MICROCAPITAL BRIEF: Private Equity Investors Wary As Return on Equity for Indian Microfinance Institutions Drops from Over 45% to Under 20%

The steep decline in microloan repayments that began in 2010 in the Indian state of Andhra Pradesh (AP) is continuing to keep private investors away from microfinance institutions (MFIs). According to Vishal Mehta, Co-founder and Partner at Lok Capital, “the sector is not at all attractive unlike a year ago. The return on equity is now in the range of 16-18 percent compared to up to 45-48 percent earlier.” Lok Capital invests in MFIs, and its affiliated LOK Foundation provides technical assistance. Last year, the portfolio of MFIs in AP was estimated to total the local-currency equivalent of USD 6.2 billion.

About Lok Capital
Lok Capital LLC is a limited-life, limited-liability company based in Mauritius that provides equity and equity-linked investments to microfinance institutions (MFIs) in India. It consists of a venture capital fund, Lok I, and the Lok Foundation. Lok I was launched in 2006 with USD 22 million. Its investors include ACCION International, The Commonwealth Development Corporation (CDC), Developement International Desjardins, Netherlands Development Company (FMO), International Finance Corporation (IFC), Kreditanstalt für Wiederaufbau (KfW) and responsAbility. While the fund’s investments generally range from USD 500,000 to USD 3 million. The Lok Foundation provides specialized technical assistance to Indian MFIs.

By Ariana Malushi, Research Associate

Business Line: “Private Equity Investors staying away from MFIs”
http://www.thehindubusinessline.com/markets/stock-markets/article2678312.ece

MicroCapital.org Story, December 20, 2011, “MICROCAPITAL BRIEF: Stymied by Local Regulation, Microfinance Institutions (MFIs) based in India’s Andhra Pradesh Expand Into Northern States”
https://www.microcapital.org/microcapital-brief-stymied-by-local-regulation-microfinance-institutions-mfis-based-in-indias-andrha-pradesh-expand-into-northern-states/

MicroCapital.org Story, July 8, 2011, “MICROCAPITAL BRIEF: Microfinance Institutions in India Continue to Struggle for Funding After Loan Recast, Adoption of Malegam Proposals”
https://www.microcapital.org/microcapital-brief-microfinance-institutions-in-india-continue-to-struggle-for-funding-after-loan-recast-adoption-of-malegam-proposals/

MicroCapital.org Story, October 11, 2011, “MICROCAPITAL BRIEF: Supreme Court of India Sends SKS Back to Andhra Pradesh High Court to Challenge Microfinance (Regulation of Moneylending) Act of 2010”? https://www.microcapital.org/microcapital-brief-supreme-court-of-india-sends-sks-back-to-andhra-pradesh-high-court-to-challenge-microfinance-regulation-of-moneylending-act-of-2010/

MicroCapital’s Universe Profile: Lok Capital https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Lok+Capital+LLC

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

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