Exclusive: Indian MFI Janalakshmi may land $50m IFC debt to expand outreach

Photo: Hemant Mishra/Mint

International Finance Corporation – the private lending arm of World Bank – is making a debt investment of $50 million in Bangalore-based micro-finance player Janalakshmi Financial Services Pvt Ltd.

The funds will help Janalakshmi expand access to borrowers who have little or no access to formal sources of financing, including those in low income states of India which have among the highest population densities and poverty rates in the country.

The MFI will also lend to small businesses who find it difficult to get loans from traditional sources of finance such as banks, IFC said in a filing.

Janalakshmi, which is currently present in 18 Indian states, is expanding deeper in northern and eastern India, where microfinance penetration has historically been low. It has 4.6 million borrowers and a loan portfolio of $1.3 billion, making it one India’s largest such players.

The company was founded ten years ago by Ramesh Ramanathan, a former managing director & European head of corporate derivatives at Citibank. He is a member of the Government of India’s expert committee on urban infrastructure finance and the Reserve Bank’s financial inclusion committee.

Janalakshmi became a non-banking financial company in 2008, and subsequently got its microfinance license in September 2013. Janalakshmi is one of the 10 recipients to be awarded the Small Finance Bank License in mid-September 2015.

IFC’s funding will be in the form of a senior debt investment. This is its second such investment proposal in the Indian MFI space in less than a month, after it put in $20 million in Grameen Koota.

Apart from the Jana Urban Foundation (sponsor entity), other key shareholders in the micro-finance firm include TPG Capital, Citigroup Venture Capital, North Haven Pvt. Equity Asia Platinum Pte Ltd., Alpha TC Hoding Pte Ltd., Treeline, India Financial Inclusion Fund, TRG, and Havells enterprise.

Performance of micro-finance firms has picked up after hitting a low in 2010, when state governments curbed activities of such financial players following allegations of coercive collection policies. Banks refused to lend to them, and bad loans piled up as borrowers refused to pay back the high-interest loans.

The central bank stepped in and introduced clear regulations for the micro-finance industry in December 2011. The central government too made its policy clearer. In a couple of years since then, the sector has bounced back and provided better returns for investors.

IFC’s previous investments in Equitas Holdings Ltd and Ujjivan Financial Services Ltd have yielded average returns of 33 per cent and 38 per cent respectively since 2012 in dollar terms.

That’s several times more than returns between 8-14 per cent that investors such as Sequoia Capital and Westbridge Partners earned between 2010-12 in the sector.

Also read:

IFC to make $20m debt investment in MFI Grameen Koota
China’s CPFA Microfinance may land $25m equity from existing investor IFC
IFC to invest $3m equity in Myanmar’s ride-hailing service Oway

 

 

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.