The seven-year-old Bandhan has 401 branches, 7 lakh members (read loan beneficiaries) and Rs 500 crore disbursements as of date.

A grant-free organisation from day one, it has gradually developed separate identities for developmental work and micro-financing. And in the process, it has successfully addressed the twin issues plaguing our economy since Independence — poverty alleviation and women’s empowerment.

Bandhan lends to landless and asset-less women, households comprising five members with monthly income less than Rs 2,500 in rural and Rs 3,500 in urban areas, and to those who do not own more than half-an-acre or capital of its equivalent value.

Cost-effectiveness is the cornerstone of Bandhan’s operations, says its founder Chandra Sekhar Ghosh, seated in his spartan office in Kolkata’s Salt Lake area. “Good portfolio quality and the efficiency of the highly-committed, handpicked staff have played an important role in slashing our costs over the years,” says a beaming Ghosh. “Our management is not top-heavy and thus costs are low.”

Asked why lending was mainly for income-generation purposes, Ghosh has a plausible explanation. “We believe what is actually required is to initiate a process whereby the poor are equipped to generate income for themselves.”

Explaining further, he says loans are given to individuals through a group formation model. “Loan is disbursed to individual members who belong to a group. Some 10-15 women of a neighbourhood form a group and meetings are held once a week. Besides being a collection centre for repayment of weekly instalments, the group also performs non-financial functions.”

The benefits are observed in the form of improved nutrition and education for the children, and better healthcare and housing facilities. Additionally, the outreach programme helps in indirectly generating employment opportunities for non-members as well.

Bandhan today reaches out to more than 65 per cent of the economically (and socially) deprived sections in its area of work — mainly in West Bengal, Tripura, Assam, Bihar, Orissa and Jharkhand. Group members receive their first loan two weeks after joining and the interest charged (Ghosh prefers to call it a service charge) is around 12.5 per cent. He says borrowing costs vary between 12.5 per cent and 11 per cent. At the end of the day, a surplus, albeit small, is generated.

According to Ghosh, on average, Rs 46 crore is disbursed to about 76,000 beneficiaries each month. Bandhan accesses more than 80 per cent of its funds from organisations such as SIDBI, HDFC Bank, Axis Bank, SBI and ABN Amro Bank.

“Simplicity gets manifested in each and every aspect of our operations — structure, processes, service delivery system and the like,” says Ghosh. Besides micro loans and micro health loans, Bandhan offers development products like the CUF-THP (Chartering into Unventured Frontiers targeting the Hard Core Poor), which aims to help the poorest of poor to graduate to mainstream.

According to a study by Bandhan, members invest 91 per cent of the loan amount on existing enterprises and only 9 per cent on start-up ventures.

And as the beneficiaries graduate to higher loan cycles, a greater proportion of the increased income is used for education, marriages in the family, medical treatment and so on.

Asked what drew him to this field, Ghosh, who has an MSc in Statistics, recounts his days as a youth in Agartala where he witnessed such crushing poverty that it left a deep scar in his mind. “This prompted me to join the NGO movement and work for the poor.” He trained with organisations like BRAC (Bangladesh Rural Advancement Committee) in Bangladesh, Vivekananda Vikash Kendra and CARE and went on to establish Bandhan.

On his dream for the future, Ghosh says, “I want to form an exclusive bank for the poor, as a substantial percentage of our population living in rural and semi-urban areas has not been brought under a banking system.”

The self-effacing founder-CEO, who guides the senior management team at Bandhan, says he did not even know of the Forbes honour until a friend from Bangalore called to convey the news.

“I want the significance of the Forbes recognition to sink in among our beneficiaries, so that they too can feel the pride of being associated with such an MFI.”