Comparative Study of the Microcredit operations of the Mann Deshi Mahila Sahkari Bank and the Bandhan Bank

Empowering people by providing access to affordable banking services is the basic objective of financial inclusion. Microcredit plays a significant role in the process. The focus of this study was to understand the importance of the scale and delivery models on the cost of microcredit and to examine the interest rates charged from the point of view of financial viability. The study finds that notwithstanding the cost of funds which was the largest component of the overall cost of microcredit, what really mattered was to have a lower per borrower operating cost and a higher ratio of high-yield assets to the total assets. The study demonstrates that microcredit is a viable, sustainable, and profitable business not only from the social point of view but also from a commercial angle and it is possible to provide affordable lending under the microcredit model. To be able to do that, it is important for banks operating in this area to be nimble in the use of resources and with a certain scale of operations and financial acumen, it is possible to successfully run a microcredit business. This study provides useful insights about the microcredit operations and identifies certain benchmarks which could be used for developing suitable business strategies in this area.