Mann Deshi Mahila Sahakari Bank

A. The main facts about the activities of the company.

The Mann Deshi Mahila Sahakari Bank (Mann Deshi Bank) is a cooperative, self-sustaining bank created by and for women. It was founded in 1997 and established in Maharashtra (India) by a group of illiterate women, who still compose the board today.

Its mission was and still is at the present to help women in impoverished regions achieve financial independence and become self-sufficient. Due to the bank’s commitment to its mission, it has gained the trust of its clients throughout the years (nowadays over 140,000), which has made it the first largest microfinance bank in Maharashtra and the second in India. The repayment rate reaches 98% and the bank has made profits since 2000, which has secured its consistent highest grade from the National Bank.

The bank’s majority of clients fall below the poverty line—called by the government the priority or weak sector—but its mission goes beyond financial aid. It has also created the NGO Mann Deshi Foundation, which provides clients with non-financial services: for instance, it allows women that dropped out of school obtain the basic knowledge to open a business or manage their earnings, and it offers a bus for the clients that live far from the city, among others. In addition, it has partnered with the government with the aim of decreasing the marginalisation of these women. In fact, the bank has won several awards (from Harvard and Yale among others) recognizing the bank’s innovative view of business and its mission.

But why did it inspire us?

The most striking fact about this bank is that it was created by a group of illiterate rural women that fought really hard to attain their objective: obtaining the first rural financial license from the Reserve Bank of India. But what was the inner motivation that pushed them to pursue this goal? The main cause for this effort was that the majority of the women living in the Satara district had no opportunities elsewhere—due to an illiteracy rate of 65%, among other factors—and so were obliged to depend completely on the agricultural sector, which was heavily affected by the lack of rain. The creation of a microfinance institution in the region translated into the offering of low-interest-rate loans mainly to poor women, which allowed them to make profitable investments and improve their standard of living. Moreover, the bank did not offer only financial services; it also tried to provide these women with the necessary skills to achieve their objectives.

The most inspiring about this company is the fact that a group of women with a strong motivation did something significant for this world, even though they lacked the necessary knowledge. They fulfilled their dreams and created a strong bank with a strong mission: helping poor women in India succeed in improving their quality of life. Therefore, this means that the ones that have more knowledge should be even more capable of creating truly ethical businesses.
We, the ones that have the knowledge, should strive to improve this world.

B. The Ethical challenges this company is addressing.

The main challenge that Mann Deshi bank is addressing is also the main problem in many countries, especially in India: huge economic inequality between people. Its challenge is to solve this big gap between people and decrease the marginalisation of the least fortunate. In fact, it focuses on rural women who are usually the most affected by poverty and marginalisation.

It achieves its objectives by helpings financially and non-financially women in poor areas. The Bank gives them financial support in order to allow them have a business and lead a better life. But apart from the financial support, it also gives them training and important knowledge to improve their business.
But it goes even further in its mission and tries to protect women in every possible way. It does not just give loans as any other bank; it tries to protect women’s financial assets as well as their personal assets. By financial assets we mean informing them about their rights to own assets- i.e. establish their rights in case of a divorce-, while by personal assets we mean giving them the necessary health information to care about their most important assets: their body.

But the most challenging objective that the Bank pursues is not only trying to cope with these problems in the present, but also trying to avoid their persistence in the future. It fights for this objective by helping younger generations have more opportunities to study and succeed and finally be able to decrease this gap.

C. What makes you believe this company is really ethical and why you trust it?

The Mann Deshi Mahila Sahakari Bank is a cooperative created by and for women. Is it ethical? It has been ethical from its inception precisely because of that. Is there a better alignment of interests between a firm and society when societal needs are precisely the cause of the creation of the firm? Possibly not. In an impoverished district in India, the perseverance of a courageous group of illiterate, rural women determined to obtain a banking license from the Bank of India ended up with the creation of a win-win business scheme in which the concepts of ethics and profitability form a unique symbiosis. In fact, the Mann Deshi Bank operates at a special level: Help the poor, help yourself. Let poor people have access to knowledge and financial resources, and you’ll be able to benefit from them.

The bank has disrupted the longstanding dichotomies between money and ethics, poverty and unprofitability; profitability motives executed with ethics reduce poverty, which increases profitability in turn. Nice synergy. But, one may shoot a counterargument at this point: Is it ethical to benefit from the poor? Should a company make money in a context where money is a really scarce element? Isn’t the Mann Deshi Bank spoiling financial resources from deprived areas? No. And no. Why? Through financial training and tailored financial products the bank is effectively generating value: It allows rural citizens to access resources from which greater value is created and extracted. It has been shown that the financial training organized by the Mann Deshi Foundation to its clients (and the door-to-door savings practice, which encourages regular savings) has been associated with an increase in weekly savings, repayment rates, and loans for more productive purposes. Therefore, existing (and new) money is diverted away from unproductive uses to more productive investments that yield larger financial rewards for all the participants. And not only that: We trust the bank because it has created a Foundation and a Self-Help Group, we trust it because its members have received awards from some of the most important institutions in the world, we trust it because it has steadily increased the number of clients, we trust it because it received the highest grade from India’s National Bank. There is no way we could not trust them.

The revolution of microfinance is here. By reducing financial economies of scale and assuming different risk-return schemes (balancing credit default risks with returns that precisely minimize default), microfinance institutions prove successful in environments where poverty and access to resources jeopardize economic development. And not only India, but more developed countries experiencing economic trouble would definitely benefit from these ethical, profitable firms.

D.The possible challenges facing the company in the future and how you think this company may improve.

The main challenge that the Mann Deshi Bank may face in the future is keeping its initial values intact from all the exterior influences. By observing its key figures, it is quite obvious that the bank will keep growing and expanding its profits. However, most companies lose the essence of their values when undergoing such an expansion and end up increasing prices to increase even more profits. Therefore, its most important challenge would be to remain loyal to its first objectives.

The company could also aim at bringing its services to the whole rural India, given that nowadays only 10% of households have loans and 60% still do not have a bank account. But the trade-off would be that the bank is developing the entire financial infrastructure and supporting the costs but in the future another bank with more resources could enter the market and use the existing infrastructure. In this case, the challenge the Mann Deshi would be developing an even deeper trust in its products that would make clients more attached to it and so less likely to change to another bank.

Another aspect is the fact that the bank helps creating its future clients. It is offering the possibility to study to the young generation, which would convert them in more knowledgeable customers for the future. This would imply that the company could more easily implement new products to more conscious clients.

And another interesting consideration would be receiving a hypothetical acquisition offer. The most important question is which would be the bank’s reaction confronted with an acquisition offer; which could be plausible taking into account the financial development it is carrying out. For many directors this is an attractive way for gaining a considerable amount of benefits, but usually affects directly the companies’ vision and mission. Therefore, an important future challenge would be resisting to such temptations and maintaining its values protected from negative influences.

And, how could the bank be improved? The fact that it does well does not prevent it from being even better:

• In order to better serve its clients and build a more solid understanding of microfinancing, the Bank could cooperate and coordinate with other microfinance institutions in India in order to build synergies and share knowledge and best practices between them.

• In order to promote the role of microfinance worldwide and make it a clear alternative to traditional finance, the Bank could promote its business model by playing an active role in conferences in a global basis, inviting people to its facilities, and attracting experts conducting empirical research on the actual profitability of microfinance institutions.

• In order to explore alternative models to achieve economic development and sustain profitability in the Bank’s area of influence, the Bank could create, invest or grant preferential loans to firms employing local people (and/or clients) as a means of creating value and industrializing the area. Alternatively, active partnership with public authorities (by means of cost sharing and/or acquisition of concessions) could attract public investment in the area in the form of infrastructure (chiefly water and electricity supply) and public equipments (mainly schools and hospitals).