Press release: IFC invests $100 million in Mahindra Finance for loans to farmers
IFC, a member of the World Bank Group, has invested INR 6.4 billion ($100 million) in Mahindra & Mahindra Financial Services Ltd. This investment will enable Mahindra Finance to augment its growth by extending loans to individuals, including farmers, to buy tractors, vehicles and other equipment, along with financing small and medium enterprises.
The investment in Mahindra Finance, the country’s leading rural finance company and India’s largest tractor financier that reaches more than half of India’s 600,000 inhabited villages, will be through secured non-convertible debentures.
Mechanized farming can cut costs by 25% and raise productivity by 20%. That will help meet the Government’s target of doubling farmers’ incomes by 2022. At present, less than 30 percent of India’s farmers use modern equipment. To compound matters, 80 percent of farms in India are classified as “small and marginal”, and require financing for smaller mechanization solutions.
“Since its inception in 1991, Mahindra Finance has been working in the rural and semi-urban areas of India, catalyzing financial inclusion of the unbanked and under-served communities and also partnering with them in their difficult times. Our focus has been on enabling these customers with innovative financial solutions, tailor made to their evolving needs” said Ramesh Iyer, Vice-Chairman & Managing Director, Mahindra Finance.
Mahindra Finance’s parent company, the vehicles-to-software conglomerate, Mahindra & Mahindra, has been IFC’s partner for several decades. The new loan will help the company expand further and cater to the needs of small landholders. Sixty percent of rural households depend on agriculture for their livelihood. Yet, agricultural productivity has not increased and climate change holds a serious threat to the sector.
“To make a significant impact in the agriculture sector, we need to provide patient capital and deliver climate-smart solutions. Mahindra Finance brings the scale and expertise, and we aim to develop agribusiness solutions focused on women,” said Arun Kumar Sharma, Chief Investment Officer, IFC.
Agriculture plays a strong role in poverty reduction. IFC invests across the agribusiness supply chain – from farm to retail – to help boost production, increase liquidity, improve logistics, and expand access to credit for small farmers. IFC also runs large advisory programs aimed at developing farmers’ knowledge and adoption of modern agricultural practices to help them raise productivity, improve incomes, and learn new skills.
IFC is the world’s largest development finance institution focused on the private sector. Since 1956, it has invested in over 400 companies in India, providing $17 billion in financing to the private sector.
Photo courtesy of Igor Ovsyannykov.