Money & Banking

MFIs eye domestic private equity investors for funds

Hyderabad | Updated on March 12, 2018

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Microfinance institutions (MFIs) plan to rope in domestic private equity (PE) investors to tide over the funds crunch they are facing at present.

“We are optimistic about domestic PE investors as they know the strength of the industry,” Mr Alok Prasad, Chief Executive Officer, Microfinance Institutions Network (MFIN), a body of MFIs registered with the Reserve Bank of India, told Business Line.

The Microfinance Equity Fund of Rs 10O crore announced in the Budget proposals would encourage domestic PE players to invest in MFIs, he opined.

Pursuing discussions

While no concrete data is available on investments by domestic PEs in MFIs during the last four months, many MFIs are presently pursuing discussions at the individual level.

Following allegations of ‘excesses' of MFI agents for recovery and subsequent enactment of MFI Regulation Act by Government of Andhra Pradesh, foreign PE players as well as banks and other financial institutions had almost stopped lending to MFIs.

“Even now, the funding scenario is very bad and not in any way different from what it was four/five months ago. This needs to be changed,” Mr Prasad said.

Banks were waiting for clarity on policy/regulation aspects (from the RBI) after the recommendations of the Malegam panel on the need to address funding needs of MFIs, he added.

Wait for policy clarity

According to Mr P.N. Vasudevan, Managing Director of Chennai-based Equitas Microfinance, the equity route, however, is not an alternative to debt route.

“If there is no debt available we need to wait for it. I think, this is time for MFIs to hold on to operations and wait for clarity of policy and regulations,” he said.

According to Mr Dilli Raj, Chief Financial Officer, SKS Microfinance Ltd, banks should support MFIs, which have small exposure in Andhra Pradesh.

“The collections outside Andhra Pradesh are about 98 per cent,” he said.

The Hyderabad-based SKS had an incremental sanction of loans to the tune of Rs 1,500 crore out of which Rs 400 crore was drawn.

Published on March 02, 2011

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