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A meeting of a Self-Help Group in Andhra Pradesh

MFI to small bank: Ujjivan's amazing story

Ratna Vishwanathan

Published: Aug. 08, 2018
Updated: Sep. 04, 2018

The story of Ujjivan, one of the largest Microfinance Institutions (MFIs) and its transformation into a Small Finance Bank (SFB)takes us deep into the microfinance business and the vision of Samit Ghosh, Ujjivan's founder.

Ujjivan's journey is not unknown, but Subir Roy’s considerable experience as a journalist is evident in his careful chronological documentation of the 13-year journey of Ujjivan, peppered with facts and figures.

For those interested in the microfinance ecosystem the book also chronicles the larger story of the ‘for profit’ microfinance entities in India.

The extensive introduction and overview is a must-read for anyone wanting to understand the journey of Non-Banking Finance Companies (NBFCs).

They came to be known as NBFC-MFIs after they specifically focused on microfinance  post the recommendations of the Malegam Committee Report on reforms in the sector. They operated within a stringent regulatory framework after the 2010 Andhra Pradesh microfinance crisis. The slightly extended overview provides a chapter- wise summary as a prelude to what follows.

The microfinance sector over the past decade has grown quite rapidly despite having had to withstand various crises at regular intervals. The entities that have weathered these storms well are those that planned growth in a robust and steady manner, putting the client at the heart of the business.

The book brings out in great detail how Samit Ghosh’s previous career as a banker helped create and drive the business model of Ujjivan. While he was inspired by the Grameen model, he realised that there was a large urban poor segment that needed basic access to finance. The business model started out by providing access to finance to low-income households across the country in urban geographies.

At the heart of the organisation lies the client-centric development of Ujjivan. But while keeping the business sharply focused on clients, Ghosh took equal care to ensure employee growth and welfare. In an era where attrition rates are high, Ujjivan has managed to have an 86 percent retention rate.

Ujjivan’s well-planned growth trajectory and its strategy of spreading business evenly across geographies helped it to overcome several crises over the years, the most recent one being of demonetisation. There are interesting snippets such as how the entity came about as the result of a moment of epiphany between Ghosh and his deceased father. Ghosh’s vision of setting up the Parinaam Foundation to enhance the skills of the population at the bottom of the pyramid to provide them with access to finance speaks  much about his vision. 

What set Ujjivan apart from its peers was Ghosh’s approach of decentralised governance with a team of highly skilled people who drove the development agenda of the organisation. The entity has worked with investors on an aligned vision. When it was on its way to an IPO just prior to its transformation into a Small Finance Bank (SFB), Ghosh was very candid in letting investors know that as they were undergoing a change of model, initially profits would dip.

It is this candid approach and the development focused orientation of Ujjivan which has driven its success. Much before the SFBs were envisioned by a forward-thinking governor of the RBI, Ujjivan had already started using technology to leverage business and bring down costs to provide low-cost service delivery to borrowers. This marriage of social benefit with technology, sound human resource practices and a client-centric business focus has gone forward to inform Ujjivan Small Finance Bank.

The book chronicles important milestones in the MFI story right up to demonetisation, which really hit the MFI industry hard. As the business was predominantly cash-driven, pulling cash out of the economy and not allowing NBFC-MFIs to accept old notes impacted the sector greatly. The unforeseen disruption by local politicians and low-level political aspirants was something that took the industry by surprise. But it also brought home the fact that there was a need to interact closely with borrowers. Ujjivan scored on this account and weathered the storm well.

The facts about the industry as a whole, and Ujjivan in particular, have been carefully researched. Experts and stakeholders have been consulted to provide insights into a sector which has been endlessly striving to be seen as a vehicle of financial inclusion due to its ‘feet on street’ model of doorstep banking services to the poor.

Where the book falters is possibly on capturing the passion that drives Samit Ghosh. Having said that, the meticulous research that has gone into the book is a tribute to Roy’s experience as a journalist of long standing. It is a good read and a treasure house of information on Ujjivan definitely, but also on the sector as a whole. 

Ratna Vishwanathan is CEO of Sustainable India Finance Facility


  • Girish Dikey

    Girish Dikey - Aug. 9, 2018, 11:06 p.m.

    This is with reference to Ratna Viswanathan’s review of Subir Roy’s book on Ujjivan. Customer centricity has been the hallmark of Ujjivan's success. This is the reason the MFI has been able to overcome unforeseen challenges and become so hugely successful.