Habitat to enter Microfinance in India

MUMBAI: The Indian arm of the US-based Habitat for Humanity—a non-profit organisation dedicated to provide affordable housing to low-income families—is putting the bricks together for its new venture in microfinance space. The NGO is setting up an NBFC—Housing Microfinance Technical Assistance Centre—for this purpose, and is in discussions with domestic financial institutions for a strategic partnership.

The current Indian foreign investment norm in the microfinance segment is pegged at 51%. And so, the domestic financial institution will hold 49% equity interest in the venture. Habitat India managing director Felix Fernandes confirmed the development and said the initiative is in the preliminary stage.

For the over two-decade-old organisation, patronised by former US President Jimmy Carter, the diversification is to tap the huge opportunity of financing the basic requirements of the rural poor in India. Habitat plans to build 50,000 homes in the country over the next couple of years.

Microfinance institutions or MFIs traditionally start off as non-profit organisations and then convert to NBFCs in order to achieve scale. It is learnt that HDFC is likely to invest in the venture. However, this couldn’t be confirmed. A text message to HDFC chairman Deepak Parekh didn’t elicit any reply. Parekh serves on the advisory committee of Habitat India.

MFIs can leverage over five times their equity and a strategic partnership with a financial institution allows Habitat to borrow money and in turn lend it to the poor. Unlike typical loan schemes, a housing finance scheme envisages a larger ticket size of between Rs 50,000 and Rs 2 lakhs and longer maturity period, making its risks higher.


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