India’s growing microfinance segment may soon see the entry of global
financial services giant, Morgan Stanley and the Switzerland-based Blue Orchard
Finance. Both these firms are in talks with the banking regulator Reserve Bank
of India to foray into the local microfinance segment.
institutions have already started looking at diversifying their avenues to raise
funds as part of the effort to lower their dependence on banks especially after
their experience in Andhra Pradesh. The two new entrants could look at infusing
funds aggregating up to Rs 500 crore, if approvals come through.
With banks having choked off
funding for microfinance firms in Andhra Pradesh, fresh inflow of capital could
help ease the strain on liquidity for these firms. Morgan Stanley is a leading
global financial services firm providing services in the fields of investment
banking, securities, investment management, wealth management and credit
services in more than 30
Blue Orchard Finance
specialises in the management of microfinance investment products. The company
assists banks and financial intermediaries seeking to invest in the microfinance
industry by offering a comprehensive package of services.
The company conducts the
initial identification and due diligence on MFIs and also monitors their
activities and portfolios on a continual basis. According to industry sources,
besides these two players, there are other institutions who are eyeing the
Indian microfinance space. If Blue Orchard and Morgan Stanley manage to obtain
regulatory approvals, it will certainly pave the way for the entry of new
such as Latin America and Eastern Europe have witnessed international financial
institutions crowding out private lenders to the MFIs. As noted in an
international paper on microfinance, the rapid growth of foreign private lending
to MFIs in the past several years has led to a surprising reversal of roles
between government-owned development institutions and private lenders.
Institutions are seen concentrating their loans in the strongest MFIs, leaving
private lenders to look for opportunities among smaller, riskier borrowers.
These institutions could only use the ECB route for bringing in funds into India
while current RBI regulations prevent such lenders from pumping in more than
$500 million in an year.
operating as non-governmental organisations (NGOs) are permitted access to
external commercial borrowings (ECBs), that too with a prior approval from the
RBI. Global financial institutions which have so far provided funds and
technical assistance to domestic MFIs include Brazil-based Accion International,
the Michael and Susan Dell Foundation based out of Texas, World Bank arm
International Finance Corporation among others.