Successful models in social impact businesses are worth a study even as financial inclusion in India continues to be a priority; the ecosystem has to be strong across the country for small entrepreneurs and borrowers alike.

If the IFMR Capital and Annapurna partnership is anything to go by, in about seven years of working together, they have contributed to the confidence of capital market investors in the micro-finance industry.

Acting as the bridge to funds that an MFI can dip into to be able to serve its customers, IFMR Capital takes exposure and connects Annapurna to the capital market.

Checks and balances

To be able to do this for the longer term, and support financial inclusion, IFMR Capital has to have “high quality originators” (MFIs, clients) on board. The NBFC assesses the experience and motivation of the originator company’s management, adherence to corporate governance practices, and its systems and processes (like information systems and risk management) besides looking for excellent financial performance and an MFI’s strength to face “unexpected stress conditions”.

Kshama Fernandes, CEO, IFMR Capital, says, “Annapurna is an inspiring story just by the sheer challenging areas they are involved in. They are reaching out to those that are hard to reach… Once we qualify an originator we try to ensure that they have access at all points of time to a debt pool.”

As of June, Annapurna had provided loans to 8.7 lakh customers and had around 6.8 lakh active customers through 194 branches in 103 districts in 10 States. Arguably, this reach requires a system that’s working well.

Particulars

Annapurna has benefited from having only a handful of other MFIs to compete with across its target markets. In Odisha and Chhattisgarh, Annapurna sees itself as one of the largest MFI players in the region with a market share of 17 per cent and 15 per cent, respectively, as of June.

Satyajit Das, CFO, Annapurna, says, “Almost half the microfinance industry is still only catering to few Tier-I and Tier-II cities. Our target customer mostly has an average annual income of below ₹1 lakh. A strong self-help group movement in the States we are operating in has led to higher pace of customer acquisitions.”

Borrowers graduating to individual loans will mean new micro entrepreneurs across the country. Annapurna is aiming for a portfolio of ₹7,500 crore over the next five years and a base of 4 million customers across 14 States. IFMR Capital will diversify into new sectors like fintech to ensure it can continue enabling access to credit for customers who would otherwise be underserved.

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