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Sunday, May 27, 2012

Sidbi to complete allocation of Rs 100-crore MFI equity fund by June

State-run Small Industries Development Bank of India or Sidbi said it expects to utilise the Rs 100-crore India Microfinance Equity Fund fully by June this year.

The government has created the Rs 100-crore dedicated corpus for investing in equities or quasi-equities of smaller microfinance companies to help them grow business. Microfinance institutions or MFIs lend to poor women, who don't have access to bank finances.

Once the corpus is exhausted, the government may think of expand the size of it.

A senior Sidbi official said the development financial institution has so far sanctioned investment proposals worth Rs 65 crore while many are in the pipeline for consideration. The development bank has disbursed Rs 20 crore till date.

The fund is being used for offering three types of instruments -- pure equity and quasi-equity for NBFC-MFIs and subordinated debt for others.

In case of equities, Sidbi invests after carrying out due diligence and equity valuation which would depend on book value or break-up value of the company and earning potential. Quasi-equity can comprise optionally convertible preference shares or non-convertible debentures.

Sidbi offers subordinated debt for non-NBFC MFIs for 6-8 years with moratorium of 4-5 years with a clause that the debt can be converted into equities if the entity transforms into an NBFC-MFI during the term of the debt

Source: EconomicTimes


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