Yes Bank to spin off microfin arm in 2 yrs

Yes Bank has set up Yes Microfinance India division to provide credit, savings, insurance and remittance products.

It has tied up with the US-based ACCION International to build expertise to extend financial services to poor, including individuals in urban areas.

The bank will carve out microfinace division into a separate entity after two years once the business acquires critical size and efficiency.

Many multilateral and investors, who can give subsidised long-term loans, are interested in picking up stake in microfinance ventures, bank managing director Rana Kapoor said.

The private sector bank will launch pilot microfinance programme in Mumbai at Worli and Andheri. Later, it will be expanded to a branch in Nashik and Nagpur (Butibori) and other semi-urban and rural branches.

The new initiative is expected to stabilise in five years, by which time the bank plans to cover three lakh households. There are about 170 million households in the underprivileged category in the country. Microfinance services are aimed at encouraging entrepreneurial efforts among poor. The loan size in the urban area is Rs 10,000-50,000 while in rural area it varies between Rs 5,000 and Rs 20,000.

The bank is already lending to micro finance institutions (MFIs). At present, its loan exposure to MFIs is Rs 55 crore and this is expected to double to Rs 120 crore in the next 12 months, Kapoor said.

The experience from the segment will be used to set up a microenterprise fund which will pick up stake in other MFI's. A microentrepreneurial fund is also anvil, he said.