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There have been many books on microfinance, in India and overseas. Most of them have been written either from the point of view of the borrowers—how microfinance has changed their lives—or are academic studies on how such entities work, the different models of microfinance, risk management, etc.

Bandhan: The Making of a Bank by Tamal Bandyopadhyay is different—it is written from the point of view of the organization. It’s about how a microfinance structure is built, and about entrepreneurship. It does not project Bandhan founder Chandra Shekhar Ghosh as a messiah for the poor, or as an agent for social change, but as an entrepreneur who seems to have hit upon a magic formula—running a profitable business and at the same time doing good for the poor. It is a celebration of entrepreneurship. An edited excerpt:

A man with uncommon sense

In one of the management committee meetings of Bandhan Bank, at its headquarters in Kolkata, a few months before the bank was launched, chairman and managing director Chandra Shekhar Ghosh narrated a story: “A gentleman was seen standing on a railway platform, asking the station master many questions. His first question was what time will the Poorva Express come from Delhi? And the next, what time will Toofan Express go to Delhi? Do you know, why was he asking such questions?"

Nobody in the senior management team had the answer.

“He wanted to cross the railway track," Ghosh quipped, adding, “We cannot do that."

“Have you ever seen the driver of an ambulance being questioned by the traffic police? We need to behave like an ambulance... Of course, there will be problems but we will find solutions and move ahead. Don’t brood over problems. Let’s solve them."

This is quintessential Ghosh—an entrepreneur who believes in action, more a doer than a thinker—a doer, driven by a strong, earthy common sense.

In another such meeting, I heard him say, “There are no words like ‘if’, ‘by chance’ in my dictionary." “Why not do it today? Let’s start. We have not the time," is a typical Ghosh expression to convey his sense of urgency. This may prompt many to brand him as a risk-taker. He is probably that, but not a gambler. There is logic behind every risk that he takes.

Enamul Haque of ASA International told me that Ghosh did not pay attention to one of ASA’s key suggestions. “We wanted him to go slow on expansion but he was going ahead at breakneck speed; he is a risk-taker but has performed very well, beyond our assumption."

Brij Mohan of SIDBI (Small Industries Development Bank Of India) too has the same impression of Ghosh. Once at the SIDBI guest house at Lake Town, Kolkata, when Brij Mohan emphasized the chances of tripping if he ran very fast, Ghosh did not defend himself. He accepted the well-meant advice, but put forward his arguments to address Brij Mohan’s concerns in terms of investment in manpower, systems and quality control.

On the spot, he explained the steps he had taken to take care of all these, including very strong internal audits. “I was convinced that he was aware of the pitfalls and had taken adequate steps," Brij Mohan said.

ASA’s Sushil Roy, who was instrumental in the technical support agreement, found in “Shekhar" a young leader who was willing to face any challenge. Unlike many others in the microfinance space, Ghosh did not have any “mindset" problem, he told me.

Ghosh approaches most things in a different way. In June 2015, an O&M (Ogilvy and Mather) team, led by Pandey, showed Ghosh the rough cuts of the ad films that the agency had made for Bandhan Bank. Television spots for the films had already been booked by media-buying agency Madison World, of Sam Balsara.

Senior executives of the bank were happy with the films, but not Ghosh. He called for his driver Shyamlal, and Samiran Das, who served tea on that floor. He wanted them to watch the clips. Only when he was convinced that the message was clear to Shyamlal and Samiran did he smile.

Next month, when the O&M team trooped down to the Bandhan headquarters again to show the final product, they also showed another film that the agency had made for a steel company, and had received many awards. Ghosh watched that film which was rather long, and quipped, “I don’t want an award-winning film. What is there for me? My bank? My products?"

A matter of fact—Ghosh doesn’t care about frills. That, however, does not mean he does not have a heart. He has that, and quite a large one. But, before we delve into those aspects, let’s understand his background first.

The roots of the Ghosh family were in Sonargaon, Dhaka, from where West Bengal’s longest-serving Communist chief minister, Jyoti Basu, hailed. Before Independence, Ghosh’s father, Haripada Ghosh, moved to Comilla, about 100km south-east of Dhaka, which was a part of Greater Tripura then. Ghosh’s great-grandfather, Nabin Ghosh, started a sweet shop at Comilla, which was about five hours by boat from Sonargaon, but close to Tripura.

Ghosh was born in Bhattapukur, Agartala, in west Tripura, in 1960. His mother, Suchitra Ghosh, was from Bikrampur, Dhaka, but mostly lived with her uncle, Chittaranjan Ghosh, a Congress leader, at Collins Street, central Kolkata.

In his early days, Ghosh was sort of a nomad, continuously changing places in search of a stable life and education. He had spent his childhood at Sonargaon, but came back to Tripura in 1971, after the liberation of Bangladesh. Soon, he went to Mariani, Assam, a neighbourhood town of Jorhat city, on the border of Nagaland, famous for the Hoollongapar Gibbon Sanctuary, to stay with his uncle, Sadananda Ghosh.

Sadananda used to sell snacks on a pushcart at the railway junction to make his living. From there, he shifted to Siliguri in north Bengal, where one of his maternal uncles used to stay.

His father tried his hand at running a restaurant at Bagdogra, part of the Greater Siliguri Metropolitan Area in Darjeeling, even as Ghosh dropped out of school and started selling milk to neighbours to help his father run the family of four sons and two daughters.

Even at Siliguri, he did not settle down; he went back to Bangladesh where he graduated from Narayanganj’s Tolaram College, staying at a Ramakrishna Ashram and his grandmother (father’s aunt) taking care of his two meals a day. When he was doing his post-graduation in statistics at Dhaka University, Ghosh lived at the Brajananda temple on the university campus.

One day, his bicycle got stolen from the university campus. Borhannbhai (Borhann Uddin, a statistics professor) lent him his old Phoenix cycle which brought the smile back to Ghosh’s face. Until recently, he was driving a Toyota Fortuner; now he has a Land Rover Discovery in his garage.

By the time Ghosh completed his MSc in statistics in 1985, his father died of liver cancer at fifty-two.

His first choice at the university was, however, physics. Benu Sharma, CEO of Asian TV in Dhaka, a classmate of Ghosh at the Dhaka University, fondly remembers “Shekhar" as someone who was always willing to help others. Those days, Ghosh used to sing Assamese singer Bhupen Hazarika’s popular song, “Manush manusher jonno" (humans are for humanity). Around that time, BRAC—formerly known as the Bangladesh Rehabilitation Assistance Committee, and later as the Bangladesh Rural Advancement Committee, a development organization dedicated to the alleviation of poverty and empowerment of the poor—advertised for a programme organizer. Ghosh applied and got the job.

His first posting was at Gaibandha, a disaster-prone northern district of Bangladesh, affected by frequent floods, cold wave, nor’easter, tornadoes and monga or seasonal food crisis.

His job was to form groups of men and women—on the lines of self-help groups—and mobilize them against corruption of the government and establish their rights. He used to meet women in the morning and men in evening and travel extensively on a bicycle. His initial salary was 1,000 taka per month ( 860, in February 2016), which was later raised to 1,600 taka ( 1384).

“I used to consider myself quite wealthy when I saw families starving for days and eating mashed potatoes after selling advance labour for 15 taka when the rate of daily wage was 75 taka," he told me on a flight from Kolkata to Delhi.

The BRAC concept was to make these people aware of their rights and let them decide what they wanted to do. While there was an outreach programme meant for that, there was another project to give them training and microcredit. At some point, the two different programmes got merged into one rural development programme.

Working with BRAC, Ghosh experienced poverty in its starkest form, and power structure in a village. That helped him a great deal to pick up skills to motivate people, analyse human behaviour and resolve conflicts. He also learnt patience and humility. As a university student, he was quite hot-headed and impatient, but looking at abject poverty he often asked himself how he could get angry at these people.

The BRAC assignment also taught him that human capital cannot be built without training; education without discipline is meaningless. The most critical piece of learning which helped him a great deal to create Bandhan was that poor people don’t care much about money if it’s given free.

Only when they are charged for the money do they deploy it, earn on it and pay back. From a programme organizer, he was promoted to the position of a manager and, finally, a faculty member giving training to MFIs across Bangladesh.

By the time he left BRAC in 1997, his salary was 10,000 taka.

His return to Kolkata followed his marriage with Nilima, whom he fondly calls Nili. To Nilima, he is “Sir" in the presence of others but “Shurid" (meaning friend) in private.

Sixth of eight children (five sisters and three brothers), Nilima comes from a wealthy family in Bishalgarh, Agartala, Tripura. Her father, Haridas Ghosh, was a transport operator who also owned a hardware shop.

In 1985, the year Ghosh completed his post-graduation from Dhaka University, his brother, Vaskar, met Nilima’s elder sister, Poornima, as a prospective bride for his elder brother. But Vaskar liked Nilima more than Poornima. Much later, in 1993, once again Vaskar dropped in at Nilima’s five-storeyed massive house in Tripura, bride-hunting for his elder brother. This time, Ghosh and a few of his friends were in tow. By that time, Poornima had already got married and Nilima was doing her graduation.

Nilima entertained them by singing a Rabindra Sangeet: Chokher aloy aly dekhechilem choker bahire

Roughly translated, it means:

The world I had seen,

A world of images, was outside.

Now, as darkness draws a screen,

I turn to my heart for a vision.

When her mother asked Nilima whether she liked Ghosh—a tall, dark and handsome young man—Nilima made it clear that she found him “uncultured" as he kept mum while his friends were doing all the talking. When the two of them were left alone in a room, Ghosh confided in her that he was running a high fever and was in no position to talk.

Nilima gave her nod for the marriage, but on one condition—that she must be allowed to complete her post-graduation.

When they got married in August 1993, Ghosh remained in Dhaka working for BRAC and Nilima in another part of Bangladesh, doing her MA in public administration from Chittagong University. Only after she completed her studies in 1996 did both come back to West Bengal, and their son, Angshuman, was born the following year.

Ghosh had been feeling uncomfortable in Bangladesh—there was social unrest, and attacks on the minorities. But life was not smooth in West Bengal either. Income from the knitting factory that he was running with his brother, Vaskar, was not sufficient to support the family. Also, there was frequent labour trouble in the Left-ruled state which was not exactly known for its work culture. He also did not find professionalism among NGOs; they were not willing to scale up the business of small loans.

He was a restless soul doing many things to manage a living, roaming around networking with people and doing the ground work for the birth of Bandhan. Occasionally, he was seen crying in the puja room of his uncle Manoranjan Ghosh’s residence at Konnagar, where the couple was staying. He often told Nili that he was always praying to God not to give them another child as he would not be able to financially support another member in his family.

What followed next seemed like a fairy tale. Bandhan was registered as a trust in April 2001, and the next year it opened two branches, at Bagnan and Konnagar, to start its microfinance operations. By 2014, when it got the in-principle approval from India’s banking regulator to set up a bank, it had 2,022 branches across twenty-two Indian states, and at least 14,000 people on its roll. There were 6.7 million borrowers. Many large corporations as well as established financial intermediaries were among the twenty-five entities that had applied for a banking licence, but only two could make it. Bandhan was one of them.

How did he build this empire?

Those who know him well say he is modest. Underneath his apparent naivety, there is a wise and even wily man. He is a man with uncommon common sense. “He looks very simple, but he is very sharp. People often misjudge his wisdom by looking at his simple exterior and he uses this to his advantage," says Brij Mohan of SIDBI. A central banker who met Ghosh at the RBI office in Kolkata (it was “love at first sight") was completely taken in by his simplicity. “He lacks articulation but knows the language of the poor. He could instantly strike a chord as he has enormous empathy for them," says this gentleman who does not want to be identified, as he is a regulator.

Another central banker who had also worked in RBI’s Kolkata office claims to have not done anything for Ghosh except for introducing him to others at various functions as “he did not know his way". Ghosh has brilliantly built on those introductions. This person too has reservations about being identified. “Everybody talks about poverty alleviation through MFIs but very few people know this like Chandra Shekhar... He understands what is poverty; what the borrowers need and how much they can pay back. He would not give them one penny extra to ensure that no money is wasted and every rupee is paid back."

A file photo of Chandra Shekhar Ghosh from 2010. Photo: Indranil Bhoumik/Mint
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A file photo of Chandra Shekhar Ghosh from 2010. Photo: Indranil Bhoumik/Mint

To illustrate the success of Ghosh, this central banker refers to the Differential Rate of Interest (DRI) scheme that was introduced by the government in March 1972. Under this scheme, in 2009, a borrower whose annual family income from all sources did not exceed 18,000 in a rural area, and 24,000 in urban and semi-urban areas, and land holding did not exceed one acre of irrigated land or 2.5 acres of non-irrigated land, was eligible for 20,000 of housing loans and 15,000 of other loans at 4% interest rate.

No collateral was required for such loans and repayment was to be done in five years, including a moratorium period.

The overall target for loans given under the DRI scheme for the banking system was 1% of the total advances of the previous year, but most could not meet the target as they found no takers. On the other hand, in Bandhan’s early days, it gave loans as small as 1000.

Ghosh used to keep RBI executives even remotely connected with rural credit informed of every step he was taking, even though he was not required to do so. He would send a monthly progress report to all of them, even though they might not read those and gave feedback only occasionally.

This illustrates his extreme sincerity, clarity of purpose and uncanny knack for building relationships with everybody who matters. Indeed, he is very much a relationship man. ASA International’s Haque told me that every time his team came to Kolkata, Ghosh called them home for dinner and served simple, home-cooked food, thereby forging stronger ties.

Saneesh Singh of SIDBI, who played a key role in Bandhan getting its first loan from the development finance organization, is also hugely impressed with Ghosh, whom he found was “extremely receptive to ideas". “He is very innovative and hard-working. He has a very strong rustic common sense and is street smart. He is always at the right place at the right time, meeting the right people and willing to explore ideas. He is an entrepreneur who is willing to take risks," Singh said.

One thing, however, Singh could not understand—why Ghosh was resisting technology. “He was happy with the manual operations of Bandhan."

Initially, Ghosh was guarded, but later they became friends and both used to discuss the vast financial needs of the poor in the hinterland and the enormous possibilities. Once, Ghosh brought some chocolates for Singh at the SIDBI office in Kolkata from one of his overseas trips, but Singh politely declined to accept them. From that day onwards, more intimacy developed between the two and Chandra Shekhar became “Shekhar" for Singh. “We were buddies though I could not put my arms around him because of the institutional framework between us," Singh said.

Y.C. Nanda of NABARD (National Bank for Agriculture and Rural Development), who had been on the board of BFSL, the non-banking finance company which got the banking licence, since 2008, says, “Initially, I would advise him frequently, tell him what BFSL should do, and he would listen to me quietly and would never argue. But I stopped advising him after I found he knew much more than I did. His assessment and judgment were far superior to mine."

“I had only managed NABARD, but he has created an institution. For me, it was easy to manage a strong, very well-established institution, but creating an entirely new organization of this size is a great achievement. I would say Bandhan is entirely Chandra Shekhar’s creation. The board’s contribution is that it did not stop him from doing what he wanted to do; it did not interfere too much. That’s the only credit the board should get."

Ghosh has the uncanny ability to see things differently.

When the logistics and premises team of Bandhan Bank was finding it difficult to close the property deals for the Kolkata branches—and only eighteen of thirty-five locations were finalized—he asked the team why they were so slow.

One of them pointed out that the rentals were an issue. With particular reference to one branch at Kankurgachi in north-central Kolkata, he said, “Sir, it’s a question of who will blink first. The Gupta Brothers [a restaurant chain] is offering 190 [per sq. ft] but the landlord likes a bank as a tenant."

Ghosh’s curt answer was, ‘I like the bank but that does not mean I don’t like money... Pay more than Gupta Brothers and take that premise.’

In some sense, Ghosh’s management style is disruptive. At least one senior banker who has joined Bandhan recently finds him a “benevolent dictator". He does not believe in hierarchy and that often creates parallel management. He reaches out to employees of almost every level. He gives them direct access, and this keeps the information flow continuous, something which he had learnt at BRAC.

He does not believe in allowing people to do their jobs without any supervision, particularly when they are dealing with money. “Poor people dealing with money always tend to deviate and hence they should be kept under strict supervision," has been his management mantra while building

Runu da does not see this as a negative point. According to him, “CMD-Sir is always with people. He has direct contact and loves to hear from them. He knows where they are lacking and how to nurse them and cover up their weak points; he recognizes people’s worth; he always thinks of how to develop employees’ futures."

Ghosh’s style of micromanagement is of course changing now. Those who have been with him for the past fourteen years vouch for the change. Some of them were shocked when, after the first board meeting of Bandhan Bank, in July 2015, Ghosh announced that the bar was open at a party which he had thrown at the Novotel Hotel for the senior management. Single-malt Glenlivet was served there. In Bandhan’s fourteen-year history, alcohol was never served at any party.

His crisis management strategy has been unique. When SKS Microfinance was flourishing and everybody else in the industry thought all other MFIs would be wiped out, he kept his calm and held on to his nerves. After watching closely, he introduced a new product in 2007: education loan at 12%—10 percentage points less than the cost of other loans at that time.

Why did he do that? There were a couple of reasons.

First, to gain social equity as nobody else was giving education loans; second, he was running the risk of losing some customers who had been paying 22%. He thought it would be better to offer a subsidized loan than losing an income of 22% and acquiring new customers. Education loans were offered only to the existing customers who had already been paying 22%.

Similarly, in 2014, after getting RBI’s in-principle approval for a bank licence he was not sure whether commercial banks would continue to give money to Bandhan. So, he wanted to rein in the loan growth but it was not easy as the customers would get nervous if they felt that Bandhan did not have money to lend.

He started looking at technicalities and found some reason or other to call for close scrutiny of books in certain pockets where the loan demand was too high. Following this, he either cut down the size of disbursements or put them on hold. Nobody suspected anything but his purpose was served. Later, when he was convinced that banks would not stop giving money to Bandhan, it was not difficult to resume giving loans, and the loan growth in the second half of the fiscal year 2015 was phenomenal.

In May 2010, ahead of SKS Microfinance’s initial public offering (IPO), the first by any MFI in India, and much before the crises that engulfed the industry in the aftermath of Andhra Pradesh promulgating a state law, Ghosh slashed interest rates by 5 percentage points to 18.97%, creating a new benchmark. ‘That was a master stroke which prevented the government of West Bengal from going the Andhra Pradesh way and clamping down on Bandhan,’ says Brij Mohan.

All these people have seen Ghosh as the Bandhan boss.

Nilratan Haldar is someone who had watched him as his boss at BRAC in Bangladesh as a senior programme manager. “A job given to him was done. I had around nineteen trainers working under me but nobody could match Shekhar in resource mobilization," Haldar told me.

He also mentioned one of Ghosh’s traits that used to irritate him. “He would pick up handbills, papers, interesting articles in magazines, and keep them in his folder. If he came across a saying like ‘The most important word in human relationship is “we" and the least important word is “I"’ on a piece of paper on the road, he would immediately pick it up and keep it in his bag. We always wondered why he was doing this. In fact, if we had lost any piece of paper, we used to say, search Shekhar’s folder."

Haldar told me that once Ghosh was caught sneaking into BRAC’s computer room which also housed its library, a restricted zone for junior employees like him. After that, Ghosh changed his strategy. He would enter at midnight and keep the person who handled the photocopier on guard.

There, he would read up books on management and make his PowerPoint presentations for the next day’s training. By the time he finished his work, it would be 4 a.m. He would get up at 7 a.m. for a walk, and by 9 a.m., he would be in the classroom.

“He can turn adversity into an opportunity. The Andhra Pradesh crisis illustrates that; he thrived after that," says Nanda. The former NABARD chairman is also aware of Ghosh’s cost-consciousness. He is extremely simple and also cost-conscious. In the EC 76, Sector I, Salt Lake City office, where Bandhan was headquartered till 2011, there used to be a wooden bench in his very small cabin on which he would sit and rest. There was no sofa.

“When I came to Kolkata to attend the first board meeting, I was put up at a guest house which did not have proper air-conditioning arrangements," Nanda told me one evening in November over a cup of tea at his flat in Mumbai.

According to former RBI deputy governor Usha Thorat, tremendous consciousness of cost is the hallmark of Ghosh. He speaks the language of the borrower and is in total control.

“He keeps his cost low by not limiting the number of people he would need... He keeps as many people as he requires but may not give them very high salary... I find his model very interesting... He has total control and at the same time he empowers people and the result is phenomenal growth."

Nanda also remembers Ghosh was getting a pittance—some 8–10 lakh—as salary after Bandhan became an NBFC.The board forced him to raise his salary as otherwise it would have been very difficult to get senior executives, as his salary would have capped their compensation. “Even today, he travels economy class on flights. We have forced him to take business class at least on long international flights."

ASA International’s Haque had an account of Ghosh’s cost-consciousness. Ghosh once took a couple of senior ASA executives and Runu da in a taxi to Park Street. He wanted to show them Kolkata. They got down from the taxi at Park Hotel and walked through New Market. Haque, who had not been to Hajj then, wanted to have beer at a Park Street restaurant. Ghosh entertained the three of them with one bottle of beer.

Is it frugality or Ghosh’s sense of humour? Singh of SIDBI also had a taste of his rustic humour. His Opportunity Fund at Dia Vikas Capital wanted to pick up a stake in Bandhan, but, as a policy, it could not pay a premium. Ghosh refused to offer the stake at a par value, saying, “If the groom does not charge dowry, the bride’s family thinks there is something wrong with the groom."

Haque’s final impression of Ghosh? “Ghosh was (and is) at the right place, at the right time. He is an explorer; he gives the impression that he is a simple and innocent man but he is wise."

Vijay Mahajan, a veteran in the MFI business, says Ghosh has seen the business, studied the predecessors well, and learnt lessons from others’ failures. “He went beyond copying to improvising—the Xerox is better than the original."

Brij Mohan finds him very good at reading between the lines and that makes him a tough negotiator with auditors, raters and investors. He has also the ability to see things from a different perspective. For instance, when everybody is blaming the over-aggressiveness of the MFI industry for the Andhra Pradesh crisis, Ghosh held the banks responsible as they were flooding MFIs with money. “Had they not been pumping so much money, how would the MFIs manage to grow their balance sheet?" he asks.

According to Nanda, Ghosh’s advantage is that he is not a banker and does not carry any extra baggage. He is driven by strong common sense. “I remember when Bandhan started growing, there was pressure on him to get highly qualified people—CAs and MBAs—at higher cost, but he kept on saying he did not need tigers to catch rats; cats could do the job. He has tremendous understanding of the operations of microfinance," he says.

Pritish Saha, a senior executive of Bandhan Bank, throws light on the humane aspects of Ghosh. Once, on a typical location survey for an MFI branch in South 24 Parganas, they felt hungry in the afternoon. Along with Ghosh and Saha, there was another gentleman, Robin Biswas, all three riding on one bike.

Ghosh wanted to have bananas for lunch. Biswas got down from the bike and started bargaining hard with a roadside banana seller, an old lady. Ghosh quietly stepped in and bought a dozen bananas for the three of them at the price which the lady asked for.

Published with permission from Penguin Random House India.

Bandhan: The Making of a Bank will be available in the market later this month.

Tamal Bandyopadhyay, a consulting editor at Mint, is adviser to Bandhan Bank. He is also the author of Sahara: The Untold Story and A Bank for the Buck.

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