Reliance, Bharti may storm microfinance

Tuesday, February 6, 2007

Reliance Retail and Bharti, which has joined hands with Wal-Mart, could storm the micro-credit space as they look to establish rural supply chain linkages to service their mega retail forays.

According to sources, Reliance Retail is likely to move the RBI seeking permission to set up an NBFC arm that will operate as a microfinance institution (MFI). It may also look at partnering existing MFIs as part of its ambitious supply chain with rural and semi-urban markets for which the company is said to have earmarked Rs 8,000-10,000 crore.

The move could significantly pep up the currently under-serviced microfinance sector. Micro-lending to the economically active poor, both urban and rural, is pegged at around Rs 7,000 crore, as reflected in bank outstandings. As against this, back-of-the-envelope calculations put the demand at around Rs 2 lakh crore.

Sources added that Reliance Retail was also exploring the possibilities of leveraging the MFIs for peddling its mass consumption goods into the rural belts, thereby making it a two-way opportunity. When contacted, a Reliance spokesperson declined to comment.

While Reliance has already made its first moves in tapping the potential and is said to be in early-stage talks with some leading MFIs based in Andhra Pradesh, rival Bharti has also shown interest in exploring the MFI route for supporting the retail supply chain, contract farming operations and dairy sourcing.

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Source: The Economic Times (link opens in a new window)