Micro Housing Finance Corporation (MHFC), a “housing finance company” based in Mumbai, India that is “focused on the urban lower income group,” has received a commitment for Rs 25 cr, the equivalent of over USD 5.3 million, in private equity from the India Financial Inclusion Fund (IFIF), a fund that specifically invests in companies that provide financial services to low-income clients, and the Michael & Susan Dell Foundation, which aims to reduce urban poverty [1,2,3,4].
This raises MHFC’s equity base to Rs 33 cr, the equivalent of over USD 7.1 million [5]. The investment will be used to help borrowers purchase homes that cost less than rs 5 lakh, the equivalent of over USD 10.7 thousand [5]. Loans will cover no more than 80 percent of the housing cost and will have an interest rate of 12 to 14 percent per year [1,5]. The loans will most likely finance flats from private developers who have ties with MHFC [5]. Most of the clients are in the informal employment sector, and are therefore under-served by financial institutions [1,5].
Micro Housing Finance Corporation was incorporated on May 16, 2008 [4]. It was started by “finance and property development professionals” who work with development institutions to finance housing for poor urban residents [4]. According to their website, the tenor of their loans is a maximum of 15 years [4]. Additionally, most of their loans cover about 75 percent of the total cost of housing [4]. In order to qualify, a borrower is expected to have a bank account as well as life insurance, permanent disability insurance, and property insurance, all of which MHFC helps to facilitate [4]. MHFC is not listed on the MIX Market, the microfinance information clearinghouse [6].
The India Financial Inclusion Fund is an offshore fund registered in Mauritius that aims to invest in “high-growth and efficient institutions that are focused on providing the entire range of financial services” [2]. The fund is advised by Caspian Advisors Private Limited, an investment management company that works specifically with microfinance investment funds [7]. IFIF focuses primarily on equity investments in institutions that provide loans to clients who are not included in the formal financial system [2]. Specifically, IFIF provides growth and start-up capital to microfinance institutions (MFIs), gives them technical advice, allow product diversification through risk capital, and support other institutions that provide services to MFIs such as “business correspondents to banks, technology companies, housing companies, etc.” [2]. IFIF does not report to the MIX Market [6].
The Michael and Susan Dell Foundation was founded in 1999 [3]. The foundation was initially meant to improve children’s health and education in Central Texas, but soon began to provide funding for these services worldwide [3]. It now has a satellite office in New Delhi, India [8]. As of March 2008, the foundation has an endowment of USD 1.3 billion and has committed USD 450 million in grants [8]. Its funds are generally used to promote primary education, provide basic health care, water and sanitation, and increasing the number of MFIs in poor, urban areas [8].
By Christopher Maggio, Research Assistant
Bibliography:
[1] Financial Chronicle article entitled ‘Mumbai micro home finance firm gets Rs 25 cr PE boost’: http://www.mydigitalfc.com/personal-finance/mumbai-micro-home-finance-fi…
[2] India Financial Inclusion Fund on Caspian Advisors: http://www.caspianadvisors.com/India%20Financial%20Inclusion%20Fund.html
[3] Michael & Susan Dell Foundation: http://www.msdf.org/About_Us/Our_Approach.aspx
[4] Micro Housing Finance: http://www.mhfcindia.com/
[5] VC Circle article entitled: ‘Micro Housing Finance Corp Gets Rs 25 Cr PE Funding’ http://www.vccircle.com/500/news/micro-housing-finance-corp-gets-rs-25-c…
[6] The MIX Market: http://www.mixmarket.org/
[7] Caspian Advisors Limited: http://www.caspianadvisors.com/aboutus.html
[8] Michael and Susan Dell Foundation Overview: http://www.msdf.org/Newsroom/Press_Kit.aspx
Conversions performed on Bloomberg Currency Converter: http://www.bloomberg.com/invest/calculators/currency.html
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