Growth Assured in Future Microfinance Investments

Microfinance Focus, June 24, 2010: The investors’ expectations from the microfinance sector were pitched very high in the closing session of MCCM today. Buoyed by the sector’s performance investors expresses their optimism for increased equity action in the investment landscape of South Asian Microfinance. The sector is perceived to have thrown open opportunities which are not just viable for social investors but will attract private equity funds in large numbers as well.

Microfinance’s scalable business models, appropriate investment vehicles and an increasing transparency have amplified its credibility as a viable asset class. Budding microfinance organizations which are showing impressive growth trajectories will entail greater participation of investors and be the hot bed for future investments. Avishkaar’s CEO, Vineet Rai said, “Future pipelines for investment are the reason for my existence. There is a lot of value in this pipeline depending upon the stakeholder or what perspective you come from.”

Shubhankar Sengupta of Arohan Financial Services said, “It has not been difficult to raise funds and get investors and I hope it continues. I don’t think that there is a conflict between being good and greedy. At Arohan we have always tried to be good and have been recognized by clients. Customer satisfaction is what is most important. It is about how flexible we are and how fair we are to our clients.”

From an investor’s perspective, Bejul Somaia, Lightspeed Advisory Services said, “We do have to try and identify players who can be invested in. We believe there is a lot of opportunity to invest in smaller MFIs which can become big in future. We see what is the value proposition of them, the quality of assets, their geographical focus, operational efficiency and what are the areas where newer MFIs can differentiate themselves. I need to be convinced that they are better serving the customer.” 

Richard Weingarten, Managing Director, Norwegian Microfinance Initiative Frontier Fund said, “One of our funds is investing in India and as investors we have a lot of value too add. We are not looking into investing more money in SKS and the likes we want to invest in tier 2 and 3 MFIs, who are expanding and have good business models and management. We look for people who are bringing new products and services. That is very important for us. That’s the way we build pipelines.

 Geeta Goel, Michael & Susan Dell Foundation spoke of her organization’s approach towards investments in India. She said, “Our role is to build the pipeline for investors. Very high growth in the market has indeed posed some risks but I don’t think social an commercial investment are poles apart when it comes to sustainable business we think capital need to come for social returns.”

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