NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, February 28, 2011

MUMBAI -India’s finance minister Monday announced the creation of a 1-billion rupee ($22 million) equity fund for microfinance institutions, a step that will provide the much needed financial support to smaller players.

“The microfinance institutions have emerged as an important means of financial inclusion. Creation of a dedicated fund for providing equity to smaller MFIs would help them maintain growth and achieve scale and efficiency in operation,” Pranab Mukherjee said while presenting the federal budget for the fiscal year that starts April 1.

The India Microfinance Equity Fund will be created with state-run Small IndustriesDevelopment Bank of India, or SIDBI.

Microfinance institutions came into a bad light when some allegedly overcharged on loans and used coercive recovery practices. The institutions faced the wrath of the Andhra Pradesh government in southern India, which moved a resolution for tighter control over them.