Microfinance India News Digest – 12/10/09

SKS Microfinance to list soon, appoints investment bankers

SKS Microfinance, India’s largest lender to the country’s poor, has mandated three investment banks for its initial public offering in what would be the first listing of its type in the country.

SKS has hired Citigroup, Credit Suisse and domestic investment bank Kotak to advise on the $200m-$250m listing, which will give international investors their first taste of one of the world’s biggest markets for micro lending.

“This is still a new sector and it needs capital,” said one person familiar with the deal. “It’s very profitable and highly scaleable and we’ll see some of these microfinance companies growing 100 per cent year-on-year.”

SKS, founded by former McKinsey consultant Vikram Akula, declined to comment on the offering. Citi, Kotak and Credit Suisse also declined to comment.  Rest of the article

Credit bureau for MFIs in making

Twenty five microfinance institutions have formed a trust called Alpha, which will put together a credit bureau called High Mark dedicated to the microfinance sector.Alpha is headed by Vijay Mahajan, chairman of BASIX, and P N Vasudevan managing director of Equitas Microfinance.

Suresh Gurumani, chief executive officer of SKS Microfinance, says, “We have invested in a credit bureau, along with 24 other MFIs, which together have about 70% of the total portfolio.”The non performing loans of MFIs are currently around 0.5-1.3% of their total disbursals.The issuance of multiple loans by the same borrower is a growing concern among lenders. There has been a district in Andhra where people borrowed from MFIs giving loans at lower interest rate to pay of loans from bigger MFIs. Rest of the Article

CRISIL releases Top 50 Microfinance Institutions in India news

Mumbai: CRISIL has published a path-breaking study on the microfinance sector in India, titled Top 50 Microfinance Institutions in India,at a CRISIL seminar, ‘Microfinance Lending: a Growth Engine for the Indian Economy’.

The publication presents an overview of the leading players in India’s microfinance institution segment (MFI), and includes a comprehensive commentary on the sector.

”This is a seminal initiative by CRISIL, creating a wealth of information in an area where lenders and investors earlier had very little to rely on,” said Umesh Chandra Sarangi, chairman, National Bank for Agriculture and Rural Development (NABARD), who was the the chief guest at the seminar.Sarangi added, “I am sure the publication will add to the interest in the sector, and lead to increased transparency among MFIs. Rest of the article

MFIs’ bad loans may triple: Crisil

Bad assets of microfinance institutions (MFIs) are expected to triple to 1.5 per cent by March 2010 compared to the March 2009 level due to the economic slowdown which has hit the repayment capability of small borrowers, according to credit rating and research agency Crisil.

The agency expects bad assets to rise to 1.5 per cent of total advances by the end of the financial year. However, the deterioration in asset quality was still not at the levels seen one-and-half-years ago, said Roopa Kudva, managing director and CEO, Crisil. MFIs’ asset quality was healthier than those of other financial players in India, she added.

The deterioration in asset quality was timed with the downturn in economic activity, said the rating agency chief. Most of MFI customers belong to vulnerable sections. They are impacted the most and almost immediately due to economic dislocation. Rest of the Article

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