Bandhan Financial Services, an India-based microfinance institution (MFI) that offers loans for health emergencies and microenterprise, reportedly has raised INR 1.6 billion (USD 26 million) in debt financing from the International Finance Corporation (IFC), the US-based World Bank Group’s private investment arm, and is seeking to raise another INR 1 billion (USD 16 million) from an unnamed Swiss multinational investor. IFC has extended to Bandhan a seven-year subordinated debt facility with a bullet repayment provision, which allows the MFI to repay the principal in a single installment at maturity. Bandhan’s interest rate for both the IFC and prospective loans reportedly is estimated to be approximately 15 percent per year. The purpose of the loan is to increase Bandhan’s capital base in order to fund its expansion. IFC holds an 11-percent stake in Bandhan.
As of 2012, Bandhan reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 983 million, a gross loan portfolio of USD 815 million, 4.4 million active borrowers, return on assets of 6.4 percent and return on equity of 37.6 percent. As of fiscal year-end 2013, IFC reported total assets of USD 77.5 billion.
By Meraj Husain, Research Associate
About Bandhan Financial Services
Bandhan Financial Services Private Limited is a microfinance institution (MFI) based in Kolkata, India, that was founded in 2002. As of 2014, it operates approximately 2,000 branches in 22 states and union territories in India. It offers microenterprise loans as well as loans for health emergencies. As of 2012, Bandhan reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 983 million, a gross loan portfolio of USD 815 million, 4.4 million active borrowers, return on assets (ROA) of 6.4 percent and return on equity (ROE) of 37.6 percent. The institution does not accept deposits.
About International Finance Corporation (IFC)
A US-based multi-lateral development bank and member of the US-based World Bank Group, the International Finance Corporation (IFC) offers loans, equity investments, advisory services and technical assistance to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. As of fiscal year-end 2013, IFC reported total assets of USD 77.5 billion.
Sources and Additional Resources
[1] Live Mint: “Bandhan building up capital base ahead of banking license issue,” http://www.livemint.com/Companies/X6M0Yt8LU26CwmW62NnvyN/Bandhan-building-up-capital-base-ahead-of-banking-licence-is.html
MicroCapital, February 7, 2014, “International Finance Corporation (IFC) Loans $20m to Attawfiq Micro-Finance for Microlending in Morocco,” https://www.microcapital.org/microcapital-brief-international-finance-corporation-ifc-loans-20m-to-attawfiq-micro-finance-for-microlending-in-morocco/
MicroCapital, January 14, 2014, “Standard Chartered Bank Loans $12m to India’s Bandhan Financial Services for Microenterprise Lending,” https://www.microcapital.org/microcapital-brief-standard-chartered-bank-loans-12m-to-indias-bandhan-financial-services-for-microenterprise-lending/
MicroCapital, July 23, 2013, “India’s Bandhan Microfinance Institution to Cut Interest Rates as a Commercial Bank,” https://www.microcapital.org/microcapital-brief-indias-bandhan-microfinance-institution-to-cut-interest-rates-as-a-commercial-bank/
MicroCapital Universe Profile: Bandhan Financial Services Private Limited https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bandhan+Financial+Services+Private+Limited
MicroCapital Universe Profile: International Finance Corporation (IFC) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Finance+Corporation+%28IFC%29
MicroCapital Universe Profile: The World Bank Group https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=The+World+Bank+Group
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