The microfinance
market in India, whose curve is moving upwards, is estimated to be growing at
an average annual rate of nearly 80 percent for the last three years. This
steady growth has attracted the attention of private equity firms to move in
and invest in MFIs. The latest figures from Venture Intelligence revealed that
since 2015, MFIs have accounted for almost 40 percent of all Indian private
equity deals.
With
things standing at such a strong place, the scenario would improve further if
the government took an initiative to support with the creation of an equity
fund, which will support MFIs to provide proper capital requirement for women
entrepreneurs. While an equity fund of Rs 100 crore was set up under SIDBI
since 2012, given the capital intensive nature of the business, the
sector needs to have continuous access to more debt and equity capital, in
order to reach out to more clients and bridge the financial inclusion gap that
still exists in the country.
With a stronger regulatory
system in place, MFIs are drawing the confidence of private banks as credible
investment options, and with the microfinance sector showing steady growth,
besides some of the larger MFIs receiving banking license from the RBI, leading
private banks have become more liberal in providing funds to small and medium
MFIs, understanding their accessibility as a platform to sell other products
like health insurance.
While
an MFI can provide loans up to a certain amount, if banks come forward to help
us, it would be of greater help to budding women entrepreneurs from poor
families, particularly in rural areas. If the government expands its equity
portfolio for MFIs beyond the existing Rs 100 crore, a lot more MFIs can be
included in the plan, and backing in the form of equity investment from the
government will make lenders further comfortable to lend.
The
need of the hour is for the government to create a large
equity fund in order to support the
capital requirement for women enterprises.
Providing
such women with special tax benefits for the first five years of business and
lending them money at special rates would also go a long way to further improve
the scenario. The success of MFIs have also proven that the model is viable and
worth replicating, providing enough reasons for commercial banks to support the
sector even more, and help a larger number of women drive towards financial
independence and empowerment.
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