Indian Microfinance at Long Last Attracting the Attention of Venture Capitalists

India, one of the most developed microfinance markets in the world, may have finally received long-awaited recognition. Venture capital has come to Indian microfinance, supporting the commercialization of the industry by providing much-needed capital. The joint venture is led by the American investment company Gray Ghost and the Dutch Hivos-Triodos Fund. To skirt India’s notorious red tape, the partners transformed an existing Indian microfinance institution into Bellwether, intended to be a source of financing for India’s most innovative microfinance institutions. The fund is capitalized at $10 million, and will address small and medium-sized institutions, which are considered less able to attract finance from the regular financial sector, relative to larger microfinance institutions.The mission of the fund is to promote the commercialization of microfinance through targeted investments and will seek out microfinance institutions that are or want to be commercially sustainable. A board and committee to advise on investments will together institutionalize Bellwether’s involvement with the chosen microfinance institutions. As the CEO of an upcoming microfinance institution spends more than 60% of his or her time fundraising, such an influx of funds will no doubt improve the availability and quality of microfinance services.

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