The microfinance sector in India, which is presently growing around 130 per cent, is expected to get into the consolidation mode in the near future.
The sector, which has lent close to Rs 10,000 crore, is moving aggressively to expand its operations. With tighter capital adequacy norms expected to come into place in 2009 and 2010, a whole lot of smaller Microfinance Institutions (MFI), are expected to be acquired by larger players.
In India there are around 135 MFIs and with good prospects ahead for them, 50 of these have converted themselves in Non-Banking Financial Companies (NBFCs) as they expand with a larger equity base.
“The CAR will be 12 per cent during the next year and then by 2010 it will be 15 per cent. Not many MFIs can sustain this and consolidation will happen in the next two years,” said a CEO of a Bangalore-based MFI.
Venture capital funds which specialise investing in MFIs are aggressively scouting for targets in India and according to industry information around $100 million is expected to be invested during 2008 into MFIs.
MFIs like Grameen Koota which during April raised close to Rs 10 crore is looking at raising a further Rs 20 crore in the near future.
Aavishkaar Goodwell, a fund which invests in MFIs, which led this investment, is understood to be looking at another three investments including one in Asomi Finance, based in North East.
Aavishkaar Goodwell, is planning towards building a $25 million balanced portfolio of smart capital investments in financial services for the poor in India.
Said P Pradeep, Chief Investment Officer of Aavishkaar Goodwell: “Aavishkaar Goodwell invests in entrepreneurial microfinance organisations with the objective of creating both social and economic value for these organisations and their clients, and consequently for our investors.”