people run are different too. Their target customers are different. Bandhan focusses primarily on rural West Bengal. Ujjivan’s target is the economically active urban poor. Bandhan is based on Asa model—which is comparatively low cost—and Ujjivan follows Grameen model. Bandhan is older and bigger, and Ujjivan is relatively new and small.
Yet, Chandra and Samit often find themselves on the same page in the newspapers these days. They are the new poster boys for the microfinance industry.
The reason is simple. While most MFIs have been shrinking their business during the last two years, the outstanding loans of both Bandhan and Ujjivan have grown. Bandhan, in fact, overtook SKS as the largest MFI late last year. Their recovery rates are still above 95 percent. While bankers and equity investors are shying away from the sector ever since Andhra Pradesh ordered MFIs to suspend operations in the state, both these firms have found it easier to raise funds, importantly equity. Last month, Bandhan raised Rs 500 crore from IDBI in a securitisation deal, and a few months before that Rs 135 crore as equity from IFC. Similarly, Ujjivan raised Rs 127 crore from its existing investors.
What makes them click? The reasons reflect the differences inherent in the personalities and organisation. Former chairman of Nabard Yogesh Chand Nanda says he was impressed with the way Bandhan has managed to integrate its social development activities with microfinance. He is now on its board. Sucharita Mukherjee, CEO of IFMR Capital, which helps MFIs raise funds and has worked with Ujjivan, says that its underlying systems and processes sets it apart, and helps them provide consistent quality of operations across the segments they operate in. Another factor is the quality of second-level leadership, she says.
Are there common strands? To find out we need to go back, and dig a little deeper.
The Tale of Two Ghoshs
Old timers remember Kolkata of the ’60s and ’70s for the music of Pam Crain and Carlton Kitto and night clubs with evocative names such as Mocambo and Moulin Rouge. But the ’60s and ’70s was also the time when the Naxal movement was gaining grounds in the campuses of Jadhavpur University and Presidency College. Among the idealistic students it drew into its fold was Samit Ghosh. In the end however, he was disillusioned by the way the movement turned out to be. A few years later he found himself in Wharton.
When he started Ujjivan—his motive was to find professional fulfilment, to round off his career in banking with serving the poor—it was with a sense of hard-nosed idealism that, at the end of the day, recognised micro credit as a loan product. Most MFIs were focussed on the rural areas, and ignored the huge market for micro credit in the cities and small towns. Of the 600 million poor, 100 million were in the urban areas, mostly untapped. He decided to focus on that segment. Carol Furtado, COO—South, Ujjivan, says he kept away from Andhra Pradesh for the same reason: The state was too crowded by other MFIs.