Arab Today, arab today india microlender trumps billionaires in race to change banking
Last Updated : GMT 05:45:46
Arab Today, arab today
Arab Today, arab today

India microlender trumps billionaires in race to change banking

Arab Today, arab today

Arab Today, arab today India microlender trumps billionaires in race to change banking

New Delhi - AFP

Chandra Shekhar Ghosh is a man in a hurry since he beat India's financial titans to win a prized banking licence for his microfinance firm that lends to poor borrowers. The founder of Bandhan Financial Services -- Bandhan means "bonding" -- must transform his microfinance company into a bank in just 18 months to serve India's millions of "unbanked poor" under the licence terms. "For a microfinance company, getting a banking licence is like achieving the Holy Grail," Ghosh told AFP in an interview. India's central bank created a stir last month when it handed one of its first banking licences in a decade to the microfinancier based in the eastern city of Kolkata, bypassing heavyweight contenders such as billionaire tycoon Anil Ambani. The second licence went to India's biggest lender to road projects, IDFC. Reserve Bank of India governor Raghuram Rajan wants these new banks to penetrate poverty-hit rural areas to promote lending and saving among farmers, small businesses and others whom traditional banks have been reluctant to serve. Just 35 percent of India's adults have bank accounts, a rate the central bank calls "pathetic". Ghosh aims to open nearly 700 bank branches in 22 states and start with at least 10 million savings accounts. Under the licence conditions, one in four branches must be in towns with fewer than 10,000 people. But Ghosh plans to go further, setting up 80 percent of his branches in rural areas, although there will also be "signature" branches in cities to raise Bandhan's profile. - Humble beginnings - The 53-year-old has come a long way from serving in his father's candy store. Money was scarce at home when Ghosh was growing up, but he earned a master's degree in statistics. He then worked for non-governmental organisations where he saw close-up exploitation of the poor by moneylenders who charge up to 200 percent a year for loans. Dismayed by the predatory loan sharks, he created in 2001 a small lending outfit with 200,000 rupees ($3,300) in capital and two employees. At first he borrowed from friends to have funds to lend. But he finally got his big break when the state-run Small Industries Development Bank of India put up capital -- allowing him to expand his loan portfolio. Bandhan slowly became India's largest microfinancier, focusing on the northeast and then expanding across the country. "I'm not an economist, I'm not a banker -- I learn from my customers," he said. Ghosh recruited poor people to run his branches, declaring only they "understood poverty" and could identify the needy. As Bandhan becomes a bank, Ghosh said some staff will need training to deal with more sophisticated financial products. Just three-fifths of his employees reached the final grade in school. "Having a degree has never been the most important qualification for a job with us," Ghosh said. - Back from the brink -The beauty of becoming a bank means cheaper lending rates. Currently, as a microfinancier, Bandhan must borrow from other financial institutions to make loans, which means its interest rates are as high as 22 percent annually. But as a bank Bandhan will have its own resources from depositors. It is a "virtuous circle and means we'll be able to lend at rates in the lower teens," explained Ghosh. Ghosh will attempt to use Bandhan's 5.2-million borrowers to build his savings account base. He already has a 57-billion-rupee loan portfolio and a staff of 12,961 working in his more than 2,100 microfinance branches. "If we get two family members from our client base opening accounts, we'll automatically have 10 million accounts," said Ghosh, who promises the bank will "listen to people to meet people's needs". But Bandhan's bank licence is key for another reason -- it signals redemption for India's microfinance sector. Two years ago, alleged strong-arm debt recovery tactics by the then biggest microfinancier, SKS, drove some farmers to suicide and brought the sector to the brink of collapse. Microlenders have since been forced to significantly drop their lending rates thanks to strict new guidelines. The risk for Bandhan as it expands is that most of its borrowers are unsecured -- they have no assets to pledge against their debt. But Bandhan already enjoys a top credit grading and a near zero default rate because under its current system an entire local community pledges to keep watch over one of its members who is borrowing. Bandhan becoming a bank is "a huge achievement" for the industry "which was thought to be in terminal decline," said Alok Prasad, head of the Microfinance Institutions Network. "Now (it) has steered its way out of troubled waters," he told AFP.

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today india microlender trumps billionaires in race to change banking Arab Today, arab today india microlender trumps billionaires in race to change banking

 



Arab Today, arab today
Arab Today, arab today Hats, scarves add beauty to women

GMT 19:10 2017 Friday ,17 February

Hats, scarves add beauty to women
Arab Today, arab today Tourist guide reveals methods of tourist attractions

GMT 17:46 2017 Saturday ,18 February

Tourist guide reveals methods of tourist attractions
Arab Today, arab today To release new antiques collection

GMT 20:33 2017 Friday ,17 February

To release new antiques collection
Arab Today, arab today Leader Omar Abdel Rahman dies in US prison

GMT 19:00 2017 Sunday ,19 February

Leader Omar Abdel Rahman dies in US prison
Arab Today, arab today Murder of 2 reporters in Dominican Republic

GMT 22:45 2017 Thursday ,16 February

Murder of 2 reporters in Dominican Republic
View News in Arabic - Business: أخبار الشركات
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Kidogo provides childcare for underserved

GMT 20:24 2017 Wednesday ,15 February

Kidogo provides childcare for underserved
Arab Today, arab today Tragic fluctuations of Bakhtiari's life revealed

GMT 06:50 2017 Wednesday ,15 February

Tragic fluctuations of Bakhtiari's life revealed
Arab Today, arab today London to tax old cars

GMT 14:06 2017 Friday ,17 February

London to tax old cars
Arab Today, arab today Pluto's unruly moons

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons
Arab Today, arab today Competes Sweden and Germans by S90

GMT 22:36 2017 Thursday ,16 February

Competes Sweden and Germans by S90
Arab Today, arab today Porsche reveals new 2018 Panamera

GMT 17:31 2017 Wednesday ,15 February

Porsche reveals new 2018 Panamera
Arab Today, arab today Actress Nadeen Al Rassi views art as her entity

GMT 07:30 2017 Saturday ,18 February

Actress Nadeen Al Rassi views art as her entity
Arab Today, arab today Teach monkeys to recognize themselves in mirror

GMT 20:41 2017 Wednesday ,15 February

Teach monkeys to recognize themselves in mirror

GMT 07:05 2017 Friday ,17 February

Singer Diana Karzon will issue a new album soon

GMT 06:40 2017 Friday ,10 February

MP calls for removing text from Islamic story

GMT 13:16 2017 Tuesday ,14 February

First fashion model with Down syndrome

GMT 10:26 2017 Tuesday ,14 February

Emergency UN meeting in Harare

GMT 14:04 2017 Tuesday ,14 February

"Lagom" new Swedish concept in interior design

GMT 12:07 2017 Thursday ,16 February

Bite-mimicking malaria vaccine

GMT 09:03 2017 Thursday ,16 February

Tour guide praises women’s beaches

GMT 13:12 2015 Saturday ,09 May

Sheikh Sultan opens Sharjah Centre

GMT 21:42 2017 Sunday ,12 February

Rania al-Ghazali designs candles of bubbles
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday