Microfinance company Ujjivan's founder Samit Ghosh's MFI journey

Ujjivan, one of the few microfinance companies to emerge unscathed from the recent crisis in the sector, has been able to consistently raise capital at a time when money was scarce for micro-lenders. Samit Ghosh (62), a first-generation entrepreneur and a Wharton graduate who founded the Bangalorebased microfinance company, is a seasoned banker with about 30 years of experience in organisations such as Citibank, Standard Chartered, HDFC Bank and BankMuscat. His motivations behind setting up an MFI were both professional and personal, he tells Paramita Chatterjee.

INITIATION

I decided to start a microfinance company, way back in the 80s, when I was part of the corporate world. It was only when I was part of the team that set up Citibank’s consumer banking division to serve the middle class that I realised that opportunity in the space. With this idea, I decided to offer financial services to the urban and semi-urban poor, a market that offered huge potential given that microfinance in the country had been traditionally reaching the rural poor.

EARLY DAYS

The initial days were difficult. We lacked capital and experience. But my background in the banking sector helped me hone my entrepreneurial skills. The organisations I worked for taught me the process of setting up many businesses. When I started Ujjivan in 2005, raising the first round of capital was the most difficult part. I began with a corpus of Rs 2.7 crore, of which Rs 70 lakh came from Bellwether Microfinance Fund, a private equity investor. The remaining came from my savings and that of my friends and colleagues.

Although there were challenges, it was a natural progression, given that starting an MFI was playing in my mind for quite some time. First, we started operating out of an office that we borrowed from Jerry Rao (former MphasiS CEO). Then we moved to a two-bedroom apartment, before taking up a garment factory as we couldn’t afford an office. It is our head office now.

STEPPING UP

First, we decided to gauge the success of the business model and ran a pilot for about 18 months in Bangalore with about 13 branches. Once we had the whole business proposition in place, we decided to expand our operation and there was no looking back. Today, we are present in 20 states with 300 branches and have both debt and equity money. So far, we have raised capital in four tranches and have private equity funding, the latest one being closed in February 2011.

MFI CRISIS

To be a long-term player in any industry, you should devise your own business model. The MFI sector in India has been under stress since late-2010 due to the crisis in Andhra Pradesh. We were never affected as we don’t operate in the state. We always operate in regions where competition is less. That is why we have been safe.