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Sequoia Capital bets on another microfinance player

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Bangalore Feb 02, 2012

After backing SKS Microfinance, Sequoia Capital is now betting on another microfinance player, Bangalore-based urban poor-focused Ujjivan Financial Services, a member of the Grameen Network, Bangladesh. Sequoia Capital on Wednesday said it had participated in the fifth round of equity financing by Ujjivan, and was now the single-largest shareholder, with a stake of around 15.7 per cent.

It added it had raised Rs 127.9 crore ($25.5 million). Two new foreign institutional investors (FIIs), FMO (Netherlands Development Finance Company) and WCP Mauritius Holdings III (Wolfensohn Capital Partners), along with current investors, participated in this round. The existing investors are Lok Capital, Unitus Corporation, Elevar Equity, Caspian Advisors, besides Sequoia. With the latest round of fund raising, private equity funds have invested a total of Rs 230 crore and hold 83 per cent in the company. The promoters group, led by Samit Ghosh, managing director, Ujjivan, hold around four per cent and has so far disbursed Rs 2,800 crore.

Mohit Bhatnagar, managing director, Sequoia Capital, said India continued to be a preferred investment destination for FIIs and it was heartening to see fundamentally strong organisations in the microfinance sector were a key focus. Samit Ghosh said, “We thank our existing investors who continue to reiterate their commitment to us and welcome our two new investors. This round of equity funding will make Ujjivan one of the best capitalised MFIs in the country”. With this round of equity funding, the last being in 2009, Ujjivan’s capitalisation has more than doubled to Rs 230 crore. Kotak Investment Banking was the advisor and arranger of the transaction.

 

Sanjiv Kapur, managing director, Wolfensohn India Advisors Pvt Ltd, said, “This is the first investment for Wolfensohn in the Indian microfinance sector, endorsing our faith in the sector and in Ujjivan’s financial inclusion model.” Sudha Suresh, Ujjivan’s chief financial officer said the additional capital would help increase the loan book from the current Rs 600 crore to around Rs 1,600 crore, given the Reserve Bank of India’s 15 per cent capital adequacy requirement for MFIs that are non-banking financial companies.

“We are very happy to work with Ujjivan, which is constantly searching for ways to better serve the urban poor. Their firm focus on their mission to alleviate poverty and strong business credentials make Ujjivan a very interesting partner for FMO” said Keesjan de Kruijf, senior investment officer, FMO.

“When we look for large MFIs which are truly client centric, transparent, have good systems, great leadership, and are sincere in its social objectives, Ujjivan is the only MFI which comes to our minda. Our investment is built around making it the borrower of choice for the base of the pyramid, across the country”, said Venky Natarajan, managing partner, Lok Capital.

Ujjivan serves over a million clients in 20 states and 49 under-banked districts across the country.

Recently, Ujjivan received the ‘Microfinance Organisation of the Year’ award and was ranked No1 in the microfinance industry as the best company to work for in India.

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.”