Hope and despair in micro-finance
Wednesday, August 22, 2007
These last few months have been marked by deals in the microfinance industry never witnessed before. With $12.5m into Spandana (of which $10m came from JM Financial), $11.5m in SKS Microfinance (majority from Silicon Valley-based Sequoia Capital) and a whopping $27m in Share (of which $25 m came from Dubai based Legatum Capital), suddenly all MFI CEOs seem to be talking about raising capital and doing it quick lest they miss the bus.
But in a nascent industry MFIs large enough (with disbursements of Rs 300-400 crore) to absorb such large doses of capital are few and far between. So while these are instances of the industry finally being able to access mainstream sources, the CEOs of most of the more modest-sized MFIs will have to continue to depend on fund sources which have targets in terms of the number of beneficiaries in addition to return on capital. Of these the more active have been the Hyderabad-headquartered Bellwether Microfinance Fund, Delhi-based Lok Capital and Unitus India based in Bangalore. Of course Nabard too has a dedicated MF equity fund, but its announcement of setting up an MFI itself has made many in the industry wary of a conflict of interest.
Of the MF industry-focused funds operating in India, Bellwether has probably been the most active, having invested over $8.6m across a dozen companies which had between themselves 265,489 customers at the end of March 2007. In terms of profile, half of these work in the rural areas and the remaining in urban areas. While six of those funded are start-ups, four were in NGOs which have been or are in the process of being transformed into for-profit MFIs and two are existing NBFCs.
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