Case Study

Bandhan (B): Sustainable banking in India

4 pages
July 2016
Reference: IMD-7-1810

The case is set at a time when Bandhan, the largest microfinance institution (MFI) in India and the largest non-deposit taking MFI in the world, was about to embark on an organizational transformation that would convert it into a mainstream bank. In July 2013, supported by a Geneva-based investor, Bandhan had applied for a banking license to expand its operations by leveraging its network. And in May 2014 the Reserve Bank of India (RBI) had granted the license to Bandhan, making it the first MFI in the country to win a bank license, and also the youngest entity to be allowed to enter the banking space in India. Established in 2001 by Chandra Shekhar Ghosh to address the dual objective of poverty alleviation and empowerment of women, Bandhan had grown by 2013 to 2,016 branches across 22 states and union territories within India. With over 5 million borrowers and total outstanding loans of INR 57 billion (~US$1 billion), it had zero non-performing loans. Ghosh had ambitious growth plans focused on the rural sector. Bandhan seemed to have built the right capabilities to be successful as an MFI. The case allows for a rich discussion about the new capabilities that Bandhan would require as it shifted from pure MFI to banking entity and how it should go about acquiring those capabilities. Was it preparing well to deal with the challenge of entering, surviving and growing in the banking industry while continuing to serve and grow in the MFI space? Could it develop a unique and innovative model to help it straddle both worlds? With this license, Bandhan had been offered an opportunity to re-create the entire banking edifice in India. Participants have the opportunity to analyse the key issues in the case and attempt to answer the question playing on everyone’s mind – how would Bandhan deliver on the goals of financial inclusion?

Learning Objective
  • Understand the essence of building a capability-driven organization, conduct a strategic capability audit and develop an action plan to respond to the deficits identified
  • Develop a framework for an effective hybrid organization, specifically addressing the tension between the social entrepreneur’s aspirations and the financial viability of the business model
  • Understand the critical role financial inclusion plays in alleviating poverty and sensitize business executives to social development and broaden their perspectives
Organizational Transformation, Microfinance, Banking, Non-Governmental Organization, Business Model, Emerging Market, Hybrid Organization, Financial Inclusion, Strategic Capability, Inclusion
Asia, India
Bandhan Financial Services, Finance and Insurance, Financial Services
Field Research
© 2016
Available Languages
English, Chinese
Related material
Teaching note, Video
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