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Muthoot Microfin to raise Rs 1,000 crore ($150 million USD) via IPO – Economic Times

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By Saloni Shukla, Saikat Das

Economic Times India

MUMBAI: Muthoot Microfin Ltd (MML), a part of the Muthoot Pappachan Group, plans to raise Rs 1,000 crore in an initial public offering that would value the firm anywhere between Rs 4,000 and Rs 5,000 crore.
The company has appointed Motilal Oswal, Edelweiss and Credit Suisse as its merchant bankers for the issue and a draft red herring prospectus (DRHP) could be filed as early as the next two weeks, people familiar with the matter told ET.
For its part, MML told ET in an e-mail that “we continue to explore various opportunities and we are watching the developments in the industry closely; but at the moment, we have no definite update to share…”

In the run-up to its IPO plans, MML has also raised Rs 250 crore to drive its microfinance business and expand its footprint in the country. This was infused by the existing promoters and US based PE Investor Creation Investments via a rights issue, taking the total capital base to Rs 614 crore at the end of FY 2018.
MML was rated M1C1 from CRISIL in April, the highest Comprehensive Microfinance Grading. Based on its growth rate and capital strength, CRISIL also upgraded the long-term debt instruments rating of the company to ‘A stable’.
Last month, Bengaluru-based microfinance firm Credit Access Grameen Ltd received Sebi’s go-ahead for a Rs 1,500-crore IPO. Spandana microfinance has also filed DHRP with the markets regulator for an IPO.

The microfinance industry is going through a phase of consolidation. Last year, IndusInd Bank acquired Bharat Financial Inclusion, followed by Kotak Mahindra Bank’s acquisition of BSS Microfinance.

Fusion Microfinance lowers rate with greater efficiency, lower cost of funds – EconomicTimes

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By Atmadip Ray, ET Bureau
Jun 22, 2018, 10.35 PM IST
KOLKATA: Despite hardening of general interest rates, there’s some relief for a certain segment of micro loan borrowers by way of lower borrowing costs. A handful of microfinance institutions (MFIs) are reducing lending rates backed by improved efficiency and lower cost of funds.

Fusion Microfinance, India’s ninth-largest MFI by outstanding loans, has cut lending rates by up to 140 points from June. It now offers loans at 23% to existing borrowers compared with 24.4% earlier while the rate for new borrowers is 23.5% against 24.6% earlier. A basis point is one-hundredth of a percentage point.

“Although interest rates are firming up, we think we will be able to hold on this rate for some time,” Fusion Microfinance chief executive officer Devesh Sachdev told ET.

The Reserve Bank of India raised the benchmark rate by 25 basis points in June for the first time in four-and-a-half years, signaling a squeeze in monetary policy to fight inflation. However, several MFIs including Fusion have managed to bring down the cost of funds over the past three to four quarters with an improvement in credit quality and operational efficiency.

RBI has capped lending rates of NBFC-MFIs at 10% over their cost of funds or 2.75 times the average base rate of five large banks, whichever is less. So, the lower cost of funds translates into lower lending rates. NBCFs are non-banking finance companies.

Fusion’s decision was preceded by rate cuts by at least two micro lenders. Svatantra Microfin, promoted by Kumar Mangalam Birla’s daughter Ananya Birla, slashed rates by 350 basis points to 19.25%, making it the cheapest micro loan offered by NBFC-MFIs. Delhi-based Satin Creditcare, the second largest NBFC-MFI after Bharat Financial Inclusion Ltd (BFIL), lowered its lending rate by 125 bps to 21.75%.

Fusion’s Sachdev said his company is looking for a rating upgrade and if this happens, the cost of funds will come down further. Fusion’s average cost of funds is now around 13%. It has a BBB+ rating. Fusion’s loan portfolio was Rs 1,600 crore at the end of March, while that of Satin is more than Rs 5,000 crore. BFIL’s loan outstanding stood at Rs 12,600 crore.

Impact Investors Hold US$228 Billion in Assets – Barron’s

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The relatively young market for impact investments—those that seek to have a positive effect on the environment and society—is continuing to expand at a steady pace as more players enter the market, the Global Impact Investing Network reported in its latest snapshot of the market released late Tuesday.

The 229 investors that responded to the GIIN’s eighth Annual Impact Investor Survey held about US$228 billion in assets as of the end of 2017, a figure the U.S.-based nonprofit describes as a conservative measure of a market largely focused on private investments. For 2016’s survey, the GIIN surveyed 209 organizations with US$114 billion in assets.

While not comprehensive, the annual survey “represents the largest exercise of its type in the market,”says Abhilash Mudaliar, the GIIN’s director of research.

A better barometer of the sector’s growth comes from a subset of 82 respondents who have participated in the survey since 2013. These investors experienced a compound annualized growth rate in assets under management of 13% a year. In their impact investments, these investors collectively held US$50.8 billion in assets in 2017 from US$30.8 billion in 2013.

“Once we account for new entrants to the market it would show the industry is growing at a rate even faster than that,” Mudaliar says.

One clear sign of the market’s youth, and the fact that it is likely to grow, is more than 50% of all the respondents made their first impact investment within the last 10 years. While most of the respondents are fund managers, managing nearly US$72 billion in impact assets, they are largely investing on behalf of wealthy individuals and family offices as well as foundations, the GIIN survey found. Family offices making direct investments for impact represented 4% of respondents.

About a quarter of investors who responded invest mostly via private equity (26%) and private debt (24%) vehicles. The top impact sectors are financial services (19%), energy (14%), microfinance (9% and housing (8%), the survey found.

Most investors the GIIN surveyed are happy with the way their impact investments are performing, with 82% saying their investments have met their expectations for impact and 76% saying their investments have met their expectations for financial performance, the survey says.

But the survey also looks at potential pitfalls. As the “mainstreaming of impact investing starts to pick up,” there’s a risk, says Mudaliar, that the integrity of the market could start to decline. To get at these risks, the surveys asks investors for their thoughts on the strategies for addressing “impact washing,” or the offering of investments that claim to have positive social and environmental impacts but may not actually be making a difference.

The best way to combat dilution in the impact investing market—and “mission drift” among investors—is to request “greater transparency from impact investors on their impact strategy and results,” 80% of survey respondents said, while 41% said “third-party certification of what qualifies as an impact investment” would help.

“This is one of the areas where the GIIN is committed to investing more resources and beyond that, looking into more strategies to uphold integrity of impact investing,” by, for example, developing a set of principles for impact investments, Mudaliar says.

The survey also found that 84% of respondents who invest in both conventional and impact investments are making more impact investments compared to three years ago and 84% also said their organization “has a greater commitment to measuring and managing the impact of impact.” of these investments. Only 6% said key decision makers at their organizations were more reluctant to make impact investments.

“These findings are extremely encouraging and promising,” Mudaliar says.

Investors did agree that various challenges remain in the way of the industry’s growth, including a lack of investing options across the spectrum of risk and returns. One reason is most impact investment options today are in the private markets, which limits the number of investors who can invest for impact. But there’s also appetite for “very early stage high-risk investment capital in start-ups, social enterprises, and frontier markets,” he says.

More impact investors are managing and measuring the actual social and environmental effects of their investments, but the approaches in the market are fragmentary. Of investors surveyed, 69% use proprietary metrics, 66% use qualitative information and 59% use metrics aligned with IRIS, a methodology for measuring social and environmental impact managed by the GIIN.

“How to address fragmentation and bring about a greater degree of standardization in the ways in which we measure and manage impact—that’s a priority for us going forward,” Mudaliar says.

Royal Visit of Her Majesty, The Queen of the Belgians to Fusion Microfinance, India

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New Delhi: It was an honour for Fusion Microfinance to host the historic visit of Her Majesty, The Queen of the Belgians at their Head Office in New Delhi, India. During her visit, The Queen Mathilde of Belgium showed a keen interest in understanding the work done by Fusion Microfinance and its impact on the lives of its clients. She interacted with some of the vintage clients of Fusion to understand their socio-economic conditions and the effect of the intervention made by Fusion in their lives. The clients shared the success stories of their economic independence and livelihood in association with Fusion. She also met some of the differently abled employee staff. Queen Mathilde of Belgium is on a seven-day state visit to India for the period of 5th – 11th November 2017 on the invitation of the President of India.

On this occasion, Mr. Devesh Sachdev, CEO and Founder of Fusion Microfinance, said, “It is an honour for Fusion to host her Majesty, the Queen. This visit endorses the work done by Fusion in the field of financial inclusion, woman empowerment and entrepreneurship. It further reinforces our resolve to continue working to create opportunities at the bottom of the pyramid.”

The visit was also graced with a business delegation comprising of Mr. Max Jadot, CEO & Chairman, Executive Board of BNP Paribas Fortis, Mr. Joris Dierckx, CEO & Country Head of BNP Paribas India, Ms. Linde Verheyden, Director Public Affairs at BNP Paribas Fortis and Mr. Loïc De Cannière, CEO, Incofin.

The visit is a testament to the efforts that Fusion Microfinance is making to reach out to the financially unserved and underserved rural women population thereby contributing to the national agenda of financial inclusion.

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Impact Investing in India – McKinsey

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Key takeaways:

  • The global market for impact investments is projected to grow to $300 billion or more by 2020
  • Mainstream investors have entered the arena and are bringing scale to what was earlier considered a niche
  • Between 2010 and 2016, India attracted over 50 active impact investors, who poured in more than $5.2 billion. About $1.1 billion was invested in 2016 alone (equity investments only, not including debt)
  • Much of the growth has come from a doubling or more of average deal size, which rose to $17.6 million in 2016, from $7.6 million in 2010. The volume of deals has remained stable, at about 60 to 80 a year.
  • Impact Investors funded 65% of deals by volume (including coinvestment deals with traditional PE funds) and 52% of investments by value. The balance has been funded by PE firms and VC firms.
  • Industry diversification is increasing but still dominated by financial inclusion and clean energy which made up 64% of deals in 2016 compared to 88% in 2010. Education, agriculture and healthcare deals have been increasing.
  • There were 48 exits between 2010 and 2015 with the median IRR at 10%. The top 1/3 had a median IRR of 34% and a range from 18-153%.
  • Financial inclusion stands out for profitable exits as nearly 80% of the exits in financial inclusion were in the top 2/3rds of IRR performance.
  • Holding periods at exit have been about five years in both average and median terms.
  • McKinsey believes impact investments have the potential to grow 20 to 24% a year between now and 2025, reaching $6 billion to $8 billion in deployment annually in India.
  • The article goes into how impact investors and conventional PE and VC firms bring complementary skill sets.

http://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/impact-investing-finds-its-place-in-india?cid=other-eml-alt-mip-mck-oth-1709&hlkid=9ac78fbfd2d24b009fa6f5fdecd91e1c&hctky=9938827&hdpid=b9a11127-3890-4565-bc87-15f1b087bc56

Capital Float raises $45 million in series C led by Ribbit Capital, Creation

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Capital Float will use the funds to expand its lending efforts, increase geographical footprint and invest in products and technology

A file photo of Capital Float founders Sashank Rishyasringa (left) and Gaurav Hinduja. Photo: Hemant Mishra/Mint

A file photo of Capital Float founders Sashank Rishyasringa (left) and Gaurav Hinduja. Photo: Hemant Mishra/Mint

Digital lending firm Capital Float on Monday said it has raised $45 million (Rs293 crore) in a series C round led by Palo Alto-based fin-tech investor Ribbit Capital, with substantial participation from follow-on investors SAIF Partners, Sequoia India and Creation Investments Capital Management.

Creation Investments had last year led Capital Float’s $25 million series B round.

Capital Float will use the funds to expand its lending efforts, increase geographical footprint and invest in products and technology, founders Sashank Rishyasringa and Gaurav Hinduja said in a telephonic interview.

The company will ramp up disbursements, with a special focus on loans to small merchants and kirana store owners, and is aiming to hit a loan book of Rs1,500 crore by March 2018. It currently has Rs700 crore in assets under management (AUM), and about 15,000 customers, mainly engaged in e-commerce-based selling, traditional retail, manufacturing and services businesses.

The latest round takes the total equity investment in the company to $87 million.

For Ribbit, this marks its fourth and largest investment in India’s financial services sector, besides Policy Bazaar (2014) and Zest Money and Money View (2015). It invested about $20 million in Capital Float as part of this round, which takes its total exposure in India to $40 million, partner Nick Shalek said.

“We see two major trends unfolding and Capital Float embodies both of them. There has been an enormous gap between supply and demand in credit in India, and second, Indian businesses and consumers, in our opinion, are looking for modern brands that serve them well online and on mobile,” said Shalek, in a conference call from California.

Ribbit’s investment suggests the growing interest from foreign investors in the fin-tech sector, particularly digital enterprise lending, in India. Recently, Chennai-based NBFC Five Star Business Finance raised funds from Norwest Venture Partners, while RentoMojo got Bain Capital Ventures and Lending Club founder Renaud Laplanche to fund its series B round.

“We see great opportunities in wealth management and insurance, both of which Capital Float touched on. I think the opportunity for investors like us is to back entrepreneurs with great technology teams and focus on innovation who can build financial brands,” said Shalek.

Capital Float is its major bet in the growing digital lending space.

“We have seen a significant growth since our last round of funding—4x in terms of our AUM and almost a 10x growth in terms of our monthly disbursal volume,” said Hinduja.

Started in 2013, Capital Float offers unsecured loans to medium and small enterprises and small entrepreneurs digitally, addressing a segment believed to be underserved by traditional lenders.

“Since we are a lending business and money is the raw material, we also want to share that we raised a large quantum of debt from banks and NBFCs over the last 12 months, totaling $67 million (approx. Rs437 crore),” said Rishyasringa. Debt capital was infused by business partners—banks including RBL Bank, IDFC Bank, Kotak Mahindra Bank and NBFCs including IFMR and Reliance Capital.

Capital Float uses proprietory credit-scoring and underwriting algorithms to on-lend funds it raises from banks and NBFCs from time to time. Over the past year, the company pioneered a hybrid model, where its financial partners “co-lend” alongside the company’s own balance sheet to fund borrowers. Currently, about 35% of the loans disbursed are through partner lenders.

Going forward, the company will look to deepening technology integrations with partners, with the aim of having 50% of assets under management funded through co-lending partners, Hinduja said.

Yes, microlending reduces extreme poverty

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June 26, 2017 by Quanda Zhang, The Conversation

A small boost in microlending to the developing world could lift more than 10.5 million people out of extreme poverty. That’s one conclusion of my study, published last month in The B.E. Journal of Macroeconomics, which found that microfinance not only reduces how many households live in poverty but also how poor they are.

While the world has seen some progress over the past 15 years in reaching the UN Millennium Development Goals (MDGs), which placed eradicating hunger and  on top of the global agenda, extreme poverty remains a pressing challenge. It continues to be a priority in the 2015-2030 Sustainable Development Goals.

By 2015, the proportion of the world’s population living in extreme poverty had dropped to 14% from 50% in 1990, according to the MDG Monitor. But in Sub-Saharan Africa, more than 40% population continues to live on less than US$1.25 a day. And extreme poverty appears to have increased in Western Asia.

Poverty may have retreated, but it clearly remains a force in people’s lives.

Microfinance and poverty reduction

The practice of giving small loans (as little as US$10 or as much as $US500) to the very poor, alongside other  such as savings accounts and financial training, was the brainchild of economist Mohammad Yunus.

In the 1970s, he began offering credit to poor women in the village of Jobra, Bangladesh, so that they could launch income-generating projects to help support themselves and their families. In 2006, those experiments won Yunus and his microcredit-focused Grameen Bank a Nobel Peace Prize.

Since then, various forms of microlending programs have been introduced in many countries, from India to the United States. According to a 2015 report from advocacy organisation Microcredit Summit Campaign, by 2013, some 3,098 microfinance institutions had reached over 211 million clients worldwide, just under half of whom were living in extreme poverty.

In 2017, the market for microfinance investments in micro, small and medium enterprises, as well as the provision of financial services to those businesses, is projected to grow by an average of 10% to 15%. Even stronger growth is expected in India and the Asia-Pacific region.

Access to credit enables poor people to become entrepreneurs, increasing their earnings and improving their quality of life. Many lenders accompany their small loans and financial services with peer support, networking opportunities and even health care to improve their clients’ odds of building a successful small business.

In doing so, many economists submit, they show that microfinance has a powerful potential to reduce poverty.

But evidence that microfinance actually works is mixed. Studies examining its impact in rural Pakistan, urban Kenya and Uganda, among other developing countries, have both confirmed and contradicted the premise of Mohammud Yunus’s innovation.

Evidence from around the world

My study aimed to make sense of this inconclusive evidence, taking a macroeconomic approach that pulls information from many countries together to provide a clearer picture.

Officially, poverty is measured using two World Bank indicators: the poverty headcount ratio (which measures the percentage of the population living below the US$1.25 a day mark) and the poverty gap (which assesses how far below that line people fall, on average, and is expressed as a percentage).

The key variable of significance in my analysis is participation in microfinance programs. I defined this in two ways for each country studied: the proportion of total clients as a share of national population, and the average size of loan (gross loan portfolio over total clients), using microfinance data from the Microcredit Summit Campaign and MIX Market), a microfinance auditing firm.

What I found was a negative relationship between microfinance participation and poverty, meaning that the more people in a given country received small loans, the less poverty it registered. Thus, in the average developing nation, an increase in the gross loan portfolio per client by just 10% could reduce the extreme poverty rate by 0.0126 percentage points.

I also found that microfinance reduces the depth of poverty, shrinking the gap between a person’s daily budget for living and the current US$1.25 per day definition of  (the non-poor have a 0% shortfall).

Policy implications

Microfinance is no panacea. Numerous studies have shown that country-specific and cultural factors are determinants in how microfinance will interact with poverty, and there are occasionally devastating tales of failure in which the inability to repay a very small loan has plunged households further into desperate penury.

Overall, however, my study suggests that more microcredit would benefit poor countries. National governments and international development agencies can continue to promote  as a tool for reducing poverty, while bearing in mind the limitations of any single strategy in tackling an entrenched global problem.

Read more at: https://phys.org/news/2017-06-microlending-extreme-poverty.html#jCp

Limited access to finance impedes MSME growth and limit their contribution to the global economy – MicroSave

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Empirical studies have shown that MSMEs contribute over 55% of GDP and over 65% of total employment in high-income countries. MSMEs and informal enterprises account for over 60% of GDP and over 70% of total employment in low-income countries, while they contribute about 70% of GDP and 95% of total employment in middle-income countries.

According to a 2010 IFC study, the global estimate for MSMEs was around 455 million with 80% of MSMEs in emerging markets. MSMEs importance to the local and national economy cannot be overlooked as they contribute to GDP, taxes and duties, and employment and jobs. It is estimated that MSMEs employ over 2.2 billion people globally, which is around 50% of the total employed workforce.

Survival statistics for MSMEs are grim, however, as many do not manage to live beyond 5 years. Limited access to finance is one of the challenges impeding MSME growth and limiting their contribution to the global economy. In this publication, we discuss the critical role of MSMEs and clearly show why MSMEs need support as they aide in alleviating poverty and boost sustainable growth in developing countries.

 

Snapshots of Myanmar’s flourishing microfinance market

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August 6, 2017 12:31 pm JST

Low-income female entrepreneurs are using small loans to build a better future

YUICHI NITTA, Nikkei staff writer

An employee counts a roughly 60 million kyat pile of bank notes at a branch of Socio Lite Foundation, a microfinance institution, on the outskirts of Yangon. About half of the money will be loaned to customers that day. (Photo by Ken Kobayashi)

YANGON — Ever since Myanmar began transitioning to civilian rule in 2011 and opening up its borders, investor money and advanced technology has been flooding in. One of the big changes accompanying this wave has been the spread of microfinance, or loan services designed to help low-income families start businesses.

A Socio Lite Foundation employee rides a motorcycle to a village to meet with customers. The foundation extends loans to about 26,000 people in seven municipalities near Yangon. (Photo by Ken Kobayashi)

Take, for example, a 51-year-old woman who runs a restaurant in north of Yangon. She applied to a microfinance institution for a 400,000 kyat ($295) loan, aiming to use the money to buy fresh mutton from relatives. Her plan is to use the proceeds from the meat sales to purchase more meat and make her weekly loan payments.

Women receive loans of 100,000 kyat each near Yangon. They break into groups of five to co-sign for each loan they receive. (Photo by Ken Kobayashi)

Nu Yi Win, 47, strokes her pig in Bago, north of Yangon. She raises the animals with the help of a loan from microfinance institution MJI Enterprise. Since receiving the loan, which requires a weekly payment of 8,500 kyat, her household income has increased by about 50%. (Photo by Ken Kobayashi)

The government is a big supporter of microfinance. In 2011, it enacted laws to allow foreign companies and nongovernmental institutions to enter the market. Last year, it relaxed regulations to enable the number of such lenders to grow rapidly.

A microfinance worker demonstrates JBrain, a customer management app jointly developed by Japanese software developer Japan Brain and Japanese microfinance consultancy Linklusion, near Yangon. (Photo by Ken Kobayashi)

An employee hands out copies of Mango! Social Magazine, a free microfinance newspaper created to improve financial literacy in Bago, north of Yangon. (Photo by Ken Kobayashi)

The practice is not without its problems, however. Some borrowers get buried under multiple debts. A woman in a rural area of Mandalay, in central Myanmar, took out loans from three microfinance institutions. But after two years, her new rice business flopped, just as she found out about her unplanned pregnancy.

The woman seated at right was forced to dip into the joint deposit of her village in Mandalay, in central Myanmar, after becoming unable to pay off her microfinance debt due to her husband’s illness. She may get sued by the other four members of her loan co-signing group. (Photo by Ken Kobayashi)

With no source of income, she makes ends meet by borrowing money from a loan shark. The four other people who belong to her loan co-signing group — required for receiving money from microlenders — have grown distrustful of her and no longer want her as a member.

This woman in Mandalay is saddled with multiple debts after taking out loans from different microfinance institutions. She is expecting her eighth child and has no prospects of paying off her debts. (Photo by Ken Kobayashi)

For those turning to microfinance, the line between success and failure can be alarmingly thin. But even the most beleaguered women I met tended to share the belief that tomorrow will bring better things.

The line between success and failure is extremely fine for entrepreneurs using microfinance services in Myanmar, but more than 99% of small loans are paid off. Hidenori Kuroyanagi, managing director of microfinance consultancy Linklusion, said he thinks microfinance can shore up the economy if the country makes full use of its hardworking people to build a healthy, customer-oriented financial market. (Photo by Ken Kobayashi)