Equity Investment in Microfinance

This study reviews the current state of equity investments in India’s microfinance sector in India and outlines barriers to the future growth of investments.

Background
Equity investment is playing an increasingly important role in providing financing for microfinance institutions (MFIs) around the world. In India, debt and donations have traditionally supplied the bulk of financing for MFIs, but over the past year and a half, equity investment in the microfinance sector has risen dramatically. Due to recent regulatory changes and the strong growth of the overall microfinance sector in India, the demand for equity financing is likely to rise even further in future years. This report presents results from surveying the state of equity investment in the microfinance sector in India and highlights challenges to the future growth of equity investments in the sector.
Approach
In this report, the researchers documented the recent rise in equity investment in Indian microfinance and described the process of obtaining equity financing and working with investors in detail.
Implications
Researchers presented two new alternative methods of financing for MFIs – portfolio buyouts and securitisation, of which a brief description is provided.

Thematic area

Financial Inclusion

Project Leads

Michael Chasnow, Doug Johnson

Location

India

Partners

NABARD, BIRD

Status

Completed