MFIs turn ’profitable’ for capital market access, by Saswati Chakravarty and J Padmapriya

Wednesday, June 1, 2005

Ramesh Ramanathan, vicechairman of Sanghamitra, says: ?There is no conflict between the objective of reaching the poor and the institutional structure you adopt.? Vijay Mahajan, MD of Basix India, a bellwether MFI, says there are about 3,000 micro-finance bodies in India, of which seven have become NBFCs structured with investors, around 20 have registered as not-for-profit organisations while 980 are still societies and 2,000 are mutually-aided societies.

Though there are 3,000 players, barely a handful have a significant size of operations. Most of the major MFIs have opted to become profitable. They include Spandana, Share Microfin, Basix India and SKS, all located in Andhra Pradesh. Spandana, the Guntur-based MFI, has disbursed Rs 550 crore so far, while Share has a cumulative disbursement of Rs 950 crore so far.

That is not all. Share Microfin is in the process of tying up a $2m equity investment from Vinod Khosla, who will get a 15-17% stake in the institution. Incidentally, Mr Khosla is shopping for more. Share Microfin is also seeing interest from ShoreBank, Sidbi and IFC.

Basix India has equity investors like Hivos Tridos Funds, HDFC, ICICI Bank, IFC while ShoreBank. Spandana is also looking for equity investment. Share Microfin MD Udaia Kumar told ET, ?MFIs are no longer shunned by banks as they are more structured, governed and make profits. It is now important for such institutions to be able to not only cover costs but make margins and declare dividend for shareholders. I have been paying 10% dividend for two years.?
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Source: The Economic Times