Visakhapatnam, May 20: IndiaFirst Life Insurance Company is foraying into health insurance and micro insurance from the current financial year and the company will achieve break-even sooner than expected, according to P. Nandagopal, Managing Director and Chief Executive Officer. He told presspersons here on Monday that at present, the company floated... 

By Biswarup Gooptu, The Economic Times BANGALORE: Many small-and mid-size microfinance institutions are taking advantage of renewed interest by banks and risk capital investors in the sector to raise fresh capital. Samasta Microfinance is currently on the road to raise up to $6 million (Rs 32.8 crore) in equity financing, and up to Rs 100 crore... 

By Biswarup Gooptu, The Economic Times

BANGALORE: Many small-and mid-size microfinance institutions are taking advantage of renewed interest by banks and risk capital investors in the sector to raise fresh capital. Samasta Microfinance is currently on the road to raise up to $6 million (Rs 32.8 crore) in equity financing, and up to Rs 100 crore in debt. The Bangalore-based company, which has an outstanding loan portfolio of Rs 50 crore, will use the money to expand into new geographies.

“We believe 2013-14 will be the turnaround year for smaller microfinance institutions. Banks are also extending more credit to us at more favourable terms compared to the year-ago period,” said Venkatesh N, managing director at Samasta. The micro-lender had tried to raise capital in 2011 and 2012, but had failed to do so.

Separately, Varanasi-based Utkarsh Micro Finance is planning to approach the market after the second-quarter of the current fiscal as it looks to raise 100 crore from investors. “The fund-raising environment has improved a lot, with the checks and balances introduced by the Reserve Bank of India over the past few months,” said Abhishek Kumar, CFO at Utkarsh Micro Finance. Utkarsh, which closed its Rs 20-crore round of equity financing in April earlier this year, is currently backed by Aavishkaar Goodwell, International Finance Corp and Norwegian Microfinance Initiative.

The first four months of the year have already seen a number of mid-sized micro-lenders raising new rounds of equity and debt financing, a significant improvement over the past two years, which saw a number of them downsize their operations due to a massive liquidity crunch.

“The RBI’s role has been significant and the industry has also reacted positively. This, in turn, has encouraged banks and investors to repose their faith in the sector,” Venkatesh said. Other MFIs that have raised funds successfully since January this year include Suryoday Microfinance, which raised Rs 60 crore through external commercial borrowings, and Delhi-based Satin Creditcare, which raised Rs 41 crore in April.

The country’s central bank has put in place a number of new regulations, including a requirement to maintain capital adequacy ratio of 15%, a key measure that determines an MFI’s ability to meet its liabilities and credit risks, as well as submission of client records to credit bureaus. “There have been a lot of regulations brought in by the RBI that have brought in more stability and more credibility to the microfinance sector,” said S Prakash Sundaram, chief risk officer at India Finserve Advisors.

Tier-2 and tier-3 micro-lenders have been the worst-hit in the downturn in fortunes of India’s microfinance sector after private capital shied away from investing in the space, after the AP government imposed tight regulations on the sector, following a spate of farmer suicides.

“A number of smaller MFIs, including Basix, Spandana, Trident, have already sought to restructure their debt. But now the smaller MFIs are managing their operating expenses much more efficiently,” said Sundaram. However, industry players prefer to sound a note of caution. “There is more optimism and the industry is settling into a bit of a rhythm, but it has to be tempered with a fair bit of caution as well,” pointed out Sameer Nanavati, founder and CEO of Ahmedabad-based Disha Microfin.

By Ritwik Mukherjee, mydigitalfc Micro finance institutions (MFIs) in the state are now fearing a domino effect of the ongoing onslaught on chit funds. Following the collapse of Saradha Group, initiation of various probes and subsequent attacks on various chit fund offices and their properties, MFIs have also pressed the panic button and started... 

By Ritwik Mukherjee, mydigitalfc

Micro finance institutions (MFIs) in the state are now fearing a domino effect of the ongoing onslaught on chit funds. Following the collapse of Saradha Group, initiation of various probes and subsequent attacks on various chit fund offices and their properties, MFIs have also pressed the panic button and started fresh awareness campaigns on the difference between so-called chit funds and MFIs.

Although not forthcoming in public, officials at most large MFIs admit in private that their operations across the state have been severely affected following the chit fund fiasco, and in some places their offices have also been attacked as people tend to mix up MFIs with chit funds.

“The developments in West Bengal are indeed a matter of great concern and highlight the urgent need for a proper framework of regulations covering all types of institutions, irrespective of legal form,” Alok Prasad, CEO, Microfinance Institutions Network (MFIN), the industry body representing non-bank finance company — microfinance institutions (NBFC-MFIs), told FC.

MFIN’s member NBFC-MFIs in West Bengal include Bandhan Financial Services, Arohan, Village Financial Services, Anjali, Ujjivan Financial Services, SKS Microfinance and SHARE Microfin.

Both Prasad and officials of these MFIs admitted that there is now need to make a clear distinction between MFIs and chit funds.

“On behalf of all its members, MFIN would like to clarify that no member NBFC-MFI has any link with chit funds. Our member MFIs are non-deposit taking entities that operate under a tight framework of regulations, as laid down by the Reserve Bank of India (RBI). As institutions that primarily provide micro-credit to low income households, MFIs have a well-defined role in the formal, RBI regulated, financial system,” Prasad clarified.

At present, MFIN’s membership comprises 44 leading NBFCs (non-banking finance companies) and micro finance institutions (MFIs). The aggregate business of MFIN members constitutes over 80 per cent of the Indian microfinance industry (excluding SHGs).

Meanwhile, the Forum for Integrated National Security (FINS), a CBDT-approved national body working in the fields of internal, external and social security, has pleaded with chief minister Mamata Banerjee to take immediate action to ensure that acceptance of money or public deposit by companies registered under the Companies Act are completely banned under section 58A and 58AA of the Companies Act.

“Many such companies have resorted to issuing debentures, taking deposits from the public. But companies cannot issue debentures without following the procedure laid down in section 117 and 117 A of the Companies Act. In case of issuing a debenture, a company has to create a trust deed for protection and benefit of subscribers,” Ashok Ghosh, chairman, economic security committee, FINS (West Bengal), who is a chartered accountant and lawyer by training and profession, said.

Bank lending to microfinance institutions seems to have gathered steam, albeit with some caution. According to Mathew Titus, Executive Director of Sa-Dhan (an association of community development finance institutions), even while bank lending to MFIs has seen an improvement in the last two years, the lending is being done on a very selective basis. “Banks... 

Bank lending to microfinance institutions seems to have gathered steam, albeit with some caution.

According to Mathew Titus, Executive Director of Sa-Dhan (an association of community development finance institutions), even while bank lending to MFIs has seen an improvement in the last two years, the lending is being done on a very selective basis.

“Banks have become very selective in their funding decisions. They are looking for MFIs which are compliant with the code of conduct and with RBI norms,” Titus said at a press meet post a workshop on Regulatory and Code of Conduct Compliance by MFIs here.

Banks, Titus said, also increasingly preferred to extend loans to MFIs, which have a registration certificate from Sa-Dhan, which has close to 180 registered members across the country, of which, 25 are in West Bengal, Titus said.

Lending by banks to the sector had witnessed a steep drop following the crisis in the MFI industry in Andhra Pradesh in 2010.

Total outstanding of MFIs, which stood at close to Rs 20,000 crore in 2010-11, came down to Rs 17,000 crore in 2011-12 as banks were shying away from lending to the sector.

Nearly 90 per cent of the disbursals made by microfinance companies are funded by bank loans.

So any shrinkage in bank loans leads to a drop in the business of MFIs.
Disbursements

However, an improvement in bank lending to MFIs will help these institutions step up advances, said Kuldip Maity, Managing Director and CEO, Village Financial Services.

Loan outstanding is likely to grow by 15 per cent to over Rs 25,000 crore in 2013-14, against Rs 22,000 in 2012-13.

MFI lending in West Bengal is likely to grow only by about 10 per cent this year. Loan outstanding in the State stood at 4,200 crore in 2012-13.

“A majority of the borrowers in Bengal have already taken loans from two MFIs and as per the recent norms we cannot lend to such customers. We have to, therefore, look at newer set of borrowers which will take some time,” said Shubhankar Sengupta, CEO of Arohan Financial Services.

SOURCE: The Hindu Business Line

Royal Bank of Scotland (RBS) today offloaded 4.62 per cent stake in Hyderabad-based SKS Microfinance for about Rs 63.50 crore. According to the data available with the stock exchanges, RBS sold 50 lakh shares, amounting to 4.62 per cent stake, of SKS Microfinance through open market transactions. The shares were sold on an average price of Rs 127.01... 

The Bangko Sentral ng Pilipinas (BSP) has increased the limit on microfinance deposits from P15,000 to P40,000 to give local banks flexibility to serve low-income earners in the country. BSP deputy governor Nestor Espenilla Jr. told reporters Monday that the move “gives MBOs (micro banking offices) greater flexibility to service the deposit transaction... 

Opportunity Fund – California’s largest nonprofit microlender to small businesses – is expanding its microlending to Greater Los Angeles. Home to more than 325,000 small businesses which employ nearly 2 million people, Los Angeles has more small businesses than any metropolitan region in the country. The nonprofit lender will offer loans... 

Opportunity Fund – California’s largest nonprofit microlender to small businesses – is expanding its microlending to Greater Los Angeles. Home to more than 325,000 small businesses which employ nearly 2 million people, Los Angeles has more small businesses than any metropolitan region in the country. The nonprofit lender will offer loans from $2,500 to $100,000 to businesses in Southern California, including Los Angeles, Orange, Riverside and San Bernardino Counties from its branch office in Huntington Park. Citi Community Development provided $100,000 in seed funding for the expansion to Los Angeles.

“Opportunity Fund has grown rapidly in the past few years in Northern California. We are investing in small businesses that are advancing the economic well-being of our Main Street entrepreneurs. Now it’s time to broaden our support for the small businesses in Southern California that have been shut out of the financial mainstream,” said Board Chair David Krimm.

Opportunity Fund concluded a successful pilot last fall to test its loans in the Los Angeles market.

In the coming year, Opportunity Fund will lend $4 million to help more than 600 entrepreneurs in Los Angeles to grow their business, boost their income, and hire new employees. This is an ambitious plan for growth: In total, Opportunity Fund is poised to lend $12 million in 2013, helping twelve hundred California entrepreneurs get the affordable financing they need, providing a path to economic prosperity for them and their families, and helping to rebuild our economy.

“Through our lending pilot, Opportunity Fund was able to help business owners like Ana, owner of Arantxa Fashions in downtown LA and Natasha and Freya, co-owners of Cool Haus ice cream in Culver City. The businesses we fund are truly remarkable engines of hope in Greater Los Angeles,” said Chief Executive Eric Weaver.

“Small businesses create 64 percent of the new jobs in our country,” says Bob Annibale, Global Director of Microfinance and Community Development for Citi. “The goal of this expansion is to provide financial inclusion for small businesses in California. It’s clear that microfinance is meeting a critical need, enabling very small business owners to access capital, obtain valuable business training and move their way into the financial mainstream.”

Click here to watch a video from Ana, where she talks about how she was in debt to a loan shark after starting her business and how, with her loan from Opportunity Fund, she’s now finally getting ahead.

In need of funding to scale up operations in Greater Los Angeles, Opportunity Fund is currently competing for $100,000 in funding from the Goldhirsh Foundation’s LA2050 competition.

Press inquiries: Caitlin McShane, 408-512-2211 (o), 415-225-8855 (c), caitlin(at)opportunityfund(dot)org
Loan inquiries: 323-581-2687, loans(at)opportunityfund(dot)org

Opportunity Fund is a not-for-profit social enterprise helping thousands of California families build financial stability. Our strategy combines microloans for small businesses, microsavings accounts, and community real estate financing. Now California’s leading microfinance provider, Opportunity Fund began based on the idea that small amounts of money and financial advice could help people make permanent and lasting change to improve their own lives. Since making our first loan in 1995, Opportunity Fund has directed $40 million in microloans and microsavings to help over 7,000 local families. Our mission is to advance the economic well-being of working people by helping them earn, save and invest in their future.

LONDON – 9 April, 2013 – VisionFund Cambodia has received top ranking for its level of transparency for all data on MIX Market.  After submitting all the documents required by MIX, our ranking improved from four diamonds to five diamonds.  We are just one of three microfinance institutions (MFIs) in Cambodia that have five diamonds on MIX... 

LONDON – 9 April, 2013 – VisionFund Cambodia has received top ranking for its level of transparency for all data on MIX Market.  After submitting all the documents required by MIX, our ranking improved from four diamonds to five diamonds.  We are just one of three microfinance institutions (MFIs) in Cambodia that have five diamonds on MIX Market.

MIX is committed to microfinance transparency and uses a “diamonds” system to indicate an MFI’s level of transparency and supporting documentation for all data on MIX Market.  A higher number of diamonds means a more transparent MFI and more reliable data.

The rules for the diamonds are as follows;

Level 1 – Profile is visible
Level 2 – Level 1 and some data on products and clients for the year
Level 3 – Levels 1 and 2 and some financial data for the year
Level 4 – Levels 1 – 3 and audited financial statements are published for the year
Level 5 – Levels 1 – 4 and rating or due diligence report is published for the year

View our profile on Mix Market.

MIX is the premier source for objective, qualified and relevant microfinance performance data and analysis. Committed to strengthening financial inclusion and the microfinance sector by promoting transparency, MIX provides performance information on microfinance institutions, funders, networks and service providers dedicated to serving the financial sector needs for low-income clients. MIX fulfils its mission through a variety of platforms.

www.mixmarket.org


About VisionFund

VisionFund improves the lives of children in the developing world by offering small loans and other financial services to families living in poverty. Our work empowers our clients to grow successful businesses which enable children to grow up with improved health and education. Our network of microfinance institutes spans 36 countries in Asia, Africa, Latin America and the Caribbean, and the Middle East and Eastern Europe.  Working in partnership with World Vision we are committed to long-term change which will unlock potential for future generations.

We improve the lives of children living in poverty. Our services in the developing world unlock the potential for small businesses to grow.  This enables children to grow up with improved health and education giving them the foundations to build a positive future.

We empower poor women and their families with small loans and other financial services. We help create real and lasting change by giving our clients, – women and men, the training and support to run successful businesses that will provide a sustainable income.

We unlock the potential for communities to thrive. VisionFund is part of World Vision, a Christian relief, development and advocacy organisation. Working together we provide the foundations for local economies to thrive in healthy and safe communities.

VisionFund has a loan portfolio of over US$450 million and currently helps more than 800,000 small businesses in 36 countries worldwide.

www.visionfund.org or follow us on twitter @visionfund

About World Vision

World Vision is a Christian humanitarian organization dedicated to working with children, families, and their communities worldwide to reach their full potential by tackling the causes of poverty and injustice. We serve the world’s poor— regardless of religion, race, ethnicity or gender.

www.wvi.org or follow us on twitter @worldvision

By M Saraswathy, Business Standard Micro-insurance products, which offer coverage to low income households, have now become not just a means to penetrate rural areas but a business generator, too. Insurers have started adopting cost-effective measures to boost renewal premiums in this segment, resulting in a rise. As a result, micro-insurance,... 

By M Saraswathy, Business Standard

Micro-insurance products, which offer coverage to low income households, have now become not just a means to penetrate rural areas but a business generator, too.

Insurers have started adopting cost-effective measures to boost renewal premiums in this segment, resulting in a rise. As a result, micro-insurance, which constitutes 20-30 per cent of the product portfolio of insurers, has seen a reduction in costs by almost 35 per cent. At the same time, there has been a rise in renewals.

According to insurers, renewal in micro-insurance is a difficult process. This is because the resources are limited and the processes have to be designed in such a way that costs are managed.

Yogesh Gupta, head (business procurement and micro insurance) at Bajaj Allianz Life Insurance, said renewal of policies have been very challenging in rural areas due to factors such as customers’ low literacy, low awareness, language barrier, lack of infrastructure, and ‘untraceable’ customers.

The company has used tools such as handwritten post cards in the local language, public announcements accompanied by drum-beating, etc, to remind customers to renew premiums. It also conducts street plays to educate customers.

“We faced a lot of challenges in the initial phase but our experience in this sector helped us design innovative and cheaper tools like use of postcards, tele-calling, panchayat meets and activities like ‘nukkad nataks’. These activities are conducted in villages across the country, reinforcing messages around the essence and importance of renewals,” said Gupta.

Effective use of local manpower is also a mechanism to boost renewal premiums for these products. In rural areas, income is seasonal and cash flow is irregular.

To drive renewals in this segment, insurers use rural bank branches, non-governmental organisations (NGOs), and micro-finance institutions (MFIs) that the locals visit regularly, to remind customer.

According to Aviva Life Insurance’s CEO & MD T R Ramachandran, the staff has to visit each customer’s house in to ensure renewal. This is a costly affair as it includes staff travel cost, daily allowance, etc.

“To make this a viable business model, MFIs typically club premium collection with other activities like loan recovery or financial literacy camps. The costs involved here are higher than in urban areas, where customers are able to visit branches or pay online or using causing bank services or credit cards. Keeping these constraints in mind, our products that are designed for the MFI segment are single premium or limited premium paying term,” said Ramachandran.

Aviva Life has been working with partners BASIX and Anjali Microfinance to bring down premium collection costs and make the process simpler. Notably, using the intermediaries’ infrastructure has helped renewals for this segment rise 20-25 per cent. In terms of number of policies, micro and rural insurance contribute close to 15 per cent to Aviva’s portfolio.

According to Gupta, Bajaj Allianz has achieved a persistency level of about 70 per cent in rural areas. The renewal premium is collected by a team of Bajaj Allianz from the branches of intermediaries. This effectively reduces cost, said Gupta.

Insurance companies promoted by banks also make use of their banks’ rural branches. G V Nageswara Rao, MD & CEO of IDBI Federal Life Insurance, said apart from MFIs and NGOs, they have been able to boost renewals in a cost-effective manner by operating though the rural branches of their partner bank. However, there are challenges in terms of cost and reach, according to insurers. After the recent MFI crisis, most MFIs have taken cost control steps and decided to close a few of their branches in rural areas, said Ramachandran. This has had its impact on renewal collection efforts.

According to experts, micro-insurance guidelines, which are to be announced soon, could increase the insurance penetration in rural areas. The guidelines talk about enabling local kirana, fair-price and medical store owners (who also act like banking correspondents) to sell microinsurance products. This is likely to improve renewal of premiums, too, experts said.

The micro insurance regulations prescribe a framework within which insurers can offer affordable micro insurance products to a targeted group of rural and urban insurable population. Last year, under these regulations, the Insurance Regulatory and Development Authority (Irda) had proposed to allow other categories such as district cooperative banks, regional rural banks, primary agricultural co-operatives societies, and individual agents to be eligible as micro insurance agents.

According to Irda’s annual report for 2011-12, while the renewal premium accounted for 60.31 per cent (up from 56.66 per cent in 2010-11) of the total premium received by life insurers, first-year premium contributed the remaining, that is 39.69 per cent (43.34 per cent in 2010-11).

Insurance Regulatory and Development Authority (Irda) today clarified entities already licensed for soliciting the insurance business or appointed as referral company are not eligible to be appointed as micro-insurance agents. According to existing regulations, district cooperative banks, regional rural and urban co-operative banks, primary agricultural...