Microfinance institution Bandhan, which has recently been given the go-ahead to set up a bank, has an old supporter, International Finance Corporation (IFC), keen to participate in its expansion plans for rural India.
With a committed portfolio in India at $4.5 billion, IFC is keen to assist more banks to offer products tailor-made for women entrepreneurs, given the immense potential in gender finance.
Karin Finkelston, Vice-President, Asia Pacific, IFC, World Bank Group, is eager to tap the huge potential of 30 lakh micro, small and medium enterprises (MSMEs), with full or partial female ownership in India. In an email interview to
Financial inclusion is central to our work in India, and supporting gender finance is a key priority for IFC. Our past investments in microfinance institution Bandhan, whose customer base is primarily women, helped reach over 5 million women, many of whom are entrepreneurs. We would be happy to provide them assistance (in their banking efforts), to be able to expand reach in rural India.
In December last year, IFC committed to providing a $150 million (around ₹895 crore) financing package to YES Bank, wherein part of the funds would go into expanding access to finance for women-owned small businesses and create jobs in India.
In South Asia, this is IFC’s first credit line with a gender component that would help YES Bank increase its lending to small businesses in India’s low income states, including in the north-east. We help banks serve businesses run by women and provide risk sharing facilities with banking and non-banking partners.
IFC believes in India’s long term fundamentals. India is IFC’s largest portfolio country. IFC has a strong advisory programme in India with a portfolio of 68 projects.
Three quarters of IFC’s advisory programme in FY 13 was in India's low income states like Odisha, where IFC expanded state-level partnerships to support regulatory reforms and mobilise investments.
The rupee linked offshore bond programme has given us the opportunity to invest in non-convertible debentures in the country. We are planning to launch a distressed assets platform shortly.
Could you elaborate on your work in rural India?
Over the last few years, IFC’s impetus in rural India has been helping grow opportunities for the under-served. For instance, IFC has invested in microfinance institution Utkarsh, to support its planned expansion in Uttar Pradesh and Bihar. Over the next six years, Utkarsh expects to increase its reach five-fold to over 800,000 women borrowers in rural and semi-urban markets.
Additionally, an IFC-funded local non-banking finance company Au Financiers is building scale to increase lending. The company is expanding its loans against property and small-ticket business loans for micro and small enterprises, even as it serves low-income, self-employed, and small transport entrepreneurs in semi-urban and rural Rajasthan and other Indian states.
Another unique partnership between IFC, India’s National Housing Bank, and the Rajasthan state government has helped establish a new housing finance company in the state, to provide affordable home loans to low-income households that have limited or no access to formal financial services.
Can you give us some details about your recent study?
IFC has studied the micro, small and medium enterprises (MSME) in India and has developed a report on ‘improving access to finance for women-owned MSMEs’. Our study has indicated that approximately 78 per cent of all women enterprises belong to the services sector.
There are a number of socio-cultural constraints which a women entrepreneur faces in India, and access to finance is one of the biggest challenges. Limited financial awareness and understanding of financial products, lack of adequate collateral, and the lack of availability of suitable products are some of the main challenges which women-owned MSMEs face in India.
Lending to women-owned small businesses as a distinct segment is still unexplored when compared to lending to MSMEs in India. Due to a lack of segmental focus and, perhaps, due to a higher perception of risk, formal financial institutions have made little effort to better understand this segment. There is a lack of awareness among bankers of the potential business opportunity presented by this segment.
IFC could assist banks to design and offer products tailor-made for this segment, given the immense potential in gender finance. We could address gaps in financing for women-owned businesses, provide specific credit lines dedicated to women entrepreneurs, or start a risk capital fund.
Could you give us your take on how corporates need to manage the under-utilised role of women in the workplace?
A diverse and professional workplace promotes competitiveness. Research shows that greater creativity and intelligence is evident in work teams when there are more women in the group. Mixed-gender teams consistently outperform those composed of only one gender.
Many of the sectors that are critical for economic growth, like agriculture, textiles, and tourism, rely heavily on women’s contribution. There is definitely a need to ensure that any workplace is gender smart: that it draws on the wealth of knowledge and expertise of both women and men.
Are there any specific instances that come to mind where you felt that a certain women entrepreneur has managed to get on her feet with very little financial help from anyone? How has IFC stepped in to deal with this?
Recently, FICCI announced its Grassroots Women Entrepreneurship Award for 2014. One of the winners was Jamna, a small business owner and mother of four from a low income neighbourhood of New Delhi, who took a micro loan from one of IFC-investee clients, to expand both her business and her home. Jamna is one of 1.1 million clients of Ujjivan Financial Services, a microfinance institution.
Another example is Phool Pati Devi, who took her first loan, around ₹12,000 ($200), from IFC’s investee client, Utkarsh Micro Finance, a start-up based in Uttar Pradesh. For 15 years, she had struggled, earning a meagre income selling food off a cart she pushed through her village. With Utkarsh’s support in 2010, she was able to open a small grocery store in her home. The store’s sales have been brisk, allowing her to send her children to a better school, and investaround ₹3,000 ($50) in the family savings account each month.