CDC commits $50m to India microfinance business Janalakshmi

Janalakshmi will use the new funding to meet tier-two capital requirements, which it needs in order to gain final regulatory approval to open a small finance bank. The company was one of 10 to gain in-principle approval for a small finance bank license from the Reserve Bank of India in 2015.

Unlike tier-one capital, which consists of equity and is considered part of the core capital of a bank, tier-two capital comprises debt instruments and reserves. Institutions that are under consideration for a small finance bank license must limit foreign equity ownership to 49%.

Some applicants have responded to this requirement with public listings so as to boost their capital holdings without having to raise more money from foreign investors. Equitas and Ujjivan, which have both received capital from foreign VC and PE investors, filed for domestic IPOs in October 2015 and January 2016 respectively.

Janalakshmi's main business is providing small batch loans to joint lending groups, but it also lends to selected individuals with good credit history, as well as micro, small and medium-sized enterprises. The company has raised several rounds of funding, including a INR6.1 billion round in 2014 with participation by TPG, Mizuho Securities and Tata Capital; a INR3.25 billion round in 2013 led by Morgan Stanley; and a 2012 round for INR1.45 billion led by CVCI.

CDC seeks growth capital and buyout opportunities to encourage development in emerging markets. Its involvement in India's microfinance sector includes participation in a consortium that last year invested INR6 billion in Ujjivan.

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• Topics
• South Asia
• Financials
• Expansion
• India
• CDC Group
• Financial Services
• Growth capital