MUMBAI: With the top four microfinance institutions (MFIs) in India having received their share of investments, investors are slowly shifting their focus towards smaller institutions. For starters, Fullerton India has advanced a line of credit worth Rs 25 crore to SE Investments, a Delhi-based microfinance institution.
Fullerton, which has also accorded a similar line of credit to Orissa-based KAS Foundation, is known to be looking at more such deals in the near future. Fullerton India is a subsidiary of Fullerton Financial Holdings, which happens to be a whollyowned subsidiary of Temasek Holdings, Singapore.
Venture capitalists who have set up microfinance funds are looking at funding needs of new entrepreneurs. They make investments into MFIs with operations in geographies like Bihar, Jharkhand, Rajasthan and the north-eastern parts of the country. These include funds such as Bellwether, Lok Capital, Avishkaar-Goodwell India Microfinance Development Company, Michael and Susan Dell Foundation and the Unitus Equity Fund.
Among newer classes of entrepreneurs looking to set up MFIs are ex-bankers , people who have been associated with MFIs at a senior level or people who are involved in other businesses wanting to diversify into the microfinance sector, says Vishwanath Prasad, founder of the Bellwether fund.
Sources from the industry state that too much of money has been chasing very few toptier MFIs. These include institutions such as SKS Microfinance, Basix, Share Microfin and Spandana , all of which are based in Andhra Pradesh. While SKS received investments from Sequoia Capital (a private venture capital fund), Legatum, a privately-owned international investment firm invested $25 million into Share Microfin.
While Lok Capital has invested in Spandana, Avishkaar has infused funds into Share Microfin and the Unitus fund has invested into SKS. Bellwether, on the other hand, has made investments into smaller players such as Sonata Finance, Mimo Finance in Dehradun, Uttaranchal , Trident Microfinance, Arohan in West Bengal and Satin Credit Care in Delhi. SE Investments is a case of a nonbank finance company, which has 65,000 customers and a portfolio of Rs 150 crore. The company has a paid-up capital of Rs 3 crore and plans to hit the equity market next year. It has operations in areas such as Jaipur, Jodhour and Agra.
Sources say that there are five or six such MFIs, which are likely to attract fresh investments. These include names like Bharatha Swamukti Samsthe (BSS), Mahasemam, KAS Foundation etc. The largest MFI, Share Mirofin in Hyderabad, has an outreach to 1,083,035 borrowers , while its loan portfolio is around Rs 399 crore.
KAS Foundation, based in Bhubhaneshwar, Orissa, has lent to 5,88,960 borrowers and a loan portfolio worth Rs 120 crore. BSS is a Bangalore-based trust involved in the microfinance business and has a base of 69,753 borrowers with a gross loan portfolio of Rs 38 crore. Mahasemam is a Tamil Nadu-based trust which has 2,21,613 borrowers under its wings and a gross loan portfolio of Rs 76.96 crore. The year 2007 saw two landmark private equity investments in the Indian microfinance sector in SKS and Share.