by Chinq Yee Chong -

MICROCAPITAL.ORG STORY: Wharton Business School Online Portal Acknowledges The Need For Innovation In The Microinsurance Sector And Highlights The Existing Barriers To A Wider Acceptance Of Microinsurance Products Based On Observations By UK-Based Microinsurance Research Centre, Munich Re Foundation And The ILO’s Microinsurance Innovation Facility

  A recent article on the ‘Knowledge@Wharton’ online portal entitled ‘Microinsurance: A safety net with too many holes’ [1] contains a detailed discussion of existing challenges facing the microinsurance market. The article notes that there has been some recent innovation in the microinsurance sector, a market that has experienced relatively slow growth compared to the microfinance sector in general. The authors note that innovation is to be welcomed and a Bangladeshi pilot microinsurance programme is cited as an example.

by Zoran Stanisljevic -

MICROCAPITAL.ORG STORY: Venture Capital and Private Equity Firms Invest Millions in India, but is there Risk in Microfinance Funding?

According to Arun Natarajan, CEO of Venture Intelligence (a provider of analysis and information on private equity (PE), Venture Capital (VC) and Mergers and Acquisition deals (M&A) in India), Venture Capital firms invested USD 117 million in over 27 deals in India during the six months ending June 2009 [1]. Microfinance Institutions (MFIs) raised roughly USD 68 million in India from venture capital (VC) and private equity (PE) firms in May through July 2009 [2]. While this increase in capital bodes well for MFIs, it brings forth a necessity for greater level of due diligence. According to Deepti Chauhary of Livemint, (an Indian provider of global, financial and economic headline news), such high cash inflows may bring new risk to MFIs such as over-indebtedness and malpractices in pre-loan disbursal [2].  Does this pose a barrier for MFIs to obtain future funding from outside investors?

by Radhika Chandrasekhar -

MICROCAPITAL.ORG STORY: Varying Views on Microfinance Institutions’ Expansion into Consumer Lending

A recent article from LiveMint.com reported that MFIs are now reaching beyond their traditional role of supplying enterprise loans and have begun consumer-lending initiatives. [1] These new schemes involve offering consumer credits by allowing the poor to buy products such as mobile phones and pay in installments. Since consumer lending does not directly serve to finance the poor’s income-generating endeavors [5], many have raised skepticism as to whether these strategies fall within scope of MFIs’ roles.

by Chinq Yee Chong -

MICROCAPITAL.ORG STORY: India-Based IFMR Trust ‘Debunks’ Myths About The Poor And Financial Services In The Wall Street Journal

In an article entitled ‘Debunking Myths About The Poor And Financial Services’ in the Wall Street Journal [1], Mr Suyash Rai, a Senior Manager with IFMR Trust [2], and Ms Sona Varma, Senior Advisor with IFMR Trust, attempt to address what they perceive to be ‘a number of popularly held misconceptions about role of finance in the lives of the poor’. IFMR Trust is a private trust with the mission of ensuring complete access to financial services for individuals and enterprises in India. It does not supply data to the MIX Market portal, an online database that houses financial and other information on MFIs around the world [11].

by Chinq Yee Chong -

MICROCAPITAL.ORG STORY: Is The Microfinance Sector Losing Its Appeal To Investors As A Result Of High Valuations?

In a report by the Hindu Business Line entitled ‘Microfinance sector losing sheen due to high valuations’ [1], reporter Mr Sagar Bhadra observes that the microfinance sector, which he stated accounted for 40 percent of all private equity transactions in India in the last 18 months, ‘seems to have lost its charm’. Valuations in the sector have ‘skyrocketed’ with the consequence that ‘investors now fear a bubble and are approaching the sector cautiously’. Some market participants feel that investments in the sector is likely to decrease as investors become more selective, particularly when funding start-up MFI, according to Mr Anurag Agrawal, Senior Vice-President of Intellecap [2], a social investment advisory firm. Mr Agrawal added that the secondary market for MFI investments will start to pick up as existing investors start looking for exits.

by Chinq Yee Chong -

MICROCAPITAL STORY: Fund-raising Continues In India – Kerala’s ESAF Microfinance And Investments Raises $2.5 Million Through Sale Of Minority Stake To Opportunity International Australia’s Subsidiary, Dia Vikas Capital

It was recently reported by Ruchika Sharma in VC Circle, a specialist South Asian journal on venture capital, that a South India based MFI, ESAF Microfinance and Investments (EMFIL) has raised Rupees 12 crore (approximately USD 2.5 million). According to the MIX Market portal, a database which provides financial and other information on MFIs across the globe, EMFIL was established in 1992 and is a regulated non-bank financial institution which is modeled along the lines of Grameen Bank. It is stated in EMFIL’s profile on the MIX Market that the MFI’s total assets as at 31 March 2008 is USD 21, 838,532 and it has active 145,712 borrowers. EMFIL’s total equity is reported to be USD 1,169,903 and it has a profit margin of 3.03%. Its return on assets is said to be 0.71 percent and return on equity is 16.74 percent. The services offered by EMFIL include microcredit, microinsurance, funds transfers and micro-energy loans. Kerala-based EMFIL raised the amount by selling 20 percent of its stake to Dia Vikas Capital Private Limited, a 100% subsidiary of Opportunity International Australia. No further information about the transaction is currently available in the public domain.

by Laura Anderson -

MICROCAPITAL STORY: Spandana Sphoorty Financial Ltd. Issues INR 800 million (USD 17 million) One-year 10 Percent Bonds in Deal Arranged by Standard Chartered Bank

Spandana Sphoorty Financial, an Indian microfinance institution (MFI), has raised INR 800 million (USD 17 million) in one-year 10 percent bonds that have been listed on the Bombay Stock Exchange (BSE).   Standard Chartered was the sole book runner and arranger.  Mrs. Padmaja Reddy, Managing Director of Spandana, indicated the funds would help the MFI to expand to seven new states this year, and that listing on the BSE would help improve Spandana’s corporate governance.

by Goda Thangada -

MICROCAPITAL STORY: Indian Giant Builds Microfinance Business: Tata Housing Company and Micro Housing Finance Corporation (MHFC) Offer Houses with Micro Mortgages

Indian companies Tata Housing Development Company Ltd., a subsidiary of the massive Tata Group, and the Micro Housing Finance Corporation (MHFC) have partnered to offer low cost housing. While Tata Housing will facilitate construction of the residential complex Shubh Griha, MHFC will provide long term micro mortgages to approved applicants. The cost of the homes ranges from USD 8,300 to USD 14,200. According to India´s Ministry of Housing and Urban Poverty Alleviation, there is a housing shortage of about 24.7 million units in the country, with 99 percent of this shortage pertaining to low income households.

by Laura Anderson -

MICROCAPITAL STORY: Hyderbad-based Spandana Microfinance Seeks to Raise Rs 300 Crore (USD 63.7 million) by June

According to a press release in The Economic Times of India, Spandana Sphoorty Financial Ltd. is set to raise Rs. 300 Crore (USD 63.7 million) in equity funding and is currently in talks with over two dozen investors.  The deal would raise the company’s valuation to Rs. 1,800 Crore (USD 382.2 million).  Spandana intends to use the funds to expand and strengthen its capital adequacy ratio.  The Reserve Bank of India (RBI) raised its capital adequacy requirements (CRAR) for non-bank financial institutions last August, requiring institutions to meet a 12 percent CRAR by April 2009 and a 15 percent CRAR by April 2010.  Spandana’s CRAR stood at 19.5 percent last fiscal year. To read a MicroCapital story on the RBI’s new regulations, click here.  Currently Mumbai-based JM Financial holds an 18 percent stake in the microfinance institution, private equity fund Valiant holds 11 percent, Lok Capital has a 5 percent stake and another 15 percent is held by senior employees, with this round of funding their stakes will be diluted.

by Laura Anderson -

MICROCAPITAL STORY: Share Microfin Seeks to Raise USD 50 Million From International Finance Corporation (IFC) and Others

SHARE Microfin, a microfinance institution (MFI) based in Hyderabad, India, has announced that it intends to raise USD 50 million in equity funding.   According to the press release on VCCircle, the International Finance Corporation (IFC) is considering investing, and the MFI is currently in talks with other investors.  If the transaction proceeds it will be one of the biggest Indian microfinance transactions after SKS Microfinance‘s USD 75 million deal in November last year.  To read a MicroCapital story about that deal, click here.  With the funding, SHARE will expand in states such as Chhattisgarh, Uttar Pradesh, Madhya Pradesh, Uttranchal, and West Bengal.  No other information regarding the deal or potential investors was available at the time of this release.

by the MicroCapital Team -

CGAP Microfinance Dealbook: March 2009 Transactions

The CGAP Microfinance Dealbook publicizes microfinance capital market transactions in an effort to bring greater transparency to the industry. This information is made freely available as a public service. Parties to microfinance transactions are encouraged to submit their deals to this effort. The following deals were collected for March 2009:

 

by Laura Anderson -

MICROCAPITAL STORY: Private Equity Fund Inflow to Indian Microfinance Sector Grows 242% in Fiscal Year 2008-2009

Venture Intelligence, a Chennai-based company that tracks investments deals, reports that there were 11 private equity investments worth USD 178 million into the Indian microfinance sector in the fiscal year ended March 2009, a 242 percent increase versus the three deals worth USD 52 million in the 2008 fiscal year.  According to the report on mydigitalfc.com, private equity investments into the Indian microfinance sector began in January 2007.