INVESTMENT FOCUS

The Fund follows a three-pronged strategy to achieve its mission of increasing the access of the poor to financial services:

Promoting the transformation of NGO-MFIs in to formal financial institutions
The Fund invests in mid-sized NGO-MFIs that are looking to significantly expand their operations and outreach. The NGO-MFIs need to have a clear poverty-focus, complimented by a focus on commercial viability and on the need to provide a return on investment to their stakeholders. While MFIs that fall within this category would not be regulated entities and would be operating as a non-profit organizations (societies/trusts), the Fund will invest in them through debt and quasi-equity structures, provided there is a clear intention on the part of the MFI’s Board and management to transform and achieve regulated status.

Investing in existing NBFCs and help them downscale in to Microfinance
The Fund believes in the effectiveness of downscaling established financial institutions in to Microfinance. These institutions are structured as non-banking financial companies (NBFCs) and typically, would have been involved in the mainstream financial services business for several years. The value of downscaling in to Microfinance has to be recognized by the NBFC as a commercially viable option as well as a socially relevant one. The Board and management have to be open to exploring some of the unique operating methods adopted in Microfinance and demonstrate a strong commitment to downscale. The Fund’s investments in this segment would be a mixture of equity and credit enhancement instruments.

Start-ups
The Fund also invests in high-potential start-ups, conceived by experienced entrepreneurs, with a special focus on those MFIs that plan to operate in the economically backward and underserved regions across the country. The Fund believes that entrepreneurial initiatives in the sector are to be actively encouraged given the relatively low outreach of the body of MFIs that exist in India today.

The Fund puts the entrepreneurs through a rigorous appraisal, both of their own entrepreneurial and operating/managerial ability and experience as well as of the strength of the Business Plan for their venture. The plan should have the potential to reach scale and efficiency and achieve the targeted outreach in a profitable manner.

Geographic spread
The Fund focuses on microfinance-deficient regions in the country and actively seeks to find more partners outside the four states of south India given the existing concentration of microfinance in these southern states.