MICROCAPITAL STORY: Development Innovations Group Launches New Microfinance Company in India to Provide Loans and Housing Finance for the Urban Poor

CapStone Financial Services Pvt Ltd., has been launched by the Development Innovations Group (DIG), a private international firm specialising in development finance. Its remit will be to provide microfinance to the urban poor. The first office is in Chennai, though the company intends to spread throughout all of India, focusing on towns with populations of over 8 million.

DIG claims the founding money has come from the Bill and Melinda Gates Foundation, which will allow it to lend a couple of USD millions in the first year, though the loan portfolio is expected to grow to USD 1 billion in the next five years.

DIG is planning to register CapStone as a Non-Banking Finance Company (NBFC) with the Reserve Bank of India, so it can act as a lender. It is also looking to create partnerships with local banks to provide refinancing. ICICI, India’s second largest bank, is understood to be a potential willing source, and early reports suggested that the bank would co-partner the whole venture.CapStone plan to give loans for housing, home improvement and microfinance. Mr Franck Daphnis, the CEO of CapStone, said home improvement loans would have an interest rate of 1.7 per cent per month, mortgage loans would have 15 per cent interest per annum with a declining rate, and personal and consumer loans would have an interest rate of 1.7 to 1.8 per cent per month.

The company will set up two more offices in Chennai and will have about 30 loan officers working into the community. Mr Daphnis explained that the Indian urban poor are as yet largely under-financed and that while some efforts are being made towards supplying rural microfinance, urban microfinance is a market waiting to be tapped.

DIG currently has operations in Lebanon, Pakistan, Iraq and Afghanistan where it focuses on housing and public finance.

Amy Rennison, Microcapital writer

Additional Sources:

‘Capstone to provides loans to urban poor’: http://news.oneindia.in/2007/08/22/capstone-to-provide-loans-to-urban-poor-1187782529.html

‘US firm sets up NBFC to finance urban poor’: http://www.ibef.org/artdisplay.aspx?tdy=1&cat_id=60&art_id=16479

‘Creating a Low-Income Housing Finance Service Company’http://ifmr.ac.in/cdf/lih.htm

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