A Helping Hand
Utkarsh Micro Finance caters to the needy in UP and Bihar and has now morphed into a small finance bank
Every Saturday morning, scores of young men— mostly high school pass outs—throng the main office of Utkarsh Micro Finance in the heart of Varanasi. Many travel from towns and villages nearly 100 kilometers away for the weekly round of direct walk-in interviews at the barely seven-year old microfinance company. The selected young men are trained to be loan evaluators – those who identify people in need of a loan and have a viable business case to repay later. Despite the low entry barrier, a fresher can earn `12,000 a month with incentives.
An indicator of unemployment levels in Uttar Pradesh is that last year, the state government received 23 lakh applications – including 150,000 graduates, 25,000 post graduates and 250 doctorates – for 368 posts of peons in the secretariat. Utkarsh’s core business is providing loans to small entrepreneurs left untouched by formal banking systems. It caters to people who have credit needs of between `10,000 to `2 lakh and, ironically, are deemed too big for microfinance firms or too small for a bank. Utkarsh addresses those that fall under this blind spot. With a client base of 1.3 million, 351 branches across 10 states and a loan portfolio of more than `2,800 crore, it is now one of the bigger non banking financial companies in India.
HUMBLE ORIGIN
The genesis of the company can be traced back to its founder Govind Singh’s humble origins. Singh—with stints at ICICI Bank, State Bank of India, Axis Bank and Bank Internasional of Indonesia—is from a village 40 kilometres from Corbett National Park. His long career in banking, coupled with the urge to do something of his own led to the formation of the company.
“I always wanted to do something of my own. In 1983, when I was a first year student at Kirori Mal
College in Delhi, I sold fire crackers on the footpath of Chandni Chowk for four days and earned `400,” says Singh. “The two things that attracted me was the viability of the business and the social aspect of offering loans to those who are outside the ambit of formal banking.” In the second half of 2009, Utkarsh came into existence with four branches in Varanasi.
Soon after Utkarsh was set up, the microfinance industry faced trouble. Suddenly, it was not an exciting business, yet Utkarsh survived because it was small. “Then, our loan portfolio was close to `32 crore and we had 49 branches. What helped us was that we were not very big. If we had a portfolio of say `100 crore or more, it would have been difficult to hold on to that level and the fall in disbursements may have been demotivating,” says Singh. “Also, fortunately, we had broken even in 11 months. So month-on-month we were not into losses.” Utkarsh used the opportunity to review and fine tune processes. “Our process is our greatest strength. We have never cut anybody’s incentive and have never pressurised employees for fresh business.”
The lull did not last long. From April 2011, money began flowing into the sector and things started looking up. In June 2011, Utkarsh had an equity round and since then it has always registered a steady growth month-on-month.
SOCIAL UPLIFTMENT
Phoolpatti Devi, 32, living on the outskirts of Varanasi first took a `10,000 loan from Utkarsh a few years back to open a ration shop and to help her husband in his