ADB will provide debt financing to AU by subscribing to up to $75 million (in Indian rupee equivalent) of senior unsecured nonconvertible debentures (NCDs) having recourse to AU's balance sheet. At least 50% of the funding will target less developed states, as classified in the Raghuram Rajan Panel Report, 2013.
|Project Name||Expanding Micro and SME Lending in Semi-Urban and Rural Areas Project|
|Borrower/Company||Au Financiers (India) Limited
|Type or Modality of Assistance||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Private sector development
|Sector / Subsector||
Finance / Small and medium enterprise finance and leasing
|Gender Equity and Mainstreaming||Some gender elements|
|Responsible ADB Department||Private Sector Operations Department|
|Responsible ADB Division||Portfolio Management Division, PSOD|
|Responsible ADB Officer||Doukidis, Doukas|
|Description||ADB will provide debt financing to AU by subscribing to up to $75 million (in Indian rupee equivalent) of senior unsecured nonconvertible debentures (NCDs) having recourse to AU's balance sheet. At least 50% of the funding will target less developed states, as classified in the Raghuram Rajan Panel Report, 2013.|
|Objectives and Scope||
(1) Support MSME growth and GOI priority sectors. ADB's funding will support growth of AU's Micro, and Small Enterprises (MSE) and Small, and Medium Enterprises (SME) portfolios and reach underserved customer segments in India directly as well as through other NBFCs. Over 85.0% of AU's loan portfolio is classified as Priority Sector Lending and will have significant financial inclusion and job creation effects. It will also support education and healthcare segments in rural India. AU has provided funding to 250 schools, helping approximately 30,000 rural children with improved educational infrastructure in rural and semi urban areas.
(2) Provide access to longer tenor debt. AU had historically focused on CV financing, with relatively shorter tenors loans. As the management continues to diversify its loan portfolio and grow its MSEs, and SME businesses that are of relatively longer tenor, AU needs to tap longer tenor financing. This is also highlighted in ICRA's credit ratings note issued in March 2016. ADB's loan will provide scarce medium-term funds to AU needed to diversify its product portfolio.
- Diversification of funding sources. Bilateral assignments and securitization with other banks are significant sources for AU's funding. As AU transitions to an SFB, management will focus on retaining a higher percentage of assets on its books and decrease its reliance on bilateral assignments and securitizations with other banks. ADB's funding will support the diversification of AU's funding sources.
|Status of Development Objectives||On track in meeting its development objectives.|
|Status of Operation/Construction||On-going.|
|Linkage to Country/Regional Strategy||The Midterm Review of Strategy 2020 emphasizes ADB's support to the financial sector by helping to develop financial infrastructure, institutions, and products and services. The proposed transaction contributes to financial sector development by supporting the growth of a Small Finance Bank, an important component of the financial sector in India. The Midterm Review of Strategy 2020 also seeks to promote inclusive growth. Without access to formal financial services, lower income people or underserved segments will be excluded from the growth process and its benefits. According to the India country partnership strategy, 2013 -2017, ADB's nonsovereign operations will continue to support the infrastructure and financial sectors by undertaking selective projects for physical and social infrastructure and financial infrastructure. The proposed transaction will support the development of microfinance in India, one of the financial infrastructures identified in the country partnership strategy and a high priority for the government.|
|Summary of Environmental and Social Aspects|
|Environmental Aspects||AU has an existing Environmental and Social Management Systems (ESMS) that applies an exclusion list and procedures based on the size of the loan to address environmental and social risks of projects. Prior to disbursement of the ADB financing, the company will enhance its existing ESMS to comply with ADB Safeguards Policy Statement requirements by updating its exclusion list, screening, and categorization procedures.|
|Involuntary Resettlement||The proposed debt financing will be used by AU to support inclusive sector segments including MSE, and SME , with targeted customers involved in trading, wholesale, distribution, education and healthcare facilities, commercial vehicle finance, and construction finance. AU will not utilize ADB funding to finance projects with category A impacts on the environment, or projects with category A or B impacts for involuntary resettlement or indigenous peoples.|
|Indigenous Peoples||The proposed debt financing will be used by AU to support inclusive sector segments including MSE, and SME, with targeted customers involved in trading, wholesale, distribution, education and healthcare facilities, commercial vehicle finance, and construction finance. AU will not utilize ADB funding to finance projects with category A impacts on the environment, or projects with category A or B impacts for involuntary resettlement or indigenous peoples.|
|Stakeholder Communication, Participation, and Consultation||The primary stakeholders in the project are the MSME borrowers who will seek loans from AU for their working capital and investment needs. Details of the consultation and participation activities and grievance and dispute resolution will be included in the company's ESMS.|
|Timetable for assistance design, processing and implementation|
|Concept Clearance||23 Sep 2016|
|Credit Committee Meeting||23 Sep 2016|
|Approval||31 Oct 2016|
|Last PDS Update||12 Jun 2019|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.
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|Title||Document Type||Document Date|
|Expanding Micro and SME Lending in Semi-Urban and Rural Areas Project: Extended Annual Review Report||Extended Annual Review Reports||Dec 2020|
|Expanding Micro and SME Lending in Semi-Urban and Rural Areas Project: Initial Poverty and Social Analysis||Initial Poverty and Social Analysis||Mar 2017|
|Expanding Micro and SME Lending in Semi-Urban and Rural Areas Project: Report and Recommendation of the President||Reports and Recommendations of the President||Oct 2016|
Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
None currently available.
Evaluation Documents See also: Independent Evaluation
None currently available.
None currently available.
The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.
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