Grameen Foundation will be offering up to US$ 8 Million through a Guarantee Pool to Support Financing from Local Banks for Indian MFI’s
Grameen Foundation along with it’s affiliates, Grameen Capital India and Grameen-Jameel Microfinance Ltd, yesterday announced a new initiative to address the tight liquidity faced by Indian microfinance institutions (MFIs) that demonstrate a double-bottom-line focusing on both social and financial returns.
Financing from Public and Private Sector Banks has shrunk throughout India in the wake of events in Andhra Pradesh over the past three months, and this initiative seeks to reignite banks’ interest in funding this sector. Socially-oriented microfinance has been a core focus of the work of all three Grameen organizations. The group will make available $8 million in guarantee funds that it expects to generate a minimum of $16 million in local-currency financing to poverty-focused MFIs from local banks.
The guarantee funds, which will be made available to MFIs to the extent allowed by applicable law, will comprise $4 million in guarantees each from Grameen Foundation and Grameen-Jameel, and will be facilitated by Mumbai-based Grameen Capital India.
“Microfinance institutions have a responsibility to demonstrate clearly that they are reaching the poorest people and that these borrowers are moving out of poverty,” said Alex Counts, president and CEO of Grameen Foundation. “This initiative will focus on Indian institutions that have a history of accountability, transparency and results related to achieving poverty reduction outcomes. Microfinance, when applying best practices and sound ethics, can be a powerful tool in the fight against poverty. We are continuing our long-standing support for ethical, best practice microfinance institutions and hope that others will join us and ensure liquidity for the sector.”
“Recent events in Andhra Pradesh have sparked a broader liquidity-squeeze across the country, with funding all but drying up, especially when it comes to the smaller MFIs,” said Royston Braganza, CEO of Grameen Capital India. “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.”
To be eligible for consideration, MFIs must have completed a social-rating or impact-assessment report, using recognized industry guidelines, in the past year. Alternatively, they must be actively using a recognized social-performance measurement tool, such as the Progress out of Poverty Index.