The Economic Pyramid of India is being explained with Analysis on the role of Microfinance through the special case of Bandhan Financial service Pvt. limited.with Formulated current and future challenges and their solutions to the business model.

5. BOP Sector In India
• Around 80% of India’s
Population subsists on
less than 2$ a day
• 3/5th of the labour
force employed in
agriculture, producing
less than 1/5th of the
country’s GDP
• Around 21.9% of the
population lies below
the poverty line
• Only 51% of the
population has bank
accounts

6. What is MFI
• Microfinance is the provision of a broad range of financial
services like deposits, loans, payment services, money
transfers and insurance to low income households and their
microenterprises

7. 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 mn
have no registration certificate. It is a
sector with huge unfulfilled demand.

9. • BANDHAN name and design

10. Bandhan
• Bandhan Financial
Services Pvt. Ltd. is a
microfinance institution
in India which offers
micro enterprise, micro
SME, and micro health
loans
• 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

11. A Few Facts About Bandhan

12. 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

13. Justification of Engagement
Bandhan is a type 3 engagement because it satisfies all the
criteria of such an engagement as has been tabulated below.

17. 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

18. 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

19. 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 2014
Year
Assets

20. Viability
• Great market potential
Areas of opportunities :
• Reaching the unbanked areas
• Targeting poor and segments below them
• Outreach & gross loan graphical data

21. Viability
• Bringing technology to every door
Bandhan’s model of combining
technology with human intervention
can prevent illiteracy and poor
infrastructure in interior areas from
becoming stumbling block in the way
of its microfinance institution
• Bandhan has started the usage of
SMS for informing the rural
population

22. Viability
• Riding high on micro-finance
revival
• Confident Indian market
(demonstrated by the fourfold
increase in our volume of
investments in India since
then – from $30 mn to $120
mn)
• India is the most important
microfinance market for
investors in Asia-Pacific region
• Political stability due to a
strong single-party govt.

24. 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

25. Social and Societal Impacts
• Impacts on family and
social dynamics
• Change in pattern of
decision making of
women with respect to
financial resources
• Change in expenditure
on child education
• Change in pattern of
food consumption

26. Social and Societal Impacts
Programs run by Bandhan
• Targeting the hardcore Program
• Bandhan Education Program (BHP)
• Bandhan Health Program(BHP)
• Bandhan Unemployment Program(BUP)

28. 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

29. Solutions
• Lack of awareness
• Field level staff who explain the programmes to the
target people
• Involving and training local people will also made an
impactful 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

30. • 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

32. • Utilization of Microloans
• The MFIs need to bring awareness about the risks of
inappropriate utilization
• Employ direct benefit transfer system properly.
• Adaptation and upgradation
• Technology introduction and upgradation on a
continuous basis
• Already collaborated with Fidelity National Information
Services to foster its technological infrastructure needs
• Mobilise low-cost deposits, both savings accounts and
current accounts, which will enable it to lower the interest
rate on its loans
Suggestions & Road Ahead

33. • Scale of Operations
• The increase in the size and scale of operations will help
in sustaining the risk and reduce the operational costs
per borrower
• Penetrate and increase distribution channels
• Diversify the lending from small and unsecured amounts
to large amounts against collateral to protect the
interest of depositors
• Initial Public Offerings
• Tread very carefully. Take lesson from experiences of
others. Moral Dilemma.
Suggestions & Road Ahead

36. 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
InterestRate(%)
Loan Interest Rate
Bandhan Arohan Village
Loans Issued in
2012-2013
Bandhan Arohan Village