Private equtiy reengages with Indian MFIs
The World Bank’s International Finance Corp. (IFC) is reportedly finalizing an INR1.3 billion ($29.2 million) investment in Indian microfinance institution (MFI) Bandhan. This comes as other PE players also reconsider investments into MFIs following a period of regulatory upheaval that chased much investment out of the sector.
According to The Business Standard, IFC's investment would be one of the largest private equity commitments in India's MFI sector since October of last year. This was when regulators implemented legislation intended to curb over-aggressive debt collecting procedures by MFIs following a series of suicides by borrowers who were allegedly hounded by their lenders.
Last month, the central government introduced a draft for a new regulatory bill that would define a legal framework for the MFI industry, outlining what lenders can and cannot do. Confidence in the regulation has piqued private equity interest in the sector. Unitas Capital is said to have been working on five deals worth INR2 billion for MFIs, and Citi Venture Capital International (CVCI) recently invested INR650 million in Bangalore-based Janalakshmi Financial Services, which continues to seek more capital.
MFI major SKS Microfinance also aims to raise as much as INR9 billion through a qualified institutional placement. SKS, which made its $350 million market debut a year ago, also took a credibility hit when one of its borrowers reportedly commit suicide in October.
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