In India the formal financial services sector has made minuscule inroads into the potential market. It is estimated that a mere 5% of the estimated 260 million enterprises have formal access to finance.
A company that is challenging this status quo is LeapFrog investment IFMR Capital (IFMRC), a non-banking finance corporation. IFMR Capital is a dynamic link between debt capital markets and high quality debt originators who are the last mile link to individuals and businesses that traditionally face challenges in access to finance.
IFMRC provides efficient and reliable access to debt for such lenders across India, in turn enabling a steady supply of finance for financially excluded families and businesses.
IFMRC uses a variety of structures to provide financing to its clients, including direct loans, securitization, guarantees, arrangement and placement of commercial paper, bonds, debentures, and other capital markets products. It invests in the debt of its originators ensuring skin-in-the-game. IFMRC developed and launched the world’s first Multi-Originator Securitization for micro-loans and listed India’s first securitised debt instruments on the BSE. It recently introduced a fund advisory and management platform and India’s first rated (AA) financial inclusion debt fund as a Category I AIF, backed by leading insurance companies, a bank and private wealth investors.
IFMRC also provides rating enhancement advisory services and helps originators to build better operations, oversight and customer protection. The result? End-borrowers receive quality products and services, providing the very foundation of trust.
This trust works its way back into the capital markets. IFMRC’s robust risk management systems at the grass roots ensure strong risk-adjusted returns for investors, and an A+ credit rating for the entity.
Today, IFMRC enables financing for over 13.8 million financially excluded people in 485 districts and 30 states across India, a number that is scaling rapidly.
IFMR Capital CEO Kshama Fernandes equates the potential of this approach to India’s sacred river, a symbol of life and sustenance to 1.3-billion people. Speaking about the reach and impact of their work, she says “Nobody who sees the Ganges in all its glory in the plains will ever believe that this mighty river actually emerges from a few droplets at Gangotri. The Ganges is a testimony to what a few droplets flowing ceaselessly in the right direction can result into!”