Money & Banking

AP muddle hits MFI funding

Anjana Chandramouly Bangalore | Updated on April 05, 2011

Karnataka-based Grameen Koota sees 50 pc dip in porfolio, loses clients

Lack of adequate funding post the Andhra Pradesh crisis, especially from banks, has resulted in about 50 per cent dip in portfolio and loss of clients for Bangalore-based micro-finance institution (MFI) Grameen Koota.

“Though we have no exposure in Andhra Pradesh, it has been quite a challenge raising funds for our business operations,” Mr Suresh Krishna, Managing Director, Grameen Koota, told Business Line. Insufficient funding has brought down its portfolio by almost 50 per cent, despite recoveries going on.

In April 2010, the MFI had a portfolio of Rs 330 crore, which dipped to Rs 190 crore at the beginning of 2011, he said. It has also lost 30,000-40,000 clients this year, and the MFI currently has a customer base of 4.5 lakh borrowers.

Alternative sources

However, Grameen Koota has raised funds through alternative channels such as non-convertible debentures, securitisation and portfolio buyout by a few banks. “Through these, we were able to raise Rs 140 crore beginning 2011. This has helped us grow our portfolio to Rs 250 crore in March,” he said.

The drastic dip in its portfolio this year has forced the MFI to review its business plans. “We have to rework our business plans for next year, but we hope to at least maintain our portfolio, if not achieve a 15-20 per cent growth on last year's business size of Rs 330 crore,” said Mr Krishna.

To fund a portfolio of about Rs 400 crore, he pointed out that the MFI might need at least Rs 300 crore during the 2011-12 fiscal. Grameen Koota is in talks with banks for funds, and Mr Krishna said that some of them have shown interest.

“But most of them are waiting for some clarity on handling repayment issues in Andhra Pradesh and also clarity from the Reserve Bank of India on the Malegam Committee recommendations,” he said. However, some banks such as SIDBI and IDBI have been funding MFIs, he added.

Published on April 05, 2011

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