ADB uses credit enhancement products to promote private sector financing for lending to micro and small business owners. In India, the Regional Microfinance Risk Participation and Guarantee Program works with banks to provide local currency financing to microfinance institutions. That means more micro borrowers, mainly rural women, are able to set up and expand their businesses.
Across Asia and the Pacific, many small entrepreneurs struggle to find loans for their businesses.
Microfinance institutions also find it hard to obtain financing commercially.
The Asian Development Bank launched a program in 2010 to encourage international and local banks…
To increase lending to microfinance institutions
The program so far has supported $535M loans to nearly 30 MFIs in India, Indonesia and Bangladesh.
3 million borrowers, mostly rural women, have obtained loans from these MFIs.
In India, ADB works with 6 partner financial institutions.
Now what the program does is basically, it provides access to lenders for microfinance institutions, backed by a guarantee that is provided by both ADB and IFMR Capital together. And I think what the program has done is through a very critical time, ensured that the flow of financing, the flow of loans to these underlying microfinance borrowers has happened in an uninterrupted manner.
Head, Inclusive Finance Institutions
RBL Bank Ltd
Our journey in microfinance began around the same time when the India microfinance sector was going through a difficult phase. RBL became the first bank in India to partner with ADB to facilitate debt requirements for the microfinance sector through a guarantee backed structure. This immensely helped microfinance institutions to raise funds not only at lower cost of debt, but also to expand its reach geographically.
Tapobrat Chaudhuri, Senior Vice President
Kotak Mahindra Bank Ltd
The microfinance partnership that Kotak Mahindra Bank has had with ADB so far has been quite meaningful, and the impact on the ground has been quite substantial. For example, there were several microfinance companies with whom Kotak did not have a relationship with, but on the strength, and on the basis of ADB’s guarantee program, Kotak has now established relationships with several MFIs.
Head of Portfolio Management for South Asia
Standard Chartered Bank
So this idea was conceived back in 2010 and we’ve been in dialogue with ADB. Since then, slowly, we’ve got some more markets involved, so we got Indonesia, Philippines, Bangladesh, and now we’re working on Nepal and Pakistan to be a part of the program. And it’s very satisfying because this is really, you can almost see the impact on the ground with access to finance for the underprivileged
Through this facility, small business owners, mainly poor rural women, have obtained loans to build their businesses.
ADB plans to expand the program to more countries over the next 3 years.