IFC, a part of the World Bank Group, has anchored an investment round of $200 million in Mahindra & Mahindra Financial Services Ltd. Mahindra Finance to create a dedicated pool of financing for micro, small and medium enterprises (MSMEs) in low-income states. At least $100 million will be earmarked for womenowned MSMEs.
IFC has invested $75 million from its own account and is mobilizing another $125 million as parallel loans. The $100 million dedicated to women will be supported by blended finance from the IFC-Goldman Sachs’ Women Entrepreneurs Opportunity Facility.
Mahindra Finance has further committed $225 million to this pool.
Non-Banking Financial Companies (NBFCs) are an important source of credit for India’s MSME sector. The sector feeds crucial industrial value chains and employs 124 million people, including semi-skilled and unskilled workers. MSMEs account for more than 80% of industrial enterprises and over 45% of exports. The biggest constraint they face is access to finance. An IFC study, conducted in 2018, estimates the total credit gap for MSMEs in India to be $397.5 billion, around 15% of GDP. The financing gap for MSMEs is more acute in low-income states. Targeted lending to women-owned MSMEs is even less prevalent.
“To expand financial services for MSMEs, IFC has been systematically supporting India’s NBFC sector,” said Hemalata Mahalingam, Manager, Financial Institutions Group, South Asia, IFC. “Although the financing needs of rural and women-owned enterprises are not radically different, the level of financial exclusion is higher. The dedicated gender line and focus on unreached segments will contribute to addressing these gaps and demonstrate the commercial viability of investing in women and low-income groups,” she added further.
Mahindra Finance provides a host of financial solutions, including vehicle, tractor and agricultural equipment financing, to rural and semi-urban customers. The company delivers these through its physical network of over 1,300 branches as well as digitally, and through rural distribution initiatives like loan melas across the country. It has fueled the entrepreneurial aspirations of more than 6.4 million customers in over 370,000 villages in India and has assets under management (AUM) of over USD 10 billion. This fresh funding will be used to further enhance credit in rural and semi-urban geographies, with customized solutions for women borrowers in low-income states.
Vice Chairman and Managing Director, Mahindra Finance, Ramesh Iyer said, “Mahindra Finance has been powering inclusive growth in rural communities for over 25 years. Our experience in these markets reveals that to achieve true financial inclusion, access to formal credit for financially under-served segments is a necessity. Availability of credit for income generation, especially to women and low-income households, will further accelerate financial inclusion.”