Then & Now: An update on past winners of Changemaker awards
Prem Kala Rai, a housewife from Darjeeling district of West Bengal, borrowed a microfinance loan of around Rs 12,000 from the erstwhile Bandhan (now Bandhan Bank) to support her husband, who was working as a helper in a hotel for a meagre salary of Rs 9,000 a month. Having repaid the loan amount successfully, she was extended several loans over the years with which she helped her husband start a tour and travel company. She subsequently took another loan, rented a property and opened her own restaurant.
Prem Kala has over the years grown from being an MFI borrower to an MSME customer for Bandhan Bank, which boasts of several such stories of not just financial but social transformation.
The bank, which had humble beginnings as a microfinance institution (MFI), with nearly 90 per cent of its business coming from rural microcredit borrowers, primarily women, believes in growing “organically” catering to the evolving needs of its customers.
From a loan book of Rs 30,000 crore in 2018, with nearly 86 per cent of it being unsecured micro credit, to an advances portfolio of close to Rs 1,08,000 crore in 2023, with the share of unsecured loans down to 58 per cent, Bandhan Bank, which commenced banking operations in August 2015, has come a long way even while keeping to its mantra of “serving the under-served population”.
Says Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank, “We have always tried to capture the demand of the customer. We have seen our customers gradually evolve from a microcredit borrower to the next level and so on and we have been designing our products, services and credit underwriting process accordingly to fulfill that need. So, from an MFI borrower, to a small, medium, and then a large MSME borrower, we look to tap into this whole cycle.”
What has changed in the last five years?
According to Ghosh, the biggest challenge during this period (2018-2023) was the pandemic. It disrupted most industries, including Bandhan Bank, which saw its collections and new disbursals dip. However, the bank continued to focus on growing its business through the “challenging period” diversifying its presence in newer geographies and adding more customers. The bank, which had close to 1.5 crore customers in 2018, currently has a customer base of three crore, of whom close to two crore are microfinance borrowers.
“Today, people like Prem Kala have not only managed to be self-employed but are employing 20 more people in their ventures thereby creating more jobs for people at the bottom of the pyramid. If two crore of my MFI customers can create employment for one crore people then it will help in poverty reduction,” he says.
The bank, which was primarily known for its presence in the East and the North-East, has been steadily expanding its base and has increased its headcount to 72,000 at present, up from around 28,000 employees in 2018.
Bandhan Bank had, in 2019, acquired affordable housing finance company Gruh Finance, strengthening its foothold in the secured housing loan sector and diversifying its loan book.
“For the next five years our growth focus will be on housing loans. Secured loan currently accounts for around 42 per cent of our total book; we would expect to take it to more than 50 per cent in the next three years. So housing and MSME would be the growth areas for us even while microcredit will continue to grow,” he explains.
But Bandhan Bank will continue to remain focused on semi-urban and rural areas, as these would be the country’s “growth drivers”. According to Ghosh, the huge amount of investment by the government in developing infrastructure such as roads, highways would help fuel growth in these markets.
Another area of transformation for the bank in the last five years has been on the digital front with nearly 95 per cent of the transactions happening digitally. The bank, which has been investing on technology, has witnessed a 49 per cent jump in digital transactions on a year-on-year basis.
The Changemaker Awards 2023 will take place in New Delhi on November 3