Experts taking part in the annual micro-finance summit here have stressed the need for evolving a corpus of funds for sourcing domestic equity capital in microfinance institutions (MFIs).

Mr N. Srinivasan, an independent consultant who authored the state of the sector report-2011, told Business Line that the venture capital/private equity mode of funds may not be the ideal one that suits the sector.

‘Patient Money’

It has to be ‘patient money’ that can stay invested for eight to 10 years against the two to three-year ‘window’ that a VC/PE tends to look at, before exiting the venture.

“It has to be a serious decision,” Mr Srinivasan said, adding that it is better that the funds evolve locally within the country.

“Given that MFIs are going to be increasingly regulated at the apex level with strict capital adequacy norms, we should be looking at a minimum corpus of Rs 1,000 crore,” he said.

But it could as well go up to Rs 3,000 to Rs 4,000 crore, depending on the risk perception. It is up to the Government at the State or Central level to take the initiative.

CSR activity

He was of the view that even the corporate sector, including companies and high-networth individuals could be roped in to this exercise by devising imaginative schemes.

For instance, they could be requested to part with the money as part of the corporate social responsibility (CSR) activity.

They could even be given tax breaks and other incentives for staying invested in micro-finance initiatives for an extended period.

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