MICROCAPITAL.ORG STORY: Bandhan Gets Rs 250-cr (USD 51.9) Million Credit Line From The Government-Backed Small Industries Development Bank of India

Bandhan, a seven-year-old microfinance institution (MFI) based in Kolkata, India has received a credit line worth over USD 51.9 million from the Small Industries Development Bank of India (Sidbi), a government-backed bank focused on investing in the “Micro, Small and Medium Enterprises Sector” (MSME) of India [1,2,3]. This comes after Sidbi extended credit worth over USD 20.7 million to Bandhan last fiscal year [3].

The loan will come in several tranches (installments) and will be received in the full amount by March 2010 [3]. The loan comes with a twelve percent interest rate each year for five years. Bandhan plans to lend these funds to its borrowers at an interest rate of 24 percent that reduces after the payment of each installment, leading to an interest rate of 12.5 percent per year on a fixed-rate basis [3]. This USD 51.9 million loan is the largest that an MFI in the east Indian state of West Bengal has ever received [3]. According to Shri Ram Nath, the general manager of Sidbi, “West Bengal is an under-served state as far as microfinance goes” [3]. Sidbi has plans to invest somewhere between USD 62.3 million and USD 83 million in West Bangal this fiscal year [3].

Though based in Kolkata, Bandhan has over 1,000 branches across India [3]. They opened their first branch in July of 2002 [1]. According to the MIX Market, the microfinance information clearinghouse, Bandhan has a gross loan portfolio of over USD 103.8 million and over 1.4 million active borrowers [4]. As of March 2009, they have a return on asset of 8.66 percent, a return on equity of 125.62 percent, and a debt to equity ratio of 15.39. Forbes ranked the MFI second in the world in a list of the best MFIs of 2007, as was reported by Microcapital in January of 2008 [5,6].

The Small Industries Development Bank of India was established by the Indian Parliament in 1990 [2]. It provides credit to “large and medium scale MFIs,” i.e., those with a fund of over USD 207,000 [2]. The entire USD 934.7 million of capital issued by the bank is subscribed to by the Industrial Development Bank of India (IDBI), with 19.21 percent retained by IDBI and the rest “transferred / divested in favour of banks / institutions / insurance companies owned and controlled by the Central Government” [2,8]. According to their website, SIDBI “sanctioned an aggregate financial assistance of [over USD 397.9 million]” in the fiscal year 2008/2009 [2]. This amount has gone toward various ventures such as term loans, equity support, and “capacity building grants” to MFIs [2]. Sidbi is listed on, but does not report data to, the MIX Market [7].

By Christopher Maggio, Research Assistant

Bibliography

[1] Bandhan: http://www.bandhanmf.com/
[2] Small Industries Development Bank of India: http://www.sidbi.com/mission_vision.asp
[3] Economic Times article entitled ‘Bandhan gets Rs 250-cr credit line from Sidbi’: http://economictimes.indiatimes.com/News/Economy/Finance/Bandhan-gets-Rs-250-cr-credit-line-from-Sidbi/articleshow/5011611.cms
[4] Bandhan on the MIX Market: http://www.mixmarket.org/mfi/bandhan
[5] Forbes article entitled ‘The World’s Top 50 Microfinance Institutions’: http://www.forbes.com/2007/12/20/top-philanthropy-microfinance-biz-cz_12…
[6] MICROCAPITAL STORY: Forbes’ Special Feature on Private Investment in Microfinance Includes Top 50 Microfinance Institutions: https://www.microcapital.org/microcapital-story-forbes-special-feature-on…
[7] Sidbi on the MIX Market: http://www.mixmarket.org/funders/sidbi-0
[8] IDBI: http://www.idbi.com/

Similar Posts: