YES Bank plans to raise $75 million from the International Finance Corporation (IFC) to help expand its network, reach out to small and medium enterprises (SMEs) and agricultural clients, and increase portfolio 3.5 times to $7.7 billion by 2016.
The corporation, a member of the World Bank Group, said this investment will be in the form of a 15-year subordinated bond. It is expected to strengthen the bank’s capital base significantly. Over 3.5 lakh additional enterprises stand to benefit from the planned expansion, the corporation added. “IFC’s support to YES Bank will help strengthen our credit systems and processes, risk management, customer relationship management and help us deliver better financial services to the target sector,” said Rana Kapoor, managing director and chief executive officer of YES Bank in a statement. YES Bank is one of the few banks to provide direct microfinance services to villages, in line with IFC’s financial inclusion strategy. According to IFC, nearly 80 per cent of India’s population lack access to formal financial services and only 30,000 of India’s 600,000 villages have a bank. Micro, small and medium enterprises in India are constrained by lack of adequate management skills, modern technologies, industrial infrastructure and financial access. IFC seeks to bridge the financing gap and enhance the capacity of the sector. This funding comes at a time when there is little international appetite for investment of this volume and tenor.
“IFC’s investment and advisory support will help YES Bank expand financial services to small and medium enterprises and the agriculture sector in an increasingly difficult credit environment,” said Karin Finkelston, IFC’s Vice-President for Asia Pacific. The project is aligned with IFC’s strategy of promoting financial inclusion in South Asia by reaching out to those at the base of the pyramid, she added.