PARTNER SPOTLIGHT

Partner Spotlight: An Interview with Samit Ghosh 

Ujjivan, a Unitus partner since 2006, is an MFI providing financial services to the economically active urban and semi-urban poor in India. Since their launch in November 2005, they've reached more than 550,000 clients with a diverse range of financial products and services. In October 2009, Unitus sat down with Mr. Samit Ghosh, founder and CEO of Ujjivan, to talk about his background in financial services, efforts to reach the urban poor, and what he sees as the next big thing in microfinance.


Q: You come from a strong banking background and are well known for your work in pioneering consumer banking in India. What made you enter microfinance?

A: My career started in 1975 with Citibank. I went through operations, corporate and investment banking—the normal route which any management trainee took. Quite by accident, I got into consumer banking because I came back to India to head the investment bank with Citibank in 1985. But by the time I reached India, Citibank had reorganized and put the investment bank as a part of treasury, a change I was uncomfortable with. As I was figuring out what to do, a friend of mine, Jerry Rao, who was starting the consumer bank for Citibank in India focused on the middle class, asked me to join him. Consumer banking was new to me and I thought I'd give it a shot. So that's how I got into consumer banking and became fascinated by it.

You must understand that the middle class in India, at that stage in 1985, really didn't have any access to financial services other than a savings account and time deposits (similar to a CD in the US banking system) with banks. There were no consumer loan products. If my father, a government doctor, wanted to build a house at that time, he would have to retire, get all his end-of-service benefits, and use that money to build a house. There was no other option. But today, anyone who works for five years can get a loan to buy a house or an apartment or a car or a two-wheeler. There were no loans available before 1985.

It took about 20 years, from 1985 to 2005, for the 200 million middle class in India to get access to the full range of financial services. As a consequence, the demand for goods and services within the country became enormous. The housing industry experienced a boom. You didn't have to wait to retire to buy a house anymore. And the automotive industry took off. Prior to the 1980's, India had only two cars available: the Fiat and the Ambassador. Demand was very low because you had to save up the entire amount to buy it. Today, India is the largest producer of two-wheeler vehicles in the world. This had a big impact for the country's economy. India's GDP used to grow from the time of Independence in 1947 at one to two percent every year. Post 1985, GDP started growing eight to ten percent and suddenly India and China were the stars of the world economic horizon.

There was phenomenal impact and today there is talk about India growing at ten or twelve percent per year, a major part of the reason is the financial access for the 200 million middle class. However this market has now become saturated.

India can progress further only if we also provide financial access to the 600 million poor. The poor however need much more than financial services. The middle class can survive because the middle class has access to education, healthcare, etc. The poor don't have that. But to start with, we can provide them financial access, and then you can try and provide them other essential services like healthcare, vocational training, education, and community development.

It took twenty years for the 200 million people in the middle class to come up. Now with better technology and an open economy, in 30 years and the lives of the 600 million poor can make a similar change. It's not going to happen overnight—it might take us the next three decades. That's what motivated me to start Ujjivan. As a financial services professional, this was the last frontier. If I could start an enterprise that could successfully provide financial services to the poor, this would help start an industry which would go on to serve this huge market and propel the country to the 'India Shining' we aspire to be.

Q: Tell us about your vision for Ujjivan.

A: In India, much of the focus for poverty alleviation programs have been for the rural poor. If you look at the poor in India, there are about 600 million people, out of which 500 million are rural. Because the rural poor numbers are so large, the focus has always been on them. But there's still around 100 million urban and semi-urban poor. And this segment is one of the fastest growing populations in India, as many rural poor migrate into the cities and towns. So when we started in November 2005, we decided to target the urban and semi-urban poor.

Also, it was a challenge because no one else had reached the urban poor on scale. When we started our 18 month pilot, everyone else—all the major MFIs—were watching us. When we finished the pilot successfully, having made a number of changes in the standard microfinance model to adopt it to an urban environment, everyone jumped in after us. Right now, the urban microfinance market is highly competitive. But we feel happy because we started a trend and at least the urban poor are now being taken care of. To us that was a challenge—to serve these urban and semi-urban poor, to do something new, and to be the first to do it at scale.

Q: What would you consider your biggest achievements?

A: From Ujjivan's point of view, I think reaching the urban poor, which nobody else had done, and making it a success. Now the 100 million urban poor, who didn't have access before, have numerous opportunities for financial services. So that's one big achievement.

I also think there's no other MFI in India which has achieved the success we've seen in less than four years—reaching half a million customers and opening 216 branches in 12 states spread across the country. In fact, if you take the 18-month pilot out, because at that time we were only in Bangalore, our expansion of 190 branches outside that area has been in less than two and a half years. So that's quite an incredible achievement that we're very proud of.

Third, we have always believed in providing excellent service to our customers and our staff. We have quite a lot of mechanisms for client and customer feedback in place. Though quite intense, it helps us develop and modify our products and services. And I want our staff to be very proud and happy to work for Ujjivan—that's always been our goal. We've worked to make Ujjivan a great place to work and last year we won and currently are number one in terms of being the best place to work in the microfinance industry. So that's another huge achievement.

Q: You spoke briefly about your client feedback process. How do you gather client feedback and use that to build a diverse range of products?

A: We have a number of mechanisms for customer feedback at the field level. One way is that each branch elects one field staff representative.  Once every two months, we meet with them to get their feedback. It was originally meant to see if they have any HR related issues, but what we found was 80-90% of the time they used that occasion to talk about issues in the field and issues the customers were facing. It’s only 10-20% of the time they discuss about their own HR related issues. This provides us with great surrogate feedback of the customers. It’s more direct feedback than we have been able to get from the clients. We’ve tried doing customer satisfactions surveys and couldn’t get honest feedback. The clients feel beholden to Ujjivan and our field staff. We are giving our customers loans and often this is the first time they’ve received such financial services. So they don’t want to say anything negative about Ujjivan or our field staff, which might put their relationship at risk. Instead, we use surrogate feedback from field staff and it’s definitely no holds barred feedback.

Secondly, we also meet with customer center leaders every two months in small groups.   They also give us feedback about our products and services, as well as new ideas. Every two months we conduct these meetings—it’s quite intense process.

Q: How do you set yourself apart from other microfinance institutions? What’s your differentiator?

A: We have a wide range of products. First, we’re not a single product company. We have different products which are an attraction to clients. Secondly, we focus on service quality. At the end of the day, we have a very good service program in place so our customer retention rates go up. Right now, we’re putting in place a service quality program that has three areas. Right at the beginning is a complaint and problem resolution center. Second focuses on loan turn-around time and transaction turn-around times. Third is customer interaction with our staff. We’ve developed an entire soft-skills training program after a lot of research for our front line staff so they’re able to effectively handle client complaints. These are the three areas on service quality we’re focusing on to start with.

Q: As you’ve expanded so dramatically, opening nearly 200 branches in just over two years, how have you preserved Ujjivan’s award-winning culture?

A: You’ve got to keep working at it. We have a set of training programs for people who join us as field staff, loan officers, and branch managers. But we’re opening 15-20 branches a month so you can imagine how many people we’re training in the field, all across the country.  And there’s always a chance that the training program might have started out the same but by the time it goes throughout India, it can be interpreted differently or modified.

So constantly we have to be in the field and auditing what is going on. We have to go and see whether they’re running the same program in the North as we’re running in the South.
At Ujjivan, we encourage every senior person to go out into the field. Yesterday, I went to the branches here in Uttarakhand, just to talk to them about process they follow. It’s important to be in the field and to have your feet on the ground.

Q: What do you see as the next big thing in microfinance?

A: One of the big goals in microfinance is impact. We've done an initial pilot on Social Performance Management to give us an indication of the impact of microfinance on poverty alleviation. Poverty is very complex; it's not a simple thing. There are many factors which keep people poor: education, healthcare, community, the water they're drinking, etc. Financial services is only one aspect of that. In our pilot, we saw some positive impact, but to say that microfinance by itself will solely remove poverty is highly pretentious.

As MFIs, we really need to work hard not only on providing microfinance but also collaborating to provide access to healthcare, education, vocational training, and community development for the customers. The impact is going to be more significant when we tackle these issues which affect the lives of the poor along with microfinance.

Q:  What do you see as one of your next biggest challenges?

A: Personally, I’m going to be turning 60 in December (2009). We’ve built a good organization and leadership team. I’m putting together a succession plan that preserves the ethos of Ujjivan’s culture and to ensure that the transition in the next few years is smooth.  I want to make sure that the core values and what Ujjivan was set-up to achieve—poverty alleviation—don’t get diluted or lost.

One month after this interview, Ujjivan came onboard as the first partner in Unitus's Social Performance Management Implementation Project (SMP IP). Learn more about Ujjivan and their involvement in the SPM IP.