Amid increasing demand for capital in India’s microfinance industry and growing interest of equity investors, concerns exist such as valuation bubbles and whether growth can be sustained were discussed at the recent “Microfinance Cracking the Capital Markets Conference & Investment Marketplace” held in New Delhi.

According to an article on the newKerala website, investors are approaching the sector with caution as industry reports indicate that MFIs have valuations as high as five to six times their book value. Regardless, the conference discussion noted that in the last 18 months, close to USD 200 million in private equity funds have been invested in Indian microfinance institutions. [1]

In addition to private equity investment, the conference discussion also included the emergence of innovative debt financing including non-convertible debentures, syndication, securitization and bond issues which are gaining popularity as funding sources.

The conference was hosted by ACCION International in collaboration with Citi Foundation and EDA Rural Systems.

By Jennifer Shevock, Research

About ACCION International:
ACCION International is a private, US-based nonprofit organization with the mission of giving people the financial tools necessary to move out of poverty, such as microenterprise loans, business training and other financial services. ACCION’s partner microfinance institutions are providing loans as low as USD 50 to poor men and women entrepreneurs in 23 countries in Latin America, Asia, Africa and the United States. In the last decade, ACCION partners have reportedly disbursed 28.5 million loans totaling USD 23.4 billion; 97 percent of the loans reportedly have been repaid.

Sources and Additional Resources:
[1] “Growing interest of Private Equity in Micro finance Institutions” June 26, 2010. http://www.newkerala.com/news/fullnews-134574.html

MICROFINANCE EVENT: “Microfinance Cracking the Capital Markets South Asia 2010” February 16, 2010. http://www.microcapital.org/?s=cracking+the+capital+markets&x=0&y=0

MICROCAPITAL BRIEF: “Microloan Default Risk Rises in India as SKS Microfinance Plans Initial Public Offering (IPO)” June 23, 2010.
http://www.microcapital.org/microcapital-brief-microloan-default-risk-rises-in-india-as-sks-microfinance-plans-initial-public-offering-ipo/#more-5352

MICROCAPITAL .ORG STORY: “Indian Microfinance Sector Sees Increase in Private Equity Investments from $61m to $143m” November 10, 2009.
http://www.microcapital.org/microcapitalorg-story-indian-microfinance-sector-sees-increase-in-private-equity-investments-from-61m-to-143m/

MicroCapital Universe: ACCION International: http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=ACCION+International

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