IFC to pick up stake in Chennai MFI

Written by fe Bureau | Chennai | Updated: Nov 13 2009, 05:12am hrs
International Finance Corp (IFC), the multilateral lending arm of the World Bank, is planning to pick up equity stake in Shre Pathrakali Finance Company, a Chennai-based microfinance start-up frim recently acquired by Govind Singh, ex-business head of micro banking at ICICI Bank, along with Aavishkar Goodwell, a microfinance fund. The equity peg is likely to be around $2 million. It will help part fund the proposed recast exercise of the firm.

The microfinance institution (MFI) has shifted its base to Varanasi in Uttar Pradesh since the acquisition in August. The company will be rechristened as Utkarsh Microfinance soon.

The firm is in the process of growing into an NBFC and funds have been lined up to facilitate it. The IFC investment, for which due diligence is under way, will help boost the transformation of the company in a big way, said an official spokesperson of Shre Pathrakali Finance. The MFI, which has opened four branches in a span of three months, will initially focus on its operations in Uttar Pradesh, and chalk out plans to expand in other states later.

According to an analyst, IFCs investment in a state like Uttar Pradesh, and in a microfinance company at an early stage, will likely to encourage other investors and entrepreneurs to expand operations in UP and nearby states, thereby increasing flow of credit to such areas.