Dear Colleagues,

2011: We celebrate the completion of six years of our operations by applauding the outstanding members of the Ujjivan and Parinaam Parivaar. We have a large group of consistent high performers and also those who went beyond their call of duty to serve our customers. Like many outstanding organizations such as HCL in India and South West Airlines, we believe that ‘Employees First & Customers Second’. In a service industry the ‘Customer is King’. This cannot happen unless we treat our staff with equal respect.

The microfinance industry is changing so swiftly that by the time you read this, it may be out-of-date! The industry is going through one of most difficult periods in the short history of less than two decades. This is part of the maturing process and the industry as a whole is not under threat of collapse. Internationally, microfinance has grown from a specialized service to a globally recognized form of finance for the un-served. In India, the Rs. 30,000+ Crores microfinance industry serves over 25 million rural and urban poor whom banks have failed to reach. This is a remarkable achievement of financial inclusion in a short span of time.

The industry grew at a very fast pace in the last five years culminating in the ‘block buster’ IPO. But behind all this, there were rumblings of dark clouds: uncontrolled growth; excessive competition leading to over extension of credit; allegations of harsh collection practices and burdening customers with excessive debt resulting in customer suicides; charging high effective interest rates; refusal of larger MFIs to share the benefits of scale with customers by reducing interest rates; extraordinarily high profitability of some MFIs in pursuit of high equity valuation; disputable equity buy outs by promoters from customer-owned mutual benefit trusts (often funded by grants); extremely high salaries of senior management of a few MFIs; bad labour practices including engaging agents and a lack of transparency and ethical behaviour not just in pricing but also in business practices. It is a long list of bad practices for an industry with the mission of poverty alleviation. It is not a black & white situation and there are a lot of grey areas. No one is unshakable and we all need to take a hard look at ourselves.

We have been fortunate to have taken wise decisions such as not entering Andhra, voluntarily reducing our interest rates in July 2010, introducing community development programs, offering bonus & ESOP to employees across the organization among a larger range of good corporate management and governance practices. Consequently, we are not as badly affected. However, in a crisis of this proportion for the industry, we have to rethink and make appropriate changes for the future.

We need to focus on:
1. Operating efficiency & expenses;
2. Reasonable pricing;
3. Relevancy of Joint Liability model;
4. Improving communications with customers, staff and external stake holders;
5. Upgrading technology;
6. Designing products which strengthens customer relationship with higher impact on poverty alleviation;
7. Enhancing our service delivery;
8. Aligning the compensation structure with our goals;
9. Retaining customers and staff, and
10. Boosting Community Development and Microfinance plus programs

2011 will be the year of consolidation, change and maturity. We will be serving more than a million customers. We will be the true ‘millionaires’. Have a great year and keep the faith.

Best Regards,
Samit Ghosh
December, 2010