IFC invests in Fullerton India Masala Bonds, Enhances Access to Finance for MSMEs
October 05, 2017, Mumbai, India
: IFC, a member of the World Bank Group, has invested $76 million (INR 5 billion) in 5-year unrated masala bond issuances of Fullerton India Credit Company Limited. The investment will strengthen their reach in underserved retail and micro, small, and medium enterprise segment in developing states.
Financing for micro, small and medium enterprise segment is a strategic focus of IFC’s financial inclusion work in India. IFC is using Masala Bonds to support companies in diversifying their funding sources. IFC helped create the Masala Bond market through its own first issuance in November 2014.
Fullerton India has established itself as a leading financial services company for MSME finance reaching 1.65 million retail and MSME customers in 22 states. Through this investment, the company expects to reach 6000 SME borrowers and 500,000 micro-enterprises in the next five years.
“We started focusing on MSME financing in rural and urban India in 2011. This now represents a significant portion of our lending” said Anand Natarajan, Head of Strategy and Business Execution, Fullerton India. “IFC’s earlier investment in 2015 helped us increase our support to MSME segment and strengthen our lending systems and processes. IFC’s renewed support strengthens our relationship and paves the way for steady and inclusion-led growth of the company’s MSME loan portfolio.”
Micro, small, and medium enterprises form a large part of the Indian economy, accounting for 45 percent of the country’s industrial output and 40 percent of its exports. There are 48.8 million Ministry of MSME, Annual Report, 2014 -15 MSMEs in India, which employ 111 million Ministry of MSME, Annual Report, 2014 -15 people. There is critical shortage of long-term funding. Per IFC–Government of Japan 2012 study on MSME financing in India, there is a total finance gap of $311.9 billion (~INR 20.9 trillion) against a total finance demand of $485.7 billion (~INR32.5 trillion).
“MSME financing is a strategic focus area for IFC to promote financial inclusion, create jobs, and drive economic growth. Our investment in FICCL through long-term capital markets instruments will set a market precedent and enhance the path for other similar institutions, to issue local currency bonds offshore,” said Jun Zhang, IFC’s country head for India.
Specific to SME finance, IFC has invested close to $1 billion in financial intermediaries in India to enable credit financing for SMEs. Since 1956, IFC has invested in over 400 companies in India, providing $17 billion in financing to the private sector.
About Fullerton India Credit Company Limited
Fullerton India Credit Company Limited (Fullerton India) is one of India’s leading Non-Banking Finance Companies (NBFC). The total revenue of the company for the fiscal year ending March 2017 stood at Rs. 1,608 crore. As on 30th June 2017, the AUM of the company stood at Rs. 11,752 crore. It has a widespread network of 526 branches spread across 22 states and 3 union territories, reaching out to 600 towns and over 51,000 villages in the country. Fullerton India offers several retail finance products for varying needs of customers ranging from rural households to SMEs, in the locations it serves. In February 2016, Fullerton India launched its housing finance company – Grihashakti. The company is headquartered in Mumbai and operates through 47 branches spread across 9 states – Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, Andhra Pradesh, Telangana and West Bengal. Fullerton India is a wholly-owned subsidiary of Fullerton Financial Holdings, Singapore, which is again a subsidiary of Temasek Holdings, Singapore.
About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In FY17, we delivered a record $19.3 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity. For more information, visit
www.ifc.org
.
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