IFC to anchor $200 million investment in Mahindra Finance to boost MSME lending

International Finance Corporation (IFC), part of the World Bank Group, has anchored an investment round of 200 million dollars (about Rs 1,430 crore) in Mahindra & Mahindra Financial Services Ltd to create a dedicated pool of financing for micro, small and medium enterprises (MSMEs) in low-income states.

At least 100 million dollars (about Rs 715 crore) will be earmarked for women-owned MSMEs. IFC has invested 75 million dollars (about Rs 536 crore) from its own account and is mobilising another 125 million dollars (about Rs 894 crore) as parallel loans.

The 100 million dollars dedicated to women will be supported by blended finance from the IFC-Goldman Sachs' Women Entrepreneurs Opportunity Facility. Mahindra Finance has further committed 225 million dollars (about Rs 1,609 crore) to this pool.

Non-banking financial companies (NBFCs) are an important source of credit for India's MSME sector. The sector feeds crucial industrial value chains and employs 12.4 crore people, including semi-skilled and unskilled workers.

MSMEs account for more than 80 per cent of industrial enterprises and over 45 per cent of exports. The biggest constraint they face is access to finance.

An IFC study conducted in 2018 estimated the total credit gap for MSMEs in India to be 397.5 billion dollars (about Rs 28.4 lakh crore), nearly 15 per cent of GDP. The financing gap for MSMEs is more acute in low-income states. Targeted lending to women-owned MSMEs is even less prevalent.

"To expand financial services for MSMEs, IFC has been systematically supporting India's NBFC sector," said Hemalata Mahalingam, Manager of Financial Institutions Group for South Asia at IFC.

"Although the financing needs of rural and women-owned enterprises are not radically different, the level of financial exclusion is higher. The dedicated gender line and focus on unreached segments will contribute to addressing these gaps and demonstrate the commercial viability of investing in women and low-income groups," she said in a statement.

Mahindra Finance provides a host of financial solutions, including vehicle, tractor and agricultural equipment financing, to rural and semi-urban customers. The company delivers these through its physical network of over 1,300 branches as well as digitally, and through ruraldistribution initiatives like loan camps across the country.

It has fueled the entrepreneurial aspirations of more than 64 lakh customers in over 3.7 lakh villages in India and has assets under management of over 10 billion (about Rs 71,500 crore). This fresh funding will be used to further enhance credit in rural and semi-urban geographies with customised solutions for women borrowers in low-income states.

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