Enam Financial, a leading Indian financial service provider, has picked up a ten percent stake in A.Little.World, a company which integrates a microfinance model with a new multi-bank payment system in order to bring mainstream banking capabilities to the large population of un-banked rural Indians. The amount of investment was not disclosed.
A.Little.World is in the middle of piloting a project that is designed to help facilitate the movement of various financial services from bank branches located in urban centers to entrepreneur “operators” who can carry out transactions in the most remote of villages using low-cost technology. The low-cost solution is the collaborative effort of A.Little.World and NXP Semiconductors, a company founded by Phillips Electronics in 2006. It is a mobile phone equipped with a biometric fingerprint authenticator, a contactless smart card, a printer and secure communication technology co-developed by NXP called Near Field Communication (NFC). According to NXP’s website, NFC technology allows for “instant yet completely secure access” to various services and is available on select phone models from Nokia, Motorola, Siemens BenQ and Samsung. The total cost of the device is INR 25,000 (USD 633.59), but the price is expected to drop to INR 17,000 (USD 430.84) in a year.
A.Little.World is also partnering with Zero MicroFinance Savings and Support Foundation, a non-profit organization that works with self-help groups and entrepreneurs to establish local “operators” in rural villages and trains them to conduct banking transactions.
The pilot is currently being conducted in 280 villages in seven states with the partnership of several banks from the private, as well as public sectors: State Bank of India, Union Bank of India, Axis Bank (formerly UTI Bank), Andhra Bank, State Bank of Hyderabad, Andhra Pradesh Grameen Vikas Bank, and Development Credit Bank. Founder and CEO of A.Little.World, Anurag Gupta, said that the goal is to reach 650,000 villages.
Enam is not the first major investment firm to take interest in A.Little.World. Just five months ago, Coronet Capital, a wholly-owned subsidiary of Legatum Capital, an international investment firm, acquired a 13 percent stake in the company. The Dubai-based firm was founded in 2006 by New Zealand-born billionaire Christopher Chandler.
In May of this year, Legatum also invested USD 25 million and acquired a majority interest in SHARE Microfin Limited, India’s largest microfinance institution (MFI). The same month, Legatum bought a USD 4.5 million stake in Mumbai-based Financial Information Network & Operations Limited (FINO), a banking technology company that seeks to help microfinance lenders “bring urban to the rural.” SHARE has 827,000 borrowers—all of whom are women—and a gross loan portfolio of USD 91.7 million. As of March 2007, the organization also had USD 101 million in total assets, a return on assets of 1.22 percent and a return on equity of 15.31 percent.
Legatum’s investments in MFIs are not part of any system of corporate social responsibility. It is clear that the firm views microfinance differently from other philanthropic efforts.
Legatum has over USD 1 billion invested in the Indian stock market, mainly in financial firms. It has stakes in ICICI, India’s largest private sector bank in terms of market capitalization and second-largest in terms of overall assets with USD 79 billion; Housing Development Finance Corporation Limited (HDFC), a premier housing finance company; HDFC Bank Limited, a commercial bank with INR 912 billion (pg 2-USD 23.1 billion) in total assets as of March 2007; Axis Bank (formerly UTI Bank), the first private sector financial institution approved by the Reserve Bank of India which currently holds INR 733 billion (pg 37-USD 18.5 billion) in total assets; and others.
Additional Resources:
The Economic Times: “Enam Financial picks 10% stake in rural financial inclusion firm”
The Hindu: “Zeroing in on branchless rural banking”
SHARE Microfin Limited: Latest News: “Ground-breaking Investment by Legatum and Aavishkaar-Goodwell to Support SHARE’s Growth to 6 Million Clients by 2012”
LiveMint.com: “NZ billionaire buys stake in microfinance venture.” By Will McSheehy.
Financial Information Network & Operations Limited (FINO)
ICICI Bank: Overview
Housing Development Finance Corporation Limited (HDFC)
HDFC Bank Limited: Auditors’ Report: Balance Sheet
UTI Bank: 13th Annual Report 2006-2007
MicroCapital article, May 31, 2007: “New Zealand-based Billionaire’s Legatum group buys $4.5 million Stake in Indian Microfinance Firm”
Microfinance Information eXchange (MIX): SHARE (SHARE Microfin Ltd.)
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