Posts Tagged ‘india’
Posted on July 19, 2010 - by M. Bennett
India’s poor need to join the banking mainstream: minister…
India’s poor masses need bank accounts and access to the financial system to help to sustain the country’s strong domestic economic growth, Finance Minister Pranab Mukherjee said Monday.
He challenged banks and other businesses such as mobile phone companies to come up with innovative systems that would help the Congress-led government attain its aim of bringing the poor into mainstream banking.
“Financial inclusion is a necessary part of our growth process — an essential part of our future,” he told a conference in the capital on “financial inclusion” of India’s officially estimated 440 million poor.
Posted on July 13, 2010 - by M. Bennett
India: Microfinance firm eyes cities…
By Urvashi Jha Jul 13 2010 , Hyderabad
Bhartiya Samruddhi Finance (BSFL), the flagship company of Hyderabad-based microfinance firm, Basix Group, is firming up plans to enter into urban micro credit market. The micro finance institution (MFI) is developing a range of micro credit products to meet the needs of urban poor spanning home, health and education sector besides meeting working capital requirements for micro-entrepreneurial activities.
Read more…
Posted on July 12, 2010 - by M. Bennett
India: Private Equity funds step up investments in MFIs…
High interest and repayment rates make micro-finance institutions profitable.
Private equity (PE) investments in microfinance institutions (MFIs), which fell by 12 per cent last year (2009), have recovered this year. Between January and June this year, MFIs have attracted PE investment totalling $84 million (about Rs 386.4 crore) — an increase of a little over 15 per cent over the first half of 2009.
Industry experts say the attraction of MFIs for PE investors lies in two sets of figures — the high interest rates that MFIs charge (30-60 per cent), and high repayment rates (exceeding 95 per cent). These two sets of figures combine to make MFIs highly profitable.
Posted on July 12, 2010 - by M. Bennett
Bloomberg: SKS to Sell Shares July 28-July 30, Document Shows…
By Ruth David
July 12 (Bloomberg) — SKS Microfinance Ltd., India’s largest microfinance company, plans to sell shares in its $250 million initial public offering from July 28 to July 30, according to a sale document obtained by Bloomberg.
The price range at which the Hyderabad-based company will offer the shares will be announced on July 26, according to the term sheet. Citigroup Inc., Credit Suisse Group AG and Kotak Mahindra Capital Co. are managing the sale.
Posted on July 9, 2010 - by M. Bennett
India: Decoding microfinance…
By Pranab Ghosh, Hindustan Times
New Delhi– He would have been a hardcore banker had he not branched out to microfinance. And that was because “it is a business with a social mission offering double bottom line satisfaction to all stakeholders”. Reykam Jayasurya, an MBA and LLM, started his career in 1982 in the State Bank of India before moving to the Small Industries Development Bank of India (SIDBI) in 1991. In 2003 he became a microfinance expert and consultant and is at present the CEO of Asmitha Microfin Limited, a leading microfinance institution, drawing a pay package, which in his own words is “competitive and comparable to the banking industry”.
“Microfinance,” to Jayasurya “means provision of financial services to the low income group which lacks access to such services.” “It offers small loans for various purposes, predominantly income-generation activities, as well as other financial services such as savings, insurance, remittances etc.” The loan amounts are repaid over one year, in small weekly, fortnightly or monthly installments.
Posted on July 9, 2010 - by M. Bennett
World Bank to lend $407 mn for microfinance, quality stats…
NEW DELHI: The World Bank and India today signed two agreements for a total loan of $407 million to scale up microfinance services in unbanked areas and improve capacity to generate quality statistics.
The assisted projects are ‘Scaling up Sustainable and Responsible Microfinance Project’ ($300 million loan) and ‘India Statistical Strengthening Project’ ($107 million loan), the government said in a statement.
“The objective of the project is to scale up access to sustainable microfinance services to the financially excluded, particularly in under-served areas of India,” it said.
Posted on July 8, 2010 - by M. Bennett
Banks should charge less than 10% while lending to microfinance institutions…
Vijay Mahajan, who in June took over as chairman of the Washington DC-based Consultative Group to Assist Poor (CGAP), wants banks in India to lend to microfinance institutions (MFIs) at sub-10% interest under the new base rate regime. Banks lend to MFIs at 11.5-14.5% interest, and these lenders charge rates as high as 30% for small loans to the poor. Mahajan, founder-chairman of microfinance firm BASIX group, however, said in a recent interview he expects rates charged by MFIs to go down on higher volumes and anticipated lower cost of funding.Mahajan, the first Indian to head CGAP, is also president of the Micro Finance Institutions Network (MFIN), a self-regulatory body comprising 39 MFIs. These represent some 80% of India’s microfinance sector, estimated at Rs24,000 crore in terms of loans.
Posted on March 19, 2010 - by James
India: MFI Funds Widen Focus to Cover New Social Sectors…
Noida, Uttar Pradesh, India, March, 16 2010 – Micro-insurance, micro housing finance, remittances and services in education & healthcare are coming under their radar.
India’s microfinance-focused private equity fund managers are now diversifying their investment base into newer areas of social investing as they raise new vehicles. These funds are investing in areas from healthcare services to rural supply chains to even rural business process outsourcing plays. With microfinance coming to the portfolio of mainstream investors with the impending public offering of SKS Microfinance, the search for the next emerging game-changer for these fund managers has already begun.
Fund managers like Aavishkaar Venture Management Services Pvt Ltd, Caspian Advisors Pvt Ltd, Elevar Equity Advisors Pvt Ltd and Lok Advisory Services Pvt Ltd have raised or are looking to raise new funds which will have a broader focus beyond credit. While the focus of these funds continues to be microfinance, they will also look at broad spectrum of areas such as micro-insurance, micro housing finance, remittances, mobile payments and services in education and healthcare.
Posted on March 15, 2010 - by James
“SKS Microfinance may hit Street with Rs 1,000-cr IPO “
NEW DELHI: Hyderabad-based SKS Microfinance is looking to raise Rs 1,000 crore from its upcoming public flotation , whose progress is being
keenly watched as it is the first share issue by a company in the fledgling microfinance sector.
“We plan to sell around 10-15 % stake. The quantum of stake sale will depend on the valuation of the company,” said a senior executive with a private equity investor in SKS, founded by Vikram Akula, one of the pioneers of the industry.
The firm, which specialises in offering small loans to poor borrowers, is expected to file its draft red herring prospectus (DRHP) by end of this month and is looking for a valuation between Rs 5,000 crore and Rs 7,000 crore, he said, requesting anonymity.
Posted on March 14, 2010 - by James
Sequoia may pick up 9.4% stake in CARE…
NEW DELHI: Private equity firm Sequoia Capital is looking to pick up 9.4% stake in rating agency Credit Analysis and Research Ltd (CARE) for Rs 73.5 crore, people close to the development said. CARE, a non-banking financial institution (NBFC) and rating firm, is controlled by IDBI Bank, SBI and Canara Bank. Currently, it has no foreign shareholding. IDBI bank, with more than 26% stake, is the largest shareholder in the rating firm, which was set up in 1993.
Canara Bank holds 23.67% in the company, while SBI has 9.97% stake. Other shareholders in CARE are Federal Bank, IL&FS and ING Vysya Bank.
Posted on March 10, 2010 - by James
India: SKS to file for IPO in 3-4 weeks…
MUMBAI, March 8 (Reuters) – SKS Microfinance, an Indian firm that makes small loans to poor borrowers, plans to file application papers for an IPO in 3-4 weeks, three sources with knowledge of the deal said. The exact size and structure of the fundraising was not yet determined, with one source putting the figure at roughly $200 million, some of which might be raised through a pre-IPO placement. Another source said the company could raise $250-$350 million.
The sources did not wish to be named as they were not authorised to speak with the media. SKS founder Vikram Akula declined to comment. The for-profit company is India’s largest microfinance institution and is backed by private-equity firms such as Sequoia Capital, Kismet Capital and Sandstone Capital.
Posted on February 25, 2010 - by James
BBC News: “Saving holds key to women’s empowerment”
Once upon a time, Sumitra used to roam the streets of the Indian city of Ahmedabad, collecting discarded caps which could be recycled and sold back to manufacturers such as Coca-Cola.
She would spend the whole day sifting through the rubbish collecting the caps in return for a few hundred rupees – about $2. Then in 2006, Sumitra was introduced to a microfinance initiative which provided her with a small loan to start her own business. Four years on, she employs five women, and is the proud owner of six bottle-cap straightening machines which process 50kg of caps a day.
Posted on February 21, 2010 - by James
WSJ: Microfinance has The Makings of An Industry…
Opportunities at the bottom of the pyramid are driving the buzz today. One of the most significant areas in this category in India is Microfinance – both in what it has been able to achieve over the past couple of decades, as well as in its unrealized potential. Besides the scale of business that is possible in microfinance, what is even more exciting is the scale of impact that is possible through microfinance, in enabling other businesses in that segment.
One of the most significant aspects of microfinance over the past 5 years has been the talent and capital it has been able to attract. From socially-focused entrepreneurs and grants, the industry has moved to attracting the best consumer finance professionals (with an equally compassionate outlook) and large scale institutional financing. This, coupled with the experience that early Microfinance Institutions provided, has led to emergence of this opportunity at an unprecedented scale.
Posted on February 17, 2010 - by James
Reserve Bank of India Asks MFIs to Improve Governance Standards
HYDERABAD: India’s booming microfinance segment is under the scanner, with the Reserve Bank of India (RBI) issuing a veiled warning that it could be taken off the priority sector lending list of banks if the industry fails to improve its governance standards.
This was spelt out at a meeting in late January between senior RBI officials, representatives of Sa-Dhan—the association of Indian microfinance institutions (MFIs)—and some senior MFI managers from Karnataka, West Bengal and Andhra Pradesh.
The RBI officials reportedly told MFI executives that the central bank was aware of the extent of benami loans being given by MFIs, the practice of writing off bad loans and sloppy corporate governance in some of the entities, all of which could have their impact years down the line.
Posted on January 13, 2010 - by James
India: Investors happy as microfinance lenders discipline growth…
Microfinance institutions (MFIs)—firms that offer tiny loans to low-income groups—are moderating their pace of growth, but private equity (PE) and venture capital (VC) funds that have invested in them aren’t complaining.
MFIs are going slow on opening branches and acquiring loan customers. In an attempt to improve quality control, the industry has prepared a code of conduct, following which MFIs will try to avoid heavy concentration in some regions and stop chasing the same set of customers.
High growth means high returns for PE and VC funds. Yet investors are pleased the Rs11,750 crore microfinance industry is starting to rein in lending to address concerns that unbridled growth may cause bad assets to pile up.
Posted on January 7, 2010 - by James
Indian Microfinance Sector Demand Exceeds Current Fundraising…
With more than Rs. 1,000 crore capital inflow into the microfinance sector in 2009, new avenues to raise funds have come under scrutiny of microfinance institutions to meet the demand for rapid expansion that the sector is witnessing in the last two years despite the global financial meltdown in the mainstream banking sector.
Led by SKS microfinance and Spandana Sphoorthy which have successfully raised funds via the non-convertible debentures (NCD) route, many MFIs will follow the suit. The NCDs, which can be issued to both retail and institutional investors, will be in the form of a loan to a company that cannot be converted into equity.
The country’s first ever listed MFI’s non- convertible debentures issue was by Hyderabad-based SKS Microfinance that had raised Rs 75 crore by one year NCD at a coupon rate of 10 per cent in May 2009. The NCDs are listed on the Bombay Stock Exchange (BSE) and have been placed with the Standard Chartered Bank’s Foreign Institutional Investments (FII). The company chose to raise funds through NCDs (debt) so that it could match its debt with the equity it raised a year before.
Posted on December 22, 2009 - by James
India: SKS Microfinance ties up with State Bank of India…
SKS Microfinance has tied up with State Bank of India and two of its group banks for integration of 600 of its branch accounts with them.
“This is an innovation on the liability side we are offering to our customers. It will facilitate last mile cash-dealing,” Mr Dilli Raj, Chief Financial Officer, SKS Microfinance, told Business Line here.
As a part of the agreement, the Hyderabad-based microfinance institution would integrate its accounts in 390 branches with State Bank of India, 150 with State Bank of Hyderabad and 60 with State Bank of Mysore.
SKS had earlier tied up with Axis Bank, HDFC Bank (NYSE:HDB) and ICICI Bank (NYSE:IBN) for a similar facility.
“In addition, State Bank of India is also giving us Rs 100 crore funds as a mix of term loan and cash credit. This is significant because it shows the willingness of public sector banks to be associated with MFIs which was not happening earlier,” he said.
SKS, which has an outstanding portfolio of Rs 3,628 crore as on November 30, 2009, now had 36 per cent of its credit sources coming from 17 public sector banks.
CAPITAL
On the need for further capital, Mr Raj said evaluation of all possible options in debt and equity (including IPO) was being examined.
SKS has been aggressive on securitization of its agri/weaker section portfolio with banks. “Before March 31, 2010, we will be doing Rs 1200 crore through this route as the funds would be cheaper by 200 to 250 basis points than the term loans (at about 8.25 per cent), he said.
So far, it had tied up with ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra, Punjab National Bank and Yes Bank (OOTC:YESBF) in this regard.
The benefit in the cost of funds would eventually be passed on to the 5.7 million customers SKS currently had, the CFO said.
“In fact, we have reduced our lending rates in Orissa, Karnataka and Andhra from 15 per cent (flat) to 12.5 per cent recently,” Mr Raj said.
SKS, which had ‘pioneered’ securitization of portfolio in MFI sector, had also tied up with Religare for commercial papers worth Rs 25 crore.
“This is the first standalone debt paper from a Mutual Fund to MFI,” Mr Raj said.
SKS, which has over 19,000 employees on its rolls, is now currently adding 1000 new employees every month to its field force for expanding its reach, he added.
Source: http://www.istockanalyst.com/article/viewiStockNews/articleid/3730342
Posted on December 16, 2009 - by James
WSJ: Microfinance’s Financial and Social Objectives
Wall Street Journal
According to the 2009 Microfinance India State of the Sector (MISS) Report, the microfinance industry’s client outreach has grown by 30% over the last year to 76.6 million and the total outstanding loan portfolio has grown by a staggering 56% to INR 359 Billion over the same period.
The growing integration of the sector with the capital markets has led to an influx of funds from various channels and has accelerated the transition of the Indian Microfinance Institutions (MFIs) into mainstream companies. While such a period of heady growth especially amidst an overall slowdown in the economy is laudable, one must question whether the industry is fulfilling its core charter of integrating millions of underserved Indians into our financial system in a socially responsible way. Critics have pointed out that even today financial inclusion remains as elusive as ever to the people at the absolute bottom of the pyramid (BOP).
There is also a real danger that some borrowers are falling behind by taking on excessive debt and then using debt rollover to meet their obligations. MFIs are also expanding the scope of their services by using their delivery platforms to bring more goods and services within the reach of rural India; but the same trend could also lead to financial profligacy amongst consumers. We delve into the intricacies of the microfinance debate and look ahead to see how Indian MFIs can manage the next phase of their growth in a way that benefits…
Posted on December 16, 2009 - by James
WSJ: As Microfinance Grows in India, So Do Its Rivals
Mahabubnagar, India
By KETAKI GOKHALE
The practice of making tiny loans to poor people, or microfinance, was supposed to help drive traditional village moneylenders from rural India.
Instead, traditional moneylenders, who typically charge high interest rates, are thriving, even in areas most heavily targeted by microfinance, which was begun as a way to help combat poverty by granting the poor access to capital to start businesses. Muhammad Yunus, the Bangladeshi founder of microfinance, won a Nobel Peace Prize.
Even as the government and nonprofit organizations came together to create the Indian microfinance market in the 1990s, traditional moneylenders’ share of total rural Indian household debt grew to 29.6% from 17.5%, according to a government survey. Another recent survey by the Reserve Bank of India found that between 1995 and 2006, the number of registered traditional moneylenders increased 56% to 19,627 from 12,601. Though much harder to quantify, unlicensed lenders are believed to have made similar gains, the survey says.
Posted on November 26, 2009 - by boris
India: Microfinance institutions wary of housing loans over default fears…
Concerns of defaults are holding back microfinance institutions, or MFIs, from a full-fledged expansion into home loans even as they seek to turn their clientele of poor borrowers into consumers and compete with commercial banks.
MFIs, established mainly to lend small sums to the unbanked poor to help them earn a living, say there’s potentially a huge demand for home loans among their customers. “This is unsecured lending. Risks are too many,” said a senior official at SKS Microfinance Ltd, India’s largest MFI, who didn’t want to be named. “It’s a different and a difficult ball game. We do not know yet how to price it.”
Home loans would be an extension of the consumer finance business of MFIs, who have already gone beyond their traditional role by financing the purchase of mobile phones, water purifiers and even refrigerators and are seeking to expand their product offerings to compete with commercial lenders.
Source: http://www.livemint.com/2009/11/23212808/MFIs-wary-of-housing-loans-ove.html
The MiFi Report
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