Sidbi plans to raise the maximum investment size from Rs 5 crore to make it attractive for microfinance entities besides addressing the structural constraints that kept microfinance entities away despite the paucity of local equity investments in the sector.
At the 8th Eastern India Microfinance Summit held in Kolkata last week, Sidbi deputy managing director Prakash Kumar said the development bank is looking to structurally modify the scheme to make it effective in providing equity support the small and medium sized microfinance companies need
Under IMEF, Sidbi subscribes to optionally convertible preference shares (OCPS) issued by microfinance companies with a promise to convert it into equity before three years of the first tranche of the investment.
Sidbi, however, puts restrictions on raising fresh funds before conversion of the OCPS, which is one of reasons behind the indifferent response from the sector, two people familiar with the matter said.
The IMEF was initially launched in 2011 with an initial corpus of Rs 100 crore. It was later enhanced to Rs 300 crore. The scheme, with Sidbi as the nodal agency, aims to support relatively smaller MFIs. The scheme had lost momentum in between and was mostly non-functional in the past four-five years. During FY 2019-20, the corpus of IMEF was transferred to MUDRA. The entire fund was transferred back to Sidbi on April 04, 2022. As on March 31, 2023, the balance in the fund was Rs 311 crore.Meanwhile, Sidbi doubled its debt financing to NBFI-MFIs with outstanding loans expected to cross Rs 10,000 crore by the end of the current financial year from around Rs 5000 crore a year back.
At the summit, Kumar said that Sidbi has commissioned a study jointly with self-regulatory body Sa-Dhan and Indira Gandhi Institute of Developmental Research (IGIDR) to assess the social impact of microfinance.
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