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IFC To Start $100M Microfinance Debt Fund

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Wednesday, 07 March 2012 07:17

International Finance Corporation (IFC), the private sector investment arm of the World Bank Group, along with two other investors, will set up a $100 million debt fund called Micro Finance Initiative for Asia (MIFA), to address the funding needs of microfinance institutions in developing and underdeveloped economies. Final decision will be taken at the fund’s next board meeting to be held on April 9.

According to IFC, the MIFA Fund will be funded through 3 classes of shares. “Initially, the investors are expected to be IFC, KfW, and Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (German Federal Ministry for Economic Cooperation and Development,” an IFC release stated.

The fund has a target size of $100 million, including up to $25 million in donor-funded concessional funding. IFC’s investment in the fund is proposed to be up to $20 million in mezzanine shares.

The Luxembourg-based fund will set up special purpose vehicles in Mauritius and India. The fund will make its debt investments across Asia, including East, South and Central Asia.

“The project is in line with the IFC microfinance strategy for increased outreach in South, East and Central Asia, especially in large countries like India and China, home to 40 per cent of the world’s population. Microfinance penetration rates in this region remain among the lowest, globally,” the release said.

By supporting the expansion and sustainability of well-performing MFIs, the project will improve access to finance for thousands of micro and small borrowers. This, in turn, will stimulate growth, employment generation and poverty alleviation in the region.

IFC claims that the fund will facilitate access of Asian emerging market MFIs to commercial funding that is better tailored to their needs. It will reduce the volatility of MFI loan portfolios, as currently most MFIs are unable to properly address the currency mismatch risk. The fund also aims to provide longer-tenor funding and subordinated debt products, a clear need for MFIs at present.

In India, the Rs 23,000 crore microfinance industry has been under stress after the Andhra Pradesh government banned the exorbitant interest rates the institutions charge to small borrowers. The MFIs normally charge higher interest rates due to the higher cost of capital and higher risks involved with repayments of smaller loans.

According to the latest RBI data, bank lending to micro-credit through self-help groups or through NBFCs was less than 1 per cent of the total bank credit, amounting to around Rs 21,000 crore.

MFIs still seeing significant growth

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May Kunmakara 
Thursday, 02 February 2012
Outstanding loans and deposits in 28 of Cambodia’s microfinance institutions rose between 30 and 40 per cent year-on-year in 2011, official data from the Cambodian Microfinance Association indicated.

The CMA’s data showed outstanding loans rose 41.5 per cent from US$916.3 million with 1.3 million borrowers in 2011, compared to $647.8 million with 1.22 million borrowers a year earlier.

Deposits grew by 32 per cent to $1.26 billion with 1.1 million depositors, compared to $952.2 million with 36,776 borrowers in 2010. MFIs in the Kingdom first began to take deposits in early 2010.

Non-performing loans (NPL) declined from 1.3 per cent of the loan total to 0.4 per cent. Officials and insiders said a strong macro-economy performance and clear regulations were responsible for the shift.

National Bank of Cambodia director general and spokeswoman Ngoun Sokha recognised the favourable direction the economy was heading, especially in the agricultural sector, which she believed was responsible for the rising demand for loans.

“The government supports the agricultural sector, especially the export of milled rice. So we promoted the adoption of MFI loans for agriculture and actually received a lot of growth in that area, adding up to more than 50 per cent of all loans,” she said.

Bun Mony, director of CMA and chairman of Sathapana Microfinance, told the Post that loan portfolios at Sathapana rose about 65 per cent to $94.6 million compared to $57 million in 2010. The number of borrowers grew from from 43,565 to 55,001.

“There was a high demand for loans as business activities continue to grow, and we don’t even seem to have any problems with repayment,” he said, adding that the NPL rate declined to from 0.93 per cent to 0.22 last year.

Sathapana provides loans to all sectors, with 40 per cent going to retail and small businesses, and more than 20 per cent to the agricultural sector.

The country’s biggest MFI, Prassac Microfinance, reported that by December 2011 its gross loan portfolio was $151 million, an increase of 43.6 per cent, with active borrowers increasing 10.9 per cent to 125,127.

“In general, I think that the industry performed well last year because all MFIs grew their portfolios while the NPL rate decreased,” Sim Senacheert, president and CEO of Prassac, said.

Prassac loans to the agricultural sector accounted for 33 per cent of its total portfolio, with trading and service making up 47 per cent.

Hout Ieng Tong, general director of Hattha Kaksekar Microfinance, reported that loan portfolios rose 70 per cent to $75 million with 62,703 borrowers, from $44 million with 47,952 borrowers the year pior.

He added that NPL declined from 0.9 to 0.07 per cent, and that agricultural loans accounted for 35 per cent of total stocks at his compay. Sathapana Microfinance’s total deposits rose 129.4 per cent from $39 million to $17 million, while Hattha Kaksekar’s total deposits grew more than 160 percent to reach $15.78 million compared with only $5 million the year before. Prassac reported smaller increases, as its operations just began in mid-2011.

The successes are tempered, however, by the uncertain economical fates of the EU and US, where much of the industry gets its primary funding. “We are a bit worried,” said Bun Mony.

“We see the EU in a crisis, and think there could be some slight impact on us, specifically regarding investments.”

Ngoun Sokha suggested a solution, saying, “We try to teach MFIs good governance, and to strengthen their internal capacity for infrastructure, so that they will be able to easily seek a source of funds domestically rather than just looking abroad.”