33616 - Equitas ECB

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Summary of Investment Information

Project Number

33616

Company Name

EQUITAS SMALL FINANCE BANK LIMITED

Date SPI Disclosed

Apr 22, 2013

Country

India

Region

South Asia

Projected Board Date

May 23, 2013

Environmental Category

FI-3 - No Impact

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 24, 2013
Signed : Jul 10, 2014
Invested : Aug 20, 2014

Sector

Microfinance and Small Business - Non Commercial Banking

Project Description

The proposed project envisages a senior debt investment in Equitas Micro Finance Private Limited (“Equitas Micro Finance” or the “Company”), which is a leading Microfinance Institution (“MFI”) in India.
Equitas Micro Finance has a borrower base of 1.3 million across 5 states and 1 union territory including the Low Income States of Rajasthan and Madhya Pradesh with a loan portfolio of US$215 million equivalent

Equitas Micro Finance is widely acknowledged for following best practices in responsible financing and corporate governance. Equitas Micro Finance also has a strong focus on using technology and process innovation to increase operational efficiency through implementation of a scalable system for IT infrastructure.

The proposed investment would manifest IFC’s support for an existing portfolio investee and would be amongst the first few ECB transactions in the microfinance space and is particularly important as a source of long tenor funding.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	10.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to Microfinance Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

1. Access to Microfinance by expanding the outreach of Equitas in several of the poorer states in India, where the Company would scale up in the next few years.
2. Promoting a more balanced growth of microfinance by supporting an institution that has been a front-runner in adopting technology, is amongst the pioneers in best practices on responsible financing, takes a very active part in sector development and is working to provide varied financial services to customer segments which have limited access to formal sources of finance.

1. Demonstration Effect: IFC''s continued investment in a portfolio MFI is expected to build confidence in the MFI sector post the AP crisis, and have a demonstration impact by catalyzing other investors, network partners and stakeholders to support Equitas Micro Finance''s expansion over the medium term. IFC''s investment would underline the faith in the sustainability of the microfinance business post the changed regulatory investment in addition to building investor confidence in the low income states towards provision of financial services to the BoP.
2. Diversification of Funding: IFC''s investment will help the Company diversify sources of funding for a new debt category (ECB) and potentially attract a new set of investors. IFC''s debt would also be for a longer tenor (greater than 5 years) which would enable Equitas Micro Finance to manage its ALM more efficiently.

E&S Category Rationale / Risks and Mitigation

This transaction involves a senior loan to Equitas microfinance and the overall portfolio risk is considered to be low. The project has therefore been categorized as FI-3 in accordance with IFC’s Environmental and Social Review Procedure. Equitas Micro Finance’s borrowers include small traders (vegetable vendors, hawkers, small grocery shops), cattle purchase, small businesses such as tailoring, informal activities such as housemaids and piece rate workers, support work in companies (housekeeping etc.) with an average loan size of less than US$ 500.

These lending activities entail minimal or no adverse environmental or social risks and/or impacts. For this project the client will be required to screen loans against the IFC Exclusion List and the Indian E&S laws and regulations.

Contacts

For Inquiries About the Project, Contact

Mr. S. Bhaskar, Chief Operating Officer
Equitas Micro Finance Private Limited
4th Floor, Temple Towers
No. 672, Anna Salai, Nandanam,
Chennai, Tamil Nadu,
India - 600035

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