Fund-starved microfin cos get $8-m Grameen Foundation lifeline

MUMBAI: Fund-starved microfinance institutions (MFIs) may get a lifeline of $8 million , which could go up to even $16 million . Grameen Foundation, promoted by Bangladesh social entrepreneur Mohammad Yunus, and its affiliates, Grameen Capital India and Grameen-Jameel Microfinance, have announced a new initiative to meet the liquidity needs of Indian microfinance institutions that focus on both social and financial returns. The group will make available $8 million in guarantee funds that it expects to generate a minimum of $16 million or up to Rs 72 crore in local-currency financing to poverty-focused MFIs from local banks.

The outstanding microfinance loans are estimated to be around Rs 35,000 crore. Though the amount is just a small portion of the total microfinance portfolio, it is expected to add some comfort to the banks which are now shying away from extending loans to MFIs, said an official involved in the deal.

“We want to help ease the capital constraints by providing vital support through this facility to all MFIs that meet clear financial and social criteria,” said Royston Braganza, CEO of Grameen Capital India . “Banks are now reluctant to extend funding support to MFIs. This initiative seeks to reignite banks' interest in funding this sector.”

Recent events in Andhra Pradesh have sparked a broader liquidity-squeeze across the country, with funding for many MFIs drying up. To be eligible for consideration , the interested MFI must have completed a social-rating or impact assessment report, using recognised industry guidelines, in the past year.

Alternatively , they must be actively using a recognised social-performance measurement tool, such as the Progress out of Poverty Index. “For microfinance to remain true to its original mission of helping the poor, it is important that microfinance institutions that demonstrably support this mission get the funding they need,” said Julia Assaad, general manager of Dubai-based Grameen-Jameel Microfinance, in a statement to the media.