Microfin Cos Will Soon Have up to Rs 450 crore More to Lend : The Economic Times

Mumbai:



Funds are 2nd series of disbursement after a gap of about three years

Nearly five lakh households in rural and semiurban areas could benefit as the Asian Development Bank's (ADB) Chennai-based partner IFMR Capital is planning to re . 400-450-crore credit to lease ` microfinance institutions (MFIs) in the second series of disbursement after a gap of about three years.

“We will now again start deploying funds to MFIs...We are already in talks with some private sector banks with national presence,“ said Kshama Fernandes, managing director and CEO of IFMR Capital, a non-banking finance company (NBFC) which is backed by the US-based LeapFrog Investments.

The development comes as the MFI industry, once mired in deep trouble, appears to have recovered in tandem with the signs of improvement in the economy and has left behind the Andhra Pradesh crisis that resulted in huge loan defaults.

“Over the past few years, the microfinance sector in India has evolved into a robust sector, both from an operations and a governance perspective,“ said Fernandes.

According to the industry , the average disbursal is ` . 15 crore per MFI, which provides loans of . 10,000-15,000 to each borrower.` In the first series of disbursement, about ` . 400 crore was given to 13 MFIs, which extended the credit to about 2.7 lakh poor households.

IFMR Capital is aiming to connect at least 20 MFIs with sound credentials to provide loans through different banks. It may soon strike a deal with one or two private sector lenders for fund allocations that in turn will also help those lenders attain priority sector lending target mandated at 40% of loan book.

“Despite all efforts, mainstream banks have struggled to reach out to the bottom of the pyramid segment,“ said Alok Prasad, CEO of Microfinance Institutions Network. “The MFI business model is focussed on providing financial services to the poor households, both rural and urban.“

The NBFC-MFI industry saw 61% compound annual growth rate in the past two years and the growth momentum is expected to intensify, said Prasad.“During the past few years, the authorities have plugged the regulatory gaps,“ he said.

In December 2010, ADB had approved one of the first partial guarantee programmes for MFIs in Asia. The ADB guarantee was designed with the objective of partnering with financial institutions that actively lend to MFIs in ADB's member countries.

“All loans as part of the ADB programme have met with 100% on-time repayments, paving the way for continued expansion of the programme,“ said Fernandes.

The outstanding loans adjusted for repayments currently . 200 crore, she said.stand at