IFC, a member of the World Bank Group, will invest Rs 1.4 crore in Utkarsh Micro Finance Private limited- microfinance start-up, to serve small borrowers in India’s low-income state of Uttar Pradesh and other parts of northern India.
In the next five years, Utkarsh expects to reach more than 5,00,000 women borrowers in the most poorly served markets.
In a release the company said that the access to microfinance in India is limited, particularly in low-income states like Uttar Pradesh. IFC’s support to Utkarsh will help make microcredit accessible in rural, semi-urban, and underserved areas. It will also equip the company to build extensive banking relationships that will be critical as the company expands and seeks debt funding.
“Utkarsh initially will operate in eastern Uttar Pradesh and gradually expand to other parts of the state and the adjoining states of Madhya Pradesh and Bihar with low microfinance penetration. With IFC’s support, we expect to expand significantly into rural and semi-urban areas where the need for microcredit is highest,” said Govind Singh, Managing Director and CEO, Utkarsh Micro Finance.
India’s microfinance market is potentially the largest but among the least-served market in the world. The current annual microcredit demand in the country is estimated at about $22 billion from 245 million low-income families, but the supply from microfinance institutions was only about $7 billion in 2009. The formal credit system has not been able to reach low-income, less educated, small-time borrowers adequately.
IFC, along with Aavishkar Goodwell India MFI Fund, is a critical component of the current fundraising plan for Utkarsh to facilitate investment in low- income states.
“IFC’s support to Utkarsh aligns with our strategic focus of making microcredit available to small businesses, traders, and women borrowers, especially in those parts of India that have not seen the benefits of growth,” said Paolo Martelli, IFC Director for South Asia.
