IndusInd Bank, Grameen Capital, SKS Microfinance in agri microfinance deal

21 Aug 2008

1

Mumbai: IndusInd Bank, Grameen Capital India and SKS Microfinance have announced the closure a Rs100-crore assignment of microfinance receivables, structured and arranged by Grameen Capital India, comprised a pool of advances to the agriculture and allied sectors.

IndusInd Bank has been assigned micro finance receivables totalling Rs150 crore, the first tranche of Rs100 crore transaction was closed on 29 July 2008 and the second tranch is slated to be concluded in February 2009.

''This is an excellent opportunity for us, not only to build up our Agri Portfolio but also to be involved in the fast growing microfinance field," says Suhail Chander, head corporate and investment banking, IndusInd Bank. "The transaction allows us to diversify our asset base by partnering with globally recognised microfinance players. ''

Under this transaction SKS offered a pool of assets amounting to Rs100 crore for assignment to IndusInd Bank, as per the Bank's selection criteria. Credit enhancement was provided by way of an over-collateralisation structure of SKS' microfinance assets. SKS Microfinance has also signed a management and collection agreement with the bank and would continue to administer these loans and channel the collections to the bank.

According to Dilliraj S, chief financial officer, SKS Microfinance, normally the assignment of agri portfolio picks up in Q4 only.

He said, "We were able to warm up the market right in July itself.  The structure is a win-win deal for both the financial intermediaries --- SKS gets to access low cost money in July itself and the IndusInd Bank is also assured of peak outstanding in March 2009 with a top-up at pre-negotiated rate.''

"At a time when the growth of agricultural credit from the banking sector has fallen by 19 per cent, this transaction is indeed good news for the poor borrowers in rural India, says Royston Braganza, CEO, Grameen Capital India said.

"It validates the tremendous value embedded in the portfolio created by MFIs. Grameen Capital will continue to enable MFIs to benefit from this value, through innovative structured solutions and strategic portfolio placement."

Post the successful closure of this transaction, SKS Microfinance has also mandated Grameen Capital to provide suitable structured finance solutions, given the ambitious growth plans to accelerate financial inclusion.

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