IFC bets big on microfinance sector; to invest Rs 435 crore

Multilateral funding agency International Finance Corp (IFC) is betting big on the microfinance sector, the only arm of the financial services industry that continues to show robust growth.

The World Bank affiliate IFC is set to invest Rs 300 crore in TPG Capital and Citigroup backed-Janalakshmi Financial Services and another Rs 135 crore in CreditAccess Asia promoted Grameen Koota Financial Services.

The investments are likely to be decided by first week of July.

IFC on Friday revealed that it is considering to invest $50 million, or about Rs 330 crore, in Janalakshmi Financial Services in form of a senior debt investment.

Janalakshmi claims to be country’s largest urban microfinance institute operating through more than 330 branches in 18 Indian states.

It has a borrower base of more than 4.6 million and loan portfolio of Rs 9,100 crore as on March end, as per IFC Data.

Promoted by Ramesh Ramanathan, former European head of corporate derivatives of Citibank, Janalakshmi is funded by some marquee names like TPG Capital, Citigroup Venture Capital, North Haven PE, India Financial Inclusion Fund, The Rohatyn Group, Treeline Investments and Havells Enterprise, among others.

This is IFC’s second trance of debt funding to Janalakshmi; it had earlier extended about Rs 120 crore in 2014.

The decision to extend the current loan would be taken by IFC’s in its board meeting scheduled for July 4.

On June 20, IFC would be making up its mind to invest Rs 135 crore in another micro-financier, Grameen Koota Financial Services.

Grameen Koota operates in five states through 298 branches. It has a borrower base of around 1.2 million and a loan portfolio of Rs 180 crore.

Both Janalakshmi and Grameen Koota are headquartered in Bangalore.

Promoted by Vinatha Reddy and Suresh K Krishna, the Netherland-based CreditAccess Asia now owns 81% stake.

CreditAccess, incidentally, is also an investor, owning 10% of pre-IPO equity of Equitas, which recently got listed.

It has sold half of its investments, netting a cool profit of euro 18.5 million, it said recently.

Interest of multilateral funding agencies like IFC and GIC Singapore, which recently invested in Bandhan Bank, in the microfinance sector is understandable looking at its performance, a bright spot in country’s economic map.

The sector witnessed growth of 84% over last year with 44% increase in client base, Microfinance Institutions Network said in its recent report.

The data excludes figures of Bandhan, which got converted into a bank, as well as Ujjivan and Satin Creditcare, both listed companies, which announced their quarterly results after MIN came out with its data on May 16.

Satin has reported 86% growth in bottomline with 53% rise in loan book while Ujjivan, country’s largest in terms of reach, came out with a 134% jump in its net profit and 68% growth in topline.