World Bank Group’s subsidiary International Finance Corp (IFC), on Monday, invested $200 million in Mahindra & Mahindra Financial Services Ltd (Mahindra Finance), as part of its plan to create a dedicated pool of financing for micro, small and medium enterprises (MSMEs) in low-income states.
The development-focused investor has earmarked at least $100 million for women-owned MSMEs, Mahindra Finance said in a stock exchange filing. While IFC has invested $75 million from its own account and is mobilizing another $125 million as parallel loans, the $100 million for women entrepreneurs will be supported through blended finance from the IFC-Goldman Sachs’ Women Entrepreneurs Opportunity Facility.
“To expand financial services for MSMEs, IFC has been systematically supporting India’s NBFC sector,” said Hemalata Mahalingam, manager, financial institutions group, South Asia at IFC.
Mahindra Finance has further committed $225 million to this pool.
“Mahindra Finance has been powering inclusive growth in rural communities for over 25 years. Our experience in these markets reveals that to achieve true financial inclusion, access to formal credit for financially under-served segments is a necessity. Availability of credit for income generation, especially to women and low-income households, will further accelerate financial inclusion,” said Ramesh Iyer, vice chairman and managing director at Mahindra Finance.
Mahindra Finance is a non-banking financial company, focused on the rural and semi-urban sector, which provides vehicles tractor and agricultural equipment financing through its physical network of over 1,300 branches as well as digitally, and through rural distribution initiatives like ‘loan melas’ across the country. So far, it has lent to more than 6.4 million customers in over 3.7 lakh villages in the country and has $10 billion assets under management.
It plans to use the fresh funding to further enhance credit in rural and semi-urban geographies, with customized solutions for women borrowers in low-income states, according to its press statement.
However, a lot needs to be done in the country as the total credit gap for MSMEs in India is estimated to be $397.5 billion, around 15 percent of its gross domestic product, according to an IFC study conducted in 2018. The financing gap for MSMEs is more acute in low-income states, while targeted lending to women-owned MSMEs is even less prevalent, the report said.
In the same month, gold-loan non-banking financial company Manappuram Finance Ltd. said that IFC planned to invest $35 million in the company to help low-income households and small enterprises avail loans against their gold assets. In July, PNB Housing Finance Ltd raised $100 million from IFC to expand its affordable housing loan portfolio.
This article was first published in livemint.com