 "IFC cheers Bandhan's licence")
The International Finance Corporation (IFC), the World Bank’s investment arm, is among the few who cheered the Reserve Bank of India (RBI)’s decision to provide new banking licences. Reason: IFC is a major investor in Bandhan Financial Services, one of the two firms that were given banking licences this week.
IFC, which has about 11 per cent stake in the microfinance firm, is likely to pump in more money into Bandhan, to fund its expansion plans. Among other shareholders, Sidbi has about 10 per cent stake in Bandhan. The rest is held by Financial Inclusion Trust, North East Financial Inclusion Trust and promoters and associates.
Nilesh Shrivastava, manager (financial institutions portfolio), South Asia at IFC, said: “The banking licence for Bandhan will enhance service delivery to the poor especially in rural areas, increase the share of micro credits as a percentage of GDP and ultimately contribute to poverty reduction. Taking into account the gender profile of Bandhan's loan portfolio, this will help address gender disparity by improving women's access to financial services."
During the past six months, IFC has invested around $91 million in non-banking finance companies (NBFCs) including Bandhan Financial Services, Magma Fincorp Ltd, and Au Financiers (India) Pvt Ltd. IFC invested $35 million in Magma, $30 million in Au Financiers and $26 million in Bandhan through the debt form subscription to non-convertible debentures, while IFC also holds an equity interest in the companies.
IFC holds a 12 per cent stake in Kolkata-based Magma in which KKR, ChrysCapital and India Capital Fund also have significant stake. According to Shrivastava, this is a positive message for the microfinance industry that there are further growth opportunities for large, sustainable players to contribute more holistically to the financial inclusion story in India, other than being only credit providers.
Bandhan operates India’s largest microfinance institution through more than 2,000 branches in 22 states with a borrower base of five million women and a loan portfolio of around Rs 5,400 crore.
Shrivastava said: “While it is a huge opportunity for Bandhan, there are also significant challenges in this process of MFI-to-bank transformation (a first for India), which we will work with Bandhan on. IFC has had wide experience in working with MFIs who have converted to banks successfully in other countries and we hope to be able to share these experiences with Bandhan. We would certainly be open to additional investment opportunities should the company need the same.”
IFC, which has about 11 per cent stake in the microfinance firm, is likely to pump in more money into Bandhan, to fund its expansion plans. Among other shareholders, Sidbi has about 10 per cent stake in Bandhan. The rest is held by Financial Inclusion Trust, North East Financial Inclusion Trust and promoters and associates.
Nilesh Shrivastava, manager (financial institutions portfolio), South Asia at IFC, said: “The banking licence for Bandhan will enhance service delivery to the poor especially in rural areas, increase the share of micro credits as a percentage of GDP and ultimately contribute to poverty reduction. Taking into account the gender profile of Bandhan's loan portfolio, this will help address gender disparity by improving women's access to financial services."
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IFC invested $28 million in 2010 in equity in Bandhan and is currently investing an additional $26 million in Tier-II instruments in the company.
During the past six months, IFC has invested around $91 million in non-banking finance companies (NBFCs) including Bandhan Financial Services, Magma Fincorp Ltd, and Au Financiers (India) Pvt Ltd. IFC invested $35 million in Magma, $30 million in Au Financiers and $26 million in Bandhan through the debt form subscription to non-convertible debentures, while IFC also holds an equity interest in the companies.
IFC holds a 12 per cent stake in Kolkata-based Magma in which KKR, ChrysCapital and India Capital Fund also have significant stake. According to Shrivastava, this is a positive message for the microfinance industry that there are further growth opportunities for large, sustainable players to contribute more holistically to the financial inclusion story in India, other than being only credit providers.
Bandhan operates India’s largest microfinance institution through more than 2,000 branches in 22 states with a borrower base of five million women and a loan portfolio of around Rs 5,400 crore.
Shrivastava said: “While it is a huge opportunity for Bandhan, there are also significant challenges in this process of MFI-to-bank transformation (a first for India), which we will work with Bandhan on. IFC has had wide experience in working with MFIs who have converted to banks successfully in other countries and we hope to be able to share these experiences with Bandhan. We would certainly be open to additional investment opportunities should the company need the same.”