Abstract

Bandhan Financial Services Pvt. Ltd. (Bandhan), the largest microfinance institution in India, got an ‘in principle’ approval in April 2014 from India’s central bank, the Reserve Bank of India (RBI), to start full-fledged banking operations. Bandhan, which had been formed by Chandra Shekhar Ghosh (Ghosh) with the social motive of giving small loans to the asset-less poor in unbanked regions of India, would now have to change its business model to play on a bigger turf and on a larger scale. While transforming itself into a bank would give it benefits like access to cheaper funds and increased scope of operations, but the considerable liberty it enjoyed by being a microfinance entity would be lost. The highly regulated banking sector would restrict its scope for financial innovation and customization of products to suit the needs of its customers. There were also apprehensions that by transforming itself into a bank, Bandhan would lose sight of its vision and end up losing all that it had built in the last fifteen years. The case talks about Bandhan and its founder Ghosh. It tracks the success story of Ghosh, who saw extreme poverty in his early days and wanted to bring about social change through financial inclusion. The case gives insights into the working of Bandhan, the vision of the founder, and the challenges Bandhan overcame to become a successful entity. The case is set in a time when Bandhan is set to take a great leap forward and transform itself into a full-fledged bank giving scope for a debate on various issues including the need, the implication for its operations, and the change in its business model which might make the entity totally lose track of Ghosh’s vision which had guided it all these years.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand various issues and challenges in managing the growth and opportunities of an entrepreneurial venture, especially a social venture
• Understand the operations of a microfinance institution taking Bandhan as a case in point and appreciate the constraints and the challenges faced by it, with the prime focus on India.
• Analyze the challenges lying ahead for Bandhan and explore ways and means to overcome those challenges
• Recognize and evaluate the challenges faced in the transformation of an organization, particularly of a social venture into a commercial one and study how to unite their goals and actions.

Keywords

Chandra Shekhar Ghosh,Bandhan Financial Services,CREATE Principles of Bandhan,Participatory Rural Appraisal,Trickle-down effect,The Bandhan model,people-centric model,SIDBI,Financial Inclusion,Group Lending