International Finance Corporation (IFC), a member of the World Bank Group, has anchored an investment round of $222 million into Chennai-based Cholamandalam Investment and Finance Company (CIFCL or Chola) to help expand access to finance for micro and small borrowers, especially in the rural and semi-urban parts.
Of the total amount, $ 92 million is from IFC’s own account and the rest syndicated from First Abu Dhabi Bank ($50 million), MUFG Bank ($50 million), National Bank of Ras Al-Khaimah PJSC ($20 million), and CTBC Bank ($10 million).
By bringing foreign banks as investors, IFC is helping CIFCL diversify its funding sources. This is the company’s first US dollar-syndicated deal since January 2019, when the Reserve Bank of India (RBI) allowed NBFCs to tap into the offshore credit market.
IFC country head (India) Jun Zhang said: “Supporting productive asset financing NBFCs is part of our financial inclusion strategy as it offers income opportunities and an escape from poverty to low-income households. Cholamandalam’s wide reach among small road transport operators and MSMEs makes it the right partner to reach these underserved segments.”
Chola executive director Arun Alagappan said: “We have pioneered technology-driven lending that is helping build credit histories of our customers, thus pulling them into the formal financing channels. IFC’s strong commitment to the NBFC space and support in helping us access credit from foreign investors will reinforce the important role played by the NBFC sector in providing last-mile credit. This arrangement, led by IFC, has helped CIFCL tap a new investor base for its borrowings at competitive rates, which will support its growth plans.”
IFC first invested in CIFCL in 2010 and again in 2014. Between 2011 and 2017, Chola reached 1,26,000 SMEs and 6.5 million micro-borrowers.