Bandhan Financial Services, a microfinance institution (MFI) based in Kolkata, India, recently announced that it is considering providing credit to smaller MFIs, in addition to lending directly to low-income groups.
“We cannot reach out to every village, and it is only logical that chance should be given to the local players there,” says Chandra Shekhar Ghosh, chairman and managing director of Bandhan. He claims that currently only large MFIs have access to low -cost funding from banks and development finance institutions (DFIs) such as the International Finance Corporation (IFC), the private sector arm of the World Bank. Bhandan reportedly proposes that these loans carry interest rates that are a couple percentage points higher than Bandhan’s cost of capital, which is around 11 percent.
Others in the industry have expressed skepticism. “The main concern is that the initial capital of these firms [smaller MFIs] is very small and they are not able to get decent risk ratings,” says a bank executive who did not want to be named. It is also unclear whether the Reserve Bank of India (RBI) would approve this new line of business.
According to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, Bandhan Financial Services reported a gross loan portfolio of USD 333 million, total assets of USD 424 million and 2.3 million active borrowers in 2009.
About Bandhan Financial Services:
Bandhan Financial Services Private Limited is a microfinance institution (MFI) based in Kolkata, India. It was founded in 2002. As of December 31, 2009, it operates in 14 states in India with 1,008 branches. It offers loans for microenterprises as well as for individuals to pay for health emergencies. According to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, Bandhan Financial Services reported a gross loan portfolio of USD 333 million, total assets of USD 424 million and 2.3 million active borrowers in 2009.
By Trevor Kwong, Research Assistant
Sources and Additional Resources:
[1] LiveMint: Bandhan plans to play bank to smaller MFIs, lend them money:
http://www.livemint.com/2010/10/12225206/Bandhan-plans-to-play-bank-to.html
[2] MicroCapital Universe: Bandhan Financial Services:
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bandhan+Financial+Services+Private+Limited
[3] Microfinance Information Exchange: Bandhan:
http://www.mixmarket.org/mfi/bandhan
Browse the MicroCapital Universe and add your entry to the wiki at?https://www.microcapital.org/microfinanceuniverse/tiki-index.php
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