Money & Banking

MFIs breathe easy with improved fund flow

G. Naga Sridhar Hyderabad | Updated on November 14, 2017 Published on March 19, 2012

The credit flow to microfinance institutions has gone up significantly in the last six months.

Major MFIs, including, Hyderabad-based SKS Microfinance Ltd and Kolkata-based Bandhan, could mobilise funds by way of term loans, rated pool assignments and private equity investments.

This marked a departure from the situation after October 2010 when banks and financial institutions blocked new sanctions to MFIs following enactment of the Andhra Pradesh Microfinance (Regulation of Moneylending) Act.

Big improvement

“We have raised Rs 1,200 crore in the year-to-date basis so far. There has been drastic improvement in sentiment to lending to MFIs,” Mr S. Dilli Raj, Chief Financial Officer, SKS Microfinance, told Business Line here.

Other MFIs which received funds from existing investors/private equity players recently include Ujjivan (Rs 127 crore), Bandhan (Rs 135 crore from International Finance Corporation) and Janalakshmi (Rs 65 crore).

The normal situation in non-AP States, and clarity on the regulatory front (except in AP) with creation of Non-Banking Finance Company-MFIs by the Reserve Bank of India, allowing banks to buy loan portfolios from MFIs to meet priority sector obligations, have been driving this funding, say experts.

According to Mr Alok Prasad, Chief Executive Officer, Microfinance Institutions Network, the fund-flow to non-AP MFIs is ‘healthy'.

The early enactment of Microfinance Institutions (Regulation and Development) Bill by the Central Government would further improve funding prospects, he added.

Shortage continues

Barring SKS, which has been able to ink loan and securitisation deals due to its operations outside Andhra Pradesh, other MFIs continue to face shortage of funds. “The environment is still not the same as prior to October 2010,” said Mr Suresh K. Krishna, Managing Director of Bangalore-based Grameen Koota.

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Published on March 19, 2012
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