CHENNAI, India, August 13, 2012 /PRNewswire/ --
In a first large scale partial guarantee program for microfinance institutions in India, Asian Development Bank ("ADB") has provided partial credit guarantee to loans to Microfinance Institutions (MFIs) in India. IFMR Capital, an NBFC engaged in providing capital market linkages to institutions that impact low-income households in India, is the structurer, lead arranger and co-guarantor to the transaction. Ratnakar Bank ("RBL"), a private sector bank in India, acting as a domestic banking partner for this facility will extend rupee loans to MFIs in India backed by the partial guarantees.
This program would help MFIs expand their outreach by on-lending to borrowers spread over an estimated 300 districts in India across the footprint of their operations. Under the program framework, IFMR Capital will recommend eligible MFIs to ADB using its own internal due diligence standards and will also provide subsequent portfolio monitoring and surveillance support to ADB on the underlying MFIs.
"This risk-sharing arrangement will result in scaled-up assistance to people in India currently unable to access funds, such as the poor, women, and cash-strapped micro- and small enterprises. Under the transaction, our commercial financing partners will be able to increase their lending without unduly increasing their risk," said Philip Erquiaga, Director General of ADB's Private Sector Operations Department.
The deal, sized at approximately INR 1.5 billion in the first round, is expected to enable financing to around 125,000 households in rural and semi urban parts of the country that have hitherto been excluded from the mainstream financial markets and would go a long way in meeting the larger objectives of financial inclusion and social empowerment in these areas. The deal also provides confidence that the Indian microfinance sector continues to display resilient performance while demonstrating sustainable and balanced growth post the crisis that hit the sector in 2010.
"This program has been launched at a very appropriate stage for microfinance in India. This will not only release much needed credit to a vast number of households, but also showcase the inherent value of the microfinance sector and enable financing from mainstream financial institutions. The deal structure also reaffirms our principals of high quality local origination (MFIs), efficient risk transmission (IFMR Capital) and risk aggregation by well capitalised investors (ADB / Ratnakar Bank)", said Dr Kshama Fernandes, CEO, IFMR Capital.
About IFMR Capital
IFMR Capital is a Chennai based NBFC which commenced operations in 2008, with the mission to provide efficient and reliable access to debt-capital markets for institutions that impact low-income households. Focussing on microfinance, micro enterprise finance & affordable housing finance sectors, IFMR Capital via its 25 partner institutions has facilitated financing of c.INR 20 billion to more than 2 million low-income households. http://capital.ifmr.co.in/
SUSMITHA CHAKKUNGAL, IFMR Capital, Ph: +91-44-66687442 l E-mail: email@example.com
SOURCE IFMR Capital