The positive impact of Microfinance on the lives of the poor is an acknowledged fact. Yet there is a long way to go before breaching the gap between the demand for Microfinance services and the supply. In India, Microfinance continues to be hampered by a lack of resources, lack of a supportive regulatory environment, a geographical divide in terms of outreach, issues of capacity building and institutional strengthening. The availability of debt to Microfinance institutions (MFIs) has improved in recent times, although still largely restricted to the mature (regulated) MFIs. Attracting equity, however, has proved to be difficult for the sector as a whole, with very few domestic institutional investors.

Several MFIs in India are at a stage where their programs are expanding and they need to significantly scale up their activities. The sector is thus poised for commercialization with MFIs seeking to become regulated, professional business entities, capable of attracting an increasing amount of mainstream investment, both equity and debt.

It is in this backdrop that The Bellwether Fund was established. Two international social investors came together with a local entrepreneur/microfinance professional in Aug 2004, to establish what would be India’s first (and as yet the only) Microfinance investment fund. Gray Ghost Microfinance Fund, Hivos-Triodos Fund Foundation and Viswanatha Prasad ensured that the Fund evolved from a concept in to a full-fledged operating entity in less than a year. The structure and strategy of the Fund were developed over this period, after extensive market research in to the specific needs of MFIs and studying the evolution of the microfinance sector in India.