Microfinance start-up plans Rs 150-crore expansion

Buoyed by the demand for microfinance from self help groups (SHGs) in Karnataka, the city-based Moksha-Yug Access, a rural infrastructure and services firm, has planned a Rs 150 crore expansion.

The start-up intends to disburse Rs 15 crore to SHGs this fiscal. The target for the next fiscal is Rs 80 crore.

At present, it has a client base of 322 SHGs (7,600 members) covering some 83 villages in Bagalkot district in North Karnataka.

The firm, which started its operations in April this year, has disbursed loans worth Rs 50 lakh to 82 SHGs (800 members) through the ICICI Bank. Following the expansion, the firm intends to reach out to SHGs (5 lakh members) in the neighbouring Bijapur and Belgaum districts.

According to Moksha-Yug Access founder & CEO Harsha Moily, the firm will raise Rs 150 crore for expansion from high net worth individuals, family and friends.

"It will go towards setting up branch offices. Apart from providing microfinance services, soil and water quality testing, it will also disseminate information on farm machinery, processing plants, procurement and marketing of inputs and extension services," he added.

"We work on an income-generating model. Microfinance will be linked to the SHGs' capacity to initiate self-employment. For instance, we assist SHGs to market their products like embroidered work and incense sticks. We have tied up with leading retailers for the purpose. We make sure the recovery is done in the simplest possible manner by empowering our field agents (local villagers)," Moily explained.

Moksha-Yug Access has signed a service provider agreement with ICICI Bank on the funding process. The microfinance firm identifies the SHGs eligible for the loan. The bank channels the loan to the SHGs through the firm which deposits a 10 per cent security.

In case the recovery of the entire funding does not happen, the firm will lose its 10 per cent security deposit while the bank will lose its 90 per cent funding. "It is the risk the bank has taken, But one aspect is clear "� we do the entire loan recovery work. At no point are the bank staff involved," Moily said.

By handing over the responsibilities of identification of beneficiaries and recovery of loan, the bank stands to save costs apart from expanding its microfinance portfolio.

The firm is in talks with other banks like HDFC and ABN-Amro to extend microfinance service to SHGs. "At the end of five years, we intend to disburse Rs 400 crore to SHGs," Moily added.

Moksha-Yug Access, in association with insurance firms, will provide life, medical and weather insurance for the SHG members.

Moily holds an MBA in International Business Management from Thunderbird, The Garvin School of International Management (USA). He worked for four years with a venture capital firm in the US before moving to a private equity firm in the UK.

He contends that microfinance is gaining importance in the third world countries: "It has enabled the rural poor to move from a day-to-day survival to planning for the future, investing in better nutrition, living conditions, health and education."