Robust rural demand likely to boost growth of microfin cos

Written by Sajan C Kumar | Chennai | Updated: Oct 16 2009, 04:27am hrs
At a time when the entire world is betting high on large enterprises to sustain growth, the Indian microfinance sector could be one that may have well bucked the trend. The demand from rural borrowers is likely to push growth of micro-finance institutions.

As per the data available with FE, the number of borrowers is estimated to touch 35 million in March 2011 as against 21 millon in March 2009. Currently, India has more than 300 active microfinance institutions (MFIs).

Demand for microfinance will continue to outstrip supply, according to a study by Crisil. Resources will be a key challenge as MFIs would need borrowings of more than Rs 65,000 crore over the next two years. Microfinance institutions will need to tap public sector banks to raise incremental borrowings.

Chennai-based Asirvad Microfinance Pvt Ltd recently lined up an investment of $1.75 million from Lok Capital LLC, a venture fund focused on the microfinance sector in India. Asirvad serves around 75,000 borrowers and has a portfolio outstanding of over $ 4.6 million. Asirvad non-executive chairman SV Raja Vaidyanathan said, This participation will add considerable value to Asirvad. Lok's experience in the Indian MFI space will go a long way.

Meanwhile, the Tamil Nadu-based NBFC Grama Vidiyal Micro Finance (GVMFL) completed its second round of equity infusion of $ 4.25 million from Micro Vest, Amar Foundation and Unitus Equity Fund. S Devaraj, CMD, GVMFL said, During the current year the company targets 7,50,000 clients and expand the network to 215 branches with a portfolio of reaching around Rs 300 crore by March 2010.

Similarly, Belstar Investment and Finance Pvt Ltd, the microfinance subsidiary of the Hand in Hand (HIH) group is tying up investments close to Rs 18 crore from International Finance Corporation (IFC).

Equitas Micro Finance India (P) Ltd raised a credit line of

Rs 100 crore from the Small Industries Development Bank of India (Sidbi) taking the total exposure of Sidbi to Equitas Rs 147 crore. P N Vasudevan, MD, Equitas said, The company has plans to raise another Rs 100 crore from the banks. The company in two years of its operation, has lent Rs 473 crore to about six lakh women.

Commonwealth Micro Finance (India) Ltd (CMFIL) launched Commonwealth Card, a multi-purpose prepaid card in India, in a bid to extend basic banking services to the 'un-banked' segment of the population. CMFIL chairman Mohan Kaul said, Our vision is to bring majority of the economically active adult population into formal banking system through leveraging technology and innovative business processes.

According to Crisil methodology, several Indian MFIs form part of the top 20 global MFIs in terms of outreach. Most of the MFIs have been funded by banks, financial institutions, donors / social investors and private equity so far, says the report. According to the study, the microfinance sector had remained an under-penetrated market as 110 million households in the country today face financial exclusion.