 "The small finance bank will be profitable within first year of operations: K Paul Thomas")
ESAF Microfinance's Chairman and Managing Director K Paul Thomas spoke to T E Narasimhan about his vision and strategy for the Bank. He is hopeful that in the first year itself the bank will be profitable and will go for listing by 2020.
How are things progressing?
They are progressing well. FIS Global is helping on IT infrastructure and for core banking solution. We will be submitting the final application next week.
Recruitments are progressing, almost 50 per cent is completed. For overall strategy processing, we are using EY as transformation consultant and we also have individuals' consultants to help in specific areas like IT, operations and others. We are almost on track and going as per our plan.
When are you planning to commence operations of the new SFB? Who are part of top management officials?
Original plan is to start by middle of August, depends on when the final licence will come from RBI. We are confident on starting the operations before December 2016. We also hired around 50 people who got banking and IT backgrounds, while the operations part will be taken care of by our existing employees, who are getting trained now. I will be the MD & CEO of the new bank subject to the RBI approval.
Top people in the management include AG Varghese, former SVP of South Indian Bank, Ajit Chowdhury who was with ICICI and State Bank of Mauritius earlier, officials from State Bank of Mauritius and Barclays were appointed for top management post. We got a nice mix of domestic and international team.
How many branches you are looking at the first year? What is your business target? When are you expecting to break even?
First year there will be around 85-100 branches and some of the existing MFI branches will be converted into a regular branch, while other will remain as customer service centres. Currently ESAF got 260 branches, of which around 10 will be converted rest will be converted as branch.
There will be three SBUs for retail liability, retail assets and micro banking. We work in 10 states and the bank will start with existing geographies and will focus on unbanked areas. We are targeting 20 lakh customers, besides the existing MFI customer base of 1.2 million. The business target is to have around Rs 3,000 crore assets, currently we got Rs 2,000 crore assets. Within the first year itself we will make profit.
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What will be your uniqueness?
We come from a development background, started as NGO in 1992 and then focused on Micro enterprise development and Livelihood programmes are our core activities.
We want to serve underserved. It is an integrated model, not loan alone triple bottom line approach social focus and agenda, we have specific inclusion plan for SC/ST, tribal, for people with disabilities. Even after we convert we will follow the same methodology that triple bottom line approach.
We also got financial products for clean energy, loan for sanitation to construct toilets, drinking water connection. We are concerned about the entire life cycle of the customers. Other uniqueness is EASF is a community-owned initiative. The current MFI company, which is going to be the holding institution for the bank, is majorly held by multi co-operative society the people. Globally it is an unique model we are trying. Other uniqueness is EASF is community owned initiative. Majority is owned by a multi state co-operative society. Globally this is going to be a unique model.
Do you have enough capital? Will you be looking at listing the new small finance bank?
Minimum capital required is Rs 100 crore, we got net worth of Rs 300 crore, so minimum capital is not an issue. Existing lendors are happy to support even after converting as bank. We will list the bank after three years, may be by 2020.
What are the challenges you foresee?
Transition from MFI culture and managing costs, including manpower and real estate cost, will be the challenges.