BOP Sector In India • Around 80% of India’s

Population subsists on

less than 2$ a day

• 3/5th of the labourforce employed inagriculture, producing

less than 1/5th of thecountry’s GDP

• Around 21.9% of thepopulation lies belowthe poverty line

• Only 51% of thepopulation has bankaccounts

What is MFI

• Microfinance is the provision of a broad range of financialservices like deposits, loans, payment services, moneytransfers and insurance to low income households and theirmicroenterprises

Microfinance in India • The existing banking policies, were

not suited to meet the requirements of poor.

• In 1980, MF was introduced in banking sector.

• MF plays a significant role in poverty alleviation & development.

• Out of 29 million SMEs, only 1 mn are financed by banks. Remaining 27 mnhave no registration certificate. It is a sector with huge unfulfilled demand.

• BANDHAN name and design

Bandhan

• Bandhan FinancialServices Pvt. Ltd. is amicrofinance institutionin India which offersmicro enterprise, microSME, and micro healthloans

• Provides loans for women and families

• It has presence in 22 states with 50% of its branches in West Bengal

• Bandhan has provided loans to 6.3 million people

A Few Facts About Bandhan

Limitations for Type I & Type II Engagement• 1st type of engagement

• It does not increase their income, which is a required for poverty alleviation

• If a company tries to expand beyond a village or a small cluster of villages, marginal costs rise rapidly and efficiency drops.

• 2nd type of engagement

• Bop constituents are tied to the particular organizations ecosystem and thus became dependent on organization

Justification of Engagement

Bandhan is a type 3 engagement because it satisfies all thecriteria of such an engagement as has been tabulated below.

Novelty

• Client-friendly repayment policies

• Ethics : Descent client protection system and grievance redressal system. Close relationship with borrowers.

• Choices

• No dependency on other facilitators

• No need of multi-channels to distribute the funds

• Direct interaction

• Only women borrowers

Profit/Loss of Bandhan

• In 2013-14, Bandhan has registered 37% annual growth in gross loan portfolio at ₹6,200 crore, ~1/5th of India's MFI sector.

• 2013-14, Bandhan's net profit stood at ₹250 crore

• Average loan balance per borrower, 2013: 188.0$

• Assets: ~ $1.1 billion

-500,000,000

500,000,000

1,000,000,000

1,500,000,000

2,000,000,000

2,500,000,000

3,000,000,000

2002 2004 2006 2008 2010 2012 2014

Year

Net Income after Taxes and before Donations

Profit/Loss of Bandhan

10,000,000,000

20,000,000,000

30,000,000,000

40,000,000,000

50,000,000,000

60,000,000,000

70,000,000,000

80,000,000,000

2002 2004 2006 2008 2010 2012 2014Year

Assets

Viability • Great market potential

Areas of opportunities :

• Reaching the unbanked areas

• Targeting poor and segments below them

• Outreach & gross loan graphical data

Viability

• Bringing technology to every door

Bandhan’s model of combiningtechnology with human interventioncan prevent illiteracy and poorinfrastructure in interior areas frombecoming stumbling block in the wayof its microfinance institution

• Bandhan has started the usage ofSMS for informing the ruralpopulation

Viability

• Riding high on micro-finance revival

• Confident Indian market(demonstrated by the fourfoldincrease in our volume ofinvestments in India sincethen – from $30 mn to $120mn)

• India is the most importantmicrofinance market forinvestors in Asia-Pacific region

• Political stability due to astrong single-party govt.

Economic Impacts• High annual household

income (13.81% per loan cycle)

• Creation of livelihood assets

• Demand Creation

• Increase in total savings

8.25

91.75

% Assets

Conumer Durables Non farm bussiness assets

Social and Societal Impacts

• Impacts on family andsocial dynamics

• Change in pattern ofdecision making ofwomen with respect tofinancial resources

• Change in expenditureon child education

• Change in pattern offood consumption

Social and Societal ImpactsPrograms run by Bandhan

• Targeting the hardcore Program

• Bandhan Education Program (BHP)

• Bandhan Health Program(BHP)

• Bandhan Unemployment Program(BUP)

Initial & Current Challenges• Lack of Awareness

• High Interest Rates

• Rural vs Urban Poors

• Lack of Collateral for Micro Loans

• Finding Talent to work with them

• Transition from NBFC to Banking

• Other Problems:• Saving vs Microfinance dilemma• Moneylenders posed a lot problems initially while

raising the funds• Secondary moneylenders as an option for villagers

Solutions• Lack of awareness

• Field level staff who explain the programmes to thetarget people

• Involving and training local people will also made animpactful bond and reliability factor among villagers

• High Interest Rates• Bargain with the financial institutions and banks for

cheaper funds.• Now it can channelize funds of depositors to its

clients

• Finding Talent to work with them• Mix of old employees coupled with local fresh

recruits to facilitate a culture transfer.• Allowances for employees working far from their

home

• Utilization of Microloans by borrowers

• Over Indebtedness

• Adaptation in tough banking competition

• Client Retention and Growth

• Flexible Repayment Options

• Scale of Operations

• Maintain Statutory liquidity ratio (SLR) and cash reserve ratio (CRR)

• Marketing/ Market Place for Borrowers’ Products

Future Challenges

• Utilization of Microloans

• The MFIs need to bring awareness about the risks ofinappropriate utilization

• Employ direct benefit transfer system properly.

• Adaptation and upgradation

• Technology introduction and upgradation on acontinuous basis

• Already collaborated with Fidelity National InformationServices to foster its technological infrastructure needs

• Mobilise low-cost deposits, both savings accounts andcurrent accounts, which will enable it to lower the interestrate on its loans

Suggestions & Road Ahead

• Scale of Operations• The increase in the size and scale of operations will help

in sustaining the risk and reduce the operational costsper borrower

• Penetrate and increase distribution channels• Diversify the lending from small and unsecured amounts

to large amounts against collateral to protect theinterest of depositors

• Initial Public Offerings

• Tread very carefully. Take lesson from experiences ofothers. Moral Dilemma.

Suggestions & Road Ahead

Comparison with Arohan& Village Microfinance

• Board

• Loan policies

• Interest rates

• Financial sustainability

Borrowers in 2012-2013

Bandhan Arohan Village

20

21

22

23

24

25

26

27

Inte

rest

Rat

e (%

)

Loan Interest Rate

Bandhan Arohan Village

Loans Issued in 2012-2013

Bandhan Arohan Village