Category: Deals

Grameen Koota, an India-based microfinance institution (MFI) that is a division of Grameen Financial Services Private Limited, has raised equity capital worth INR 27.5 crore, the equivalent of over USD 5.88 million [1,2].

The funds were raised through investments from four funds: Italy’s MicroVentures SpA, Luxmbourg’s MicroVentures Investments (an affiliate of MicroVentures SpA), Belgium’s Incofin, and Aavishkaar Goodwell, an “Indian-Dutch joint venture” [3,4,5]. This is Grameen Koota’s second round of equity funding, after receiving an equity investment in 2008 of INR 9.2 crore, the equivalent at the time of over USD 2.3 million, from Aavishkaar Goodwell [6]. According to Suresh Krishna, the Managing Director of Grameen Koota, this investment will be used to increase the MFI’s number of borrowers in the Indian states of Karnataka and Maharashtra, to expand lending to the states of Andhra Pradesh, Tamil Nadu, and Madhya Pradesh, and to “invest in technology development” [1,7].

The International Finance Corporation (IFC), the investment arm of the World Bank, is set to provide a trade financing line of USD 51 million to Kotak Mahindra Bank, an Indian commercial bank, to lend to small and medium enterprises (SMEs) involved in international trade [1,2,3]. The line is part of the IFC’s Global Trade Finance Program, a USD 3 billion program intended to allow banks to “deliver trade financing by providing risk mitigation in new or challenging markets where trade lines may be constrained” [4]. Kotak Mahindra is the first Indian bank to be supported under this program [1]. MicroCapital has reported on the participation of other banks in this program, including Bank Respublika of Azerbaijan [5]. Dipak Gupta, the Executive Director of Kotak Mahindra Bank, has stated the importance of the line in allowing the bank to provide “a wider base of short-term foreign-currency trade finance products” [1].

KfW, the German Development Bank, The Housing Development Finance Corporation (HDFC), an Indian mortgage lender, and SKS Microfinance, an Indian microfinance institution (MFI), have entered an agreement to provide loans for home improvement to, primarily, low-income women [1,2,3]. Under a “special agreement,” KfW will provide HDFC with the funds for the project [1]. For the first tranche of funding, KfW will provide HDFC with INR 10 Crore, the equivalent of over USD 2.1 million, to loan to SKS [1]. In turn, SKS will loan to borrowers that have had at least three years of “good credit history” with the MFI [1]. Further details on the arrangement between KfW and HDFC – such as whether the financing is a grant or loan – have not been made public. The companies have indicated that the loans will mainly be extended for the improvement of homes that also serve as a site of an “income generating activity” [1].  Loan sizes will range from INR 50,000, the equivalent of over USD 1,080, to INR 150,000, the equivalent of over USD 3,240 [1]. Borrowers will have three to five years to repay the loans [1]. The interest rate will be 21 percent fixed on a reducing basis [1]. Renu Sud Karnad, the managing director of HDFC, has indicated that there will be more funding for the program in the future [1].

The National Bank for Agriculture & Rural Development (NABARD), a state-run development bank in India, will encourage investment in microfinance institutions (MFIs) by offering funding to regional rural banks and cooperative banks to purchase ratings of MFIs [1,2]. The scheme will last until March 31, 2010 [1]. With the scheme, NABARD hopes to “encourage proper standards, systems and safeguards, efficiency and transparency” amongst MFIs [1]. NABARD has agreed to reimburse up to INR 300,000, the equivalent of over USD 6,000, to banks for the first rating performed by Crisil, M-CRIL, ICRA, CARE and Planet Finance or another approved agency [1]. Eligible MFIs to be rated must have loans outstanding worth a minimum of INR 5 million, the equivalent of over USD 107.7 thousand, and a maximum of INR 100 million, the equivalent of over USD 2.1 million [1].

International Finance Corporation (IFC), a member of the World Bank Group, has agreed to provide equity of USD 1.15 million to Hand in Hand’s microfinance arm, Belstar Investment and Finance Limited. Hand in Hand is an NGO that is involved in efforts such as reducing child labor and malnutrition and improving solid waste management. The financing is intended to enable Belstar to obtain support from other investors and IFC Advisory Services will help Belstar improve risk management, staff training and product range.

The French Development Agency (AFD) recently signed an agreement with the Ministry of Finance (MOF) of Vietnam to loan an equivalent of USD 44.7 million (€ 30 million), which is to be allocated towards a government project titled “Supporting private sector for People’s Credit Fund.”

Eighteen banks in South Korea have donated a total of 255.5 billion won, the equivalent of over USD 221.4 million, to the Microfinance Foundation, a program led by the South Korean Government to provide unsecured micro loans [1]. These banks will also, over the next 10 years, invest 700 billion won, the equivalent of over USD 603.9 million, in the Microfinance Foundation [1]. The funds for this investment will come from “‘dormant deposits’ – small accounts that have been idle for years at the contributing banks” [1]. Some of these banks are Korean banks including the state-run Korea Development Bank and the commercial bank, Hana Bank [1,2,3]. Other banks, such as Citi from the United States, are foreign commercial banks operating in South Korea [1,4]. The Microfinance Foundation intends to “open 20 to 30 regional units [to service the microloans] by May 2010 and raise that to 200 to 300 [units] in the next two or three years” [1].

ACCION International recently invested USD 500,000 for a 49.5 percent equity stake in Saija Finance Pvt Ltd, [4] a microfinance institution (MFI) based in Northern India that started in April 2008. The investment was made through ACCION International’s ACCION Gateway Fund. [3] Saija is the fund’s fourth investment in India. Other recent investments in Indian MFIs include Swadhaar FinServe, [5] which caters to the urban poor, Lok Capital, [6] which serves social enterprises, and United Villages, [7]  which focuses on the rural poor.

According to an article in the online publication ‘Trading Markets,’ The Phillippines Central Bank (BSP) has signed an agreement with the International Finance Corporation (IFC), the investment arm of the World Bank, and the German Technical Cooperation (GTZ), a development enterprise of the German government, to receive technical assistance for supervision and regulation of lending to small and medium enterprises (SMEs) [1,2,3,4]. Employees from the BSP will be provided with training programs to enhance supervision and regulation of banks that extend loans to SMEs [1]. Additionally, the IFC and GTZ hope to generally improve BSP examination procedures in terms of SME lending [1]. The ‘Trading Markets’ articles states that SMEs in the Philippines currently struggle with credit access, only receiving 11-21 percent of “total funding requirements,” as opposed to the world benchmark of 30 percent [1]. This agreement, therefore, aims to “[enhance] the enabling policy and regulatory environment” for SME lending [1].