Ujjivan (ujjivan.com/) is a for profit MFI in India. Unlike most MFI's, they focus on the 200 million urban poor of India. Ujjivan's founder is Samit Ghosh. Their mission is: To provide financial services to the economically active poor to enable them to build a better life.
Mr. Samit Ghosh grew up the son of a doctor who choose to service the poor coal mining districts. Mr. Ghosh received a good education and eventually went to Wharton for his MBA. From 1975 - 2005 he worked for Citibank, mostly in the Middle East, especially in Bahrain.
Mr. Ghosh noticed that consumer banking was not widespread in India. He began to research the work of Micro Finance Institutions (MFI's) in Bangladesh. He wanted to be able to open a mass market bank in India. So, in 2005 he set up Ujjivan as a for profit MFI in India.
Since most MFI's in India were in the Hydrobad area focusing on the rural poor, Ujjivan was set up in Bangalor to focus on the urban poor. However, from the beginning, it was Mr Ghosh's idea to cover all of India. So by 2007 Ujjivan had expanded to cover Bangalor, Delhi, Kolkuta, and Pune, giving them a wide geographic distribution. By 2011, Ujjivan had 351 branches in 51 states of India.
Although Ujjivan has not had the same severe impact that many other MFI's suffered in the 2009-2010 Micro Finance crisis, they have had to make a number of changes. Being geographically disbursed was very helpful in the crisis. It allows them to reduce both political and regional risk. Avoiding the Hydrobad area was also helpful as that market was so over saturated.
Note: Mr Ghosh recommends reading Michael Lewis's book Boomerang.
By focusing on urban areas, Ujjivan managed to stay under the radar for most of the crisis time. But still they have been working on doing a better job of pacing their growth. Today Ujjivan is working on efficiency. They have cut back their branches to 302. They are adding system automation for their loan collections and credit checks. They are also working to introduce a document management system. The other big area of focus for Ujjivan is training and leadership development. Micro lending is a people intensive, high touch business. Mr. Ghosh believes that the only way to service people well is to have happy employees. Ujjivan actually placed in the top 20 of the "Great place to work" India. Not just in Micro Finance, but overall. One of the reasons for this is the high connection the staff have with the company's mission. They are excited about being able to make a difference in the lives of people around them.
After the micro finance crisis hit and banks stop lending to MFI's Ujjivan started working towards raising equity capital. Having capital makes borrowing much easier. They are focused on increasing their lending portfolio without necessarily increasing their client base. They are also looking to expand their service offerings. Ujjivan already offers life and health insurance. They are hoping to offer both savings accounts and remittance servies when government rules allow this. Ujjivan also plans to register as a bank to allow more flexibility in their services.
Ujjivan has been selected as India's top micro lender for 2011. Some details about the business are:
Interest Rate cap = 26%
Funding cost = 15%
Operating expense ratio = 14% (down from 16% 2 years ago)
Administrative fee = 1% (this is a one time fee for customers)
Capital requirements = 15% required, 20% preferred
Repayment rate = 98.1%
Branches =306
Employees = 3000
Customers = over 1 million
Customer base = 1005 of their loans go to women
Ujjivan is trying to ge their operating expense ratio down to 10%. They are doing this through automation, reduction in client meeting frequency, reduction in physical branches, consolidating some functions, outsourcing data input, and leadership training to increase the effectiveness of their staff.
Related, but independent from Ujjivan is the Purinaam Foundation. Purinaam's mission is to serve the poorest of the poor. Parnaam provides social services to the ultra poor. This is a grant based foundation.
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