ADB, IFMR partner for India microfinance loans
Asian Development Bank (ADB) has joined with IFMR Capital, an Indian non-banking finance company (NBFC), to provide local currency loans to Indian microfinance institutions (MFIs).
The loans will be provided through India's IndusInd Bank, with ADB and IFMR covering part of the default risk of selected MFIs. The firms will cover up to $20 million in loans for the initial allocation of capital, according to a release, with IFMR contributing portfolio monitoring and surveillance support to ADB and IndusInd. More than 200,000 households are expected to receive financing through the program.
ADB's partial guarantee program represents a renewal of a previously existing partnership between ADB and IFMR for local currency financing to Indian MFIs. Under that program, launched in 2012 with IFMR, the firms have so far provided $207 million in financing to about 270,000 households in rural areas of India.
"The guarantee allows banks to leverage their risk appetite and significantly increase their lending to MFIs while diversifying their exposure across new geographies and districts," said IFMR Managing Director and CEO Kshama Fernandes.
IFMR offers structured finance products across securitizations, bonds, commercial papers and guarantees, enabling risk transfer from originator institutions to investors. Founded in 2008, the company now operates in 24 states in India, and serves 6.6 million borrowers and 7.6 million insured customers.
US-based LeapFrog Investments has made several commitments to IFMR in recent years. The GP made a $29 million investment in April 2014, and later participated in a $25 million round with Lok Capital in August 2015.
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