StanChart to up microfinance portfolio

Standard Chartered Bank is planning to scale up its microfinance business in India. The bank which has a microfinance portfolio of around Rs 60 crore is planning to increase it to around Rs 500 crore in the next 18 months.

The foreign bank's group Chairman Mervyn Davies had pledged to create a $500 million microfinance fund over the next five years.

Around 20 per cent of this fund is expected to flow to India. At present, the bank operates its microfinance business in 10 countries and plans to launch it in around 17 countries by the end of this year.

"We started the microfinance business in India in early 2006. We are present in 10 countries in South Asia, Africa and Bangladesh. In the next six months, we plan to take this business to another six to seven countries. Our aim is also to use capital market instruments in India to augment its microcredit base,'' said Ranjan Ghosh, regional head, South Asia, Standard Chartered Bank.

The bank has made a decision to adopt the partnership model to ensure that costs of operations are low in this business. Standard Chartered has partnered with 15 microfinance institutions in India. These MFIs will be used as agents for credit delivery.

"The bank also aims to be a bridge between the MFIs and developmental organisations. Taking a step in this direction, the bank has securitised a microfinance portfolio of around $125 million. It is a diversified basket and a good way to get multilateral agencies to share the risk,'' added Ghosh.

The bank has issued a medium term note in Dubai, which is expected to close in July. The MTN issue is a basket of microfinance portfolio from India, Bangladesh and Africa.