The Hindu Business Line : HDFC Bank's micro lending set to double

`The need of the hour is to get more NGOs to set up micro finance institutions. The bank is ready to provide arrangement services and forex advisory services to the MFIs eligible to borrow from abroad.'

Chennai , March 25

HDFC Bank's disbursements of micro credit this year would cross the Rs 60-crore-mark, more than double the Rs 25 crore it achieved in 2003-04.

"We are looking at trebling this number next year," Mr N.S. Kishore Kumar, Head-Agriculture Business and Micro Finance, HDFC Bank, told Business Line on Wednesday.

He said that the bank was working with at least fifteen micro finance institutions (MFIs), which had among them over one lakh beneficiaries. HDFC Bank intends to firm up relationship with many more MFIs.

There are a number of well-run MFIs, with good repayment track record, with whom we could work, Mr Kumar said.

Asked about profitability of micro lending, Mr Kumar said, "This is a sector that gives better spread than industrial credit."

He, however, pointed out that the operating costs were typically higher, and hence the MFIs should be supported by grants and equity participation.

He said that the opening up of the ECB window to the MFIs was bound to have a positive impact on micro lending.

Several MFIs, such as Share MircoFin, Sewa, Spandana and Basix, are said to be keen on borrowing funds from abroad.

"Micro finance is an area that has attracted the attention of international lenders," Mr Kumar said.

He said that HDFC Bank was willing to provide arrangement services and forex advisory services to those MFIs that were eligible to borrow from abroad.

Mr Kumar said that the need of the hour was to get more NGOs to set up micro finance institutions.

Banking industry sources say that potentially, micro finance offers a Rs 45,000-crore lending opportunity, to some 400 million rural people.

Against this potential, only about 20 million of them have been served so far, by the organised financial sector, with total disbursements of about Rs 3,900 crore.

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