Money & Banking

MFIs to get Rs 100-cr fund support; Rs 500 cr for SHGs

Our Bureau Mumbai | Updated on March 01, 2011 Published on March 01, 2011

The Finance Minister, Mr Pranab Mukherjee, announced on Monday the setting up of a Rs 100-crore ‘India Microfinance Equity Fund' to support smaller microfinance institutions (MFIs). The fund would be managed in partnership with the Small Industries Development Bank of India (SIDBI).

“The MFIs have emerged as an important means of financial inclusion. Creation of a dedicated fund for providing equity to smaller MFIs would help them maintain growth and achieve scale and efficiency in operations. I propose to create in the course of the year, India Microfinance Equity Fund of Rs 100 crore with SIDBI,” said Mr Mukherjee in his Budget speech.

The Budget has further proposed a Rs 500-crore corpus for a ‘Women's SHG Development Fund', which would help empower women further.

“The Government is considering putting in place appropriate framework to protect the interests of small borrowers,” he said.


MFIs had been cash-strapped after commercial banks had sharply reduced lending following rising defaults by companies in Andhra Pradesh and the introduction of an ordinance in the State, to regulate the MFI's operations. It was alleged that MFIs were charging exorbitant interest rates and using illegal practices for loan recovery.

“We are particularly pleased that this reconfirmation that microfinance is a national priority is backed by concrete measures that will augment the flow of credit to the sector. The creation of the Rs 100-crore fund will help the microfinance institutions to meet capital requirements. We welcome the increase in rural and social sector allocations like rural housing, which will enhance rural cash flows and improve the credit standing of our micro borrowers,” said SKS Microfinance CFO, Mr Dilli Raj.

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Published on March 01, 2011
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