A ‘triple bot­tom line’ ap­proach for op­er­a­tions

ESAF Small Fi­nance Bank in­tends to bring peo­ple, planet and profit as part of all its busi­ness deal­ings and the fo­cus will be on in­clu­sive devel­op­ment and not just profit:

Banking Frontiers - - News - Mo­han@bank­ingfron­tiers.com

ESAF Small Fi­nance Bank in­tends to bring peo­ple, planet and profit as part of all its busi­ness deal­ings and the fo­cus will be on in­clu­sive devel­op­ment and not just profit

ESAF Small Fi­nance Bank, the Thris­sur, Ker­ala-based MFI turned small fi­nance bank has evolved what it de­scribes as the ‘Triple Bot­tom Line’ ap­proach in its busi­ness trans­ac­tions. On par with the fi­nan­cial bot­tom line, the bank gives em­pha­sis to so­cial and en­vi­ron­ment bot­tom lines. K. Paul Thomas, MD and CEO of the bank ex­plains: “In this ‘Triple Bot­tom Line’ ap­proach, we fo­cus on 3 Ps - peo­ple, planet and profit. With our em­pha­sis on fi­nan­cial in­clu­sion, our branches are con­nect­ing well with the cap­tive area - es­pe­cially with schools, re­li­gious in­sti­tu­tions and small and mi­cro en­trepreneurs. The fo­cus is mainly on in­clu­sive devel­op­ment and not merely on lend­ing money and reap­ing the re­wards. We have in place an en­vi­ron­men­tal pol­icy that man­dates pro­mo­tion of green prod­ucts. It also em­pha­sizes on clean en­ergy loans that mit­i­gate en­vi­ron­men­tal con­cerns. We are in the process of in­tro­duc­ing ‘Haritha Loans’ which is in­tended to re­vive the farm­ing sec­tor.”

He adds that this as­sertive ap­proach is per­va­sive in all stages of the bank’s trans­for­ma­tion - from a so­ci­ety to an NBFC-MFI and from an MFI to a small fi­nance bank.


The bank opened its branch re­cently in Mum­bai as part of its pan-In­dia ex­pan­sion plan. By March 2018, it in­tends to open 145 new bank­ing out­lets. The Mum­bai branch is the 60th branch to be opened. ESAF in fact has a pres­ence in Ma­ha­rash­tra since 2004, with 33 mi­cro bank­ing out­lets, es­pe­cially in the Vi­darbha re­gion. Apart from the branches, it has 370 bank­ing out­lets in 10 states. It has plans to add more out­lets and would soon have a pres­ence in the North East.

The bank of­fers a host of bank­ing ser­vices like ATMs, debit cards, safe de­posit lock­ers, in­ter­net bank­ing, and mo­bile bank­ing, SMS bank­ing, RTGS, NEFT and CTS. Some of the ex­clu­sive ser­vices it of­fers are the door step de­liv­ery ser­vices and Skype fa­cil­ity at branches. One of its unique of­fer­ings is the Hru­daya De­posit Scheme, which stands for a so­cial cause. Through this scheme, the bank pro­vides the cus­tomers an op­por­tu­nity to be a part in the eco­nomic devel­op­ment of the bot­tom of the pyra­mid.

The de­posits are used for the wel­fare and in­fra­struc­ture devel­op­ment of the marginal­ized sec­tions of the so­ci­ety - ru­ral farm­ers, fish­er­men, veg­etable ven­dors, etc - and as such the cus­tomer who opts for the de­posit scheme be­comes a part in na­tion build­ing. An in­di­vid­ual or a le­gal en­tity can join the Hru­daya De­posit Scheme with a min­i­mum de­posit amount of Rs15 lakh and for a min­i­mum pe­riod of two years. An ac­count can be opened through in­ter­net bank­ing as well. The cus­tomer will also have the op­por­tu­nity to gain first hand ex­pe­ri­ence of how his or her money is used to im­prove the lives of the or­di­nary peo­ple in the coun­try.


Thomas traces the ge­n­e­sis of the bank: “ESAF was started as an NGO in 1992 in Man­nuthy near Thris­sur. In 1995, we started the Mi­cro En­ter­prises Devel­op­ment Pro­gramme, after real­iz­ing that fi­nan­cial sup­port was in­evitable for the holis­tic devel­op­ment of the poor. In 1998, we fur­ther ex­panded our op­er­a­tions and re­ceived the first fund­ing from Grameen Bank, Bangladesh, headed by the No­bel lau­re­ate Muham­mad Younus. Grad­u­ally, both PSU banks and pri­vate banks started sup­port­ing us. In or­der to move to­wards a more reg­u­lated space, we launched ESAF Mi­cro­fi­nance and In­vest­ments, in 2008, a non-bank­ing fi­nance Com­pany. Al­though we have moved from non-profit to profit, we have never lost our fo­cus on our so­cial mis­sion. This fo­cus has been in tact in all the trans­for­ma­tions we have un­der­gone ESAF to ESAF Mi­cro­fi­nance and now to ESAF Small Fi­nance Bank.”

Thomas main­tains that as a bank the tar­get au­di­ence varies, depend­ing on the na­ture of the prod­uct. “As a bank, we need to mo­bi­lize our de­posit base. For that, we need to tar­get the higher end of the spec­trum pri­mar­ily and then the cus­tomers

at the mid­dle and lower end. At the same time, our loan prod­ucts mainly tar­get peo­ple at the bot­tom of the pyra­mid. From a prod­ucts’ per­spec­tive, our en­deavor will fo­cus mainly on de­vel­op­ing new prod­ucts for the lower class. Also, a sep­a­rate mi­cro bank­ing ver­ti­cal has been cre­ated in the bank to cater to the needs of the bot­tom of the pyra­mid.”

He says the piv­otal role be­ing played by MFIs in fi­nan­cial in­clu­sion was the prime rea­son why ESAF Mi­cro­fi­nance re­ceived the bank­ing li­cense. “In the course of time, we would like to be known as a bank that caters to all the seg­ments in the so­ci­ety. An ed­u­ca­tional prod­uct tar­get­ing schools at the high end is all set to be launched,” says he.


As a mi­cro­fi­nance in­sti­tu­tion, ESAF has been of­fer­ing doorstep bank­ing ser­vice. How will this ser­vice get en­hanced as it has now be­come a bank?

Thomas says the prime dif­fer­en­tia­tor for ESAF Small Fi­nance Bank will be its door step de­liv­ery ser­vice. “We want to pro­vide our cus­tomers the ‘joy of bank­ing’, by as­sur­ing them the miss­ing link, ie, the hu­man touch in bank­ing, al­though we will make use of state-of-the-art tech­nolo­gies. This will be our USP and this will be the way we will make a dif­fer­ence,” says he.

“We have plans to ap­point 10,000 agents for this pur­pose. These agents will pro­vide ser­vices such as ac­count open­ing, bank­ing trans­ac­tions and small value loans,” he adds.


He also em­pha­sizes that while the bank’s mi­cro bank­ing ac­tiv­i­ties will con­tinue to fo­cus on women, as a bank it will broaden its tar­get seg­ment depend­ing on the wide ar­ray of prod­ucts it in­tends to of­fer.

All the cus­tomers of the mi­cro­fi­nance com­pany have now be­come cus­tomers of the bank. The num­ber of cus­tomers to­day stands at 19 lakh.

Thomas says the cost in­volved in adopt­ing new tech­nolo­gies and iden­ti­fy­ing the right tal­ent to ex­e­cute the var­i­ous jobs were the prime chal­lenges for the bank on the tech­nol­ogy front. Be­sides, dig­i­tal aware­ness at the bot­tom of the pyra­mid and con­nec­tiv­ity at ru­ral in­te­ri­ors were ma­jor chal­lenges too on the ex­e­cu­tion front.


“Go­ing by our core val­ues, we def­i­nitely want to be a pa­per­less bank that cares for the en­vi­ron­ment. For this to hap­pen in an ef­fec­tive man­ner, we want to change the mind­set of the peo­ple, es­pe­cially at the bot­tom of the pyra­mid. Al­ready, we have started ini­tia­tives for ed­u­cat­ing the peo­ple on the im­por­tance of en­vi­ron­ment friendly life­style. We have en­gaged FIS Global as our sys­tem in­te­gra­tor and we hope to over the chal­lenges on the tech­nol­ogy as well as ex­e­cu­tion fronts,” says Thomas.

The bank has also tied up with head hunt­ing firms to get the right tal­ent to man­age tech­nol­ogy and en­sure that the ser­vices pro­vided are ef­fi­cient and ef­fort­less.

The bank al­ready has its own ATMs, it has launched tablet bank­ing, debit cards and eKYC. Within a short span of time, it in­tends to in­tro­duce POS ter­mi­nals and a fea­si­bil­ity study is now un­der way on the same.


Thomas men­tions that the bank has as­sets worth `3400 crore un­der its man­age­ment. “As a bank we would be at­tain­ing a to­tal busi­ness of `45,000 crore in the first five years of our op­er­a­tion. Ap­prox­i­mately `25,000 crore of this would be met by the de­posit base and the re­main­ing will be from ad­vances,” says Thomas.

Cur­rently, 99% of the bank’s loans are mi­cro fi­nance loans linked to groups of bor­row­ers, with an av­er­age ticket size of `60,000.

The bank in­tends to go for an IPO by 2020. The cap­i­tal re­quire­ments will also be ful­filled through sources like PE and in­sti­tu­tional in­vestors.

Thomas says as per the li­cens­ing agree­ment with the RBI, ESAF Mi­cro­fi­nance, the hold­ing com­pany will be con­verted into a core in­vest­ment com­pany. The process for the same is now go­ing on.

Also, as per RBI guide­lines, the hold­ing com­pany will have to bring down its stake to 40% in the next 5 years. ESAF Mi­cro­fi­nance and Thomas, who is the founder of ESAF Group, are the promoters of the bank.

K. Paul Thomas speaks about the Hru­daya De­posit Scheme where the de­pos­i­tor will be­come part of the devel­op­ment of the bot­tom of the pyra­mid sec­tions

Johny Joseph, former chief sec­re­tary of Ma­ha­rash­tra, open­ing the Mum­bai branch

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