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Friday, Dec 13, 2002

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SIDBI plans to hive off micro-credit foundation

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According to the Chairman of SIDBI, the Rs 100-crore fund was considered insufficient to meet the ever growing micro-finance needs of the rural segment, and hence the decision to form a separate company.


THE Small Industries Development Bank of India (SIDBI) plans to hive off the Rs 100-crore SIDBI Foundation for Micro Credit (SFMC), a department providing micro-finance services to rural poor, into a separate private company.

Addressing the two-day national workshop on "Key dimensions in transformation — from NGOs to formal institutions" being organised by SIDBI, at the Indian School of Business (ISB) here on Thursday, the SIDBI Chairman, Mr P.B. Nimbalkar, said the move to hive off SFMC was aimed at meeting the increasing demands of rural poor for micro-finance.

According to him, the Rs 100-crore fund was considered insufficient to meet the ever growing micro-finance needs of the rural segment, and hence the decision to form a separate company. The new entity would raise further capital towards meeting the demands of rural borrowers.

Mr Nimbalkar said that SIDBI had recently appointed a leading consultancy group to study the various options in the market and work out a strategy for SFMC in the changing environment.

SFMC is currently engaged in providing services such as on-lending fund support and need based capacity building support to its partner micro-finance institutions (MFIs) to enable them become self sustainable in due course. The fund has of late introduced new products such as transformation loan and short-term loan for liquidity management, Mr Nimbalkar said.

Stating that the operations and activities of SFMC registered significant growth during the last three years, Mr Nimbalkar said, "This has been possible as we have freed ourselves from the shackles of conventional lending and have adopted a pro-active and goal driven approach."

Mr Nimbalkar stressed the need for innovation in product structuring and delivery channels if micro credit services were to reach a larger number of poor. SIDBI was currently exploring new areas such as link between micro-finance and sustainable environment and expects this exercise to result in throwing up ideas and questions for consideration by the policy-makers and micro-finance providers in the country.

Stating that timely availability of credit and a degree of freedom on the end use of funds were the two significant aspects to be taken care of while designing credit services for the poor, Mr Nimbalkar said NGOs and MFIs would emerge as potent intermediaries for delivery of micro- finance services in the country.

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