Dia Vikas re-ups allocations into MFIs

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Dia Vikas, a leading social sector investor, has infused money across three microfinance institutions. The company has invested Rs 13 crore into BWDA Finance Ltd (BFL), one of the major MFIs based in Tamil Nadu. The investment comprises Rs 6.5 crore in equity and Rs 6.5 crore as subordinated debt.

The Tamil Nadu-based MFI has been working with underprivileged communities across the state, along with Bullockcart Workers Development Association (BWDA), its development wing. BWDA has been engaged in providing developmental interventions in the community viz. health and sanitation, education and gender awareness programmes, and has established several educational institutions. 

 BFL primarily operates in the north-east and the south-west regions of Tamil Nadu, as well as in the Union Territories of Pondicherry and the Andaman and Nicobar Islands. Till February, 2011, BFL has 214,470 active borrowers and the gross loan portfolio outstanding amounts to Rs 1087.5 million, a media statement said.

Dia Vikas has also invested Rs 6 crore in the Rashtriya Grameen Vikas Nidhi, North East (RGVN, NE), with Rs 3 crore as equity and Rs 3 crore as Tier II debt. Headquartered in Guwahati, RGVN (NE) has started its MF journey more than a decade ago and operates across the entire north-eastern region of India.

Till February, 2011, it has served 128,675 borrowers with a portfolio of Rs 729 million. The money raised will be used to expand its operations across the seven north-eastern states. It also facilitates livelihood and other developmental services to its clients through its parent body RGVN.

Along with these two initiatives, Dia Vikas also announced making fresh investment of Rs 3.85 crore into ESAF Microfinance. A reputed MFI, ESAF operates in the states of Kerala, Tamil Nadu, Maharashtra, Chhattisgarh, Madhya Pradesh & Delhi-NCR. Till February, 2011, it has catered to 320,863 borrowers and has a gross loan portfolio of Rs 2182 million.

ESAF Microfinance and its associate institutions provide various credit-plus services to their members. These include business development services, skills training, production, marketing support and so on. Besides facilitating insurance services, it has also tied up with Pension Fund Regulatory and Development Authority (PFRDA) of the Indian government to support its clients with pension services under the NPS-Lite Swavalamban scheme.

Dia Vikas has earlier invested Rs 7.85 crore in ESAF in June, 2009. This investment takes Dia's total equity exposure to ESAF Microfinance to Rs 11.43 crore. Dia Vikas has made these investments to support its partner MFIs, as this sector seems to be passing through a difficult patch.

K. C. Ranjani, managing director of Dia Vikas, said, "The microfinance sector in India is going through a difficult phase and funds for smaller MFIs working in backward areas are drying up. Dia partners with small and medium MFIs whose relentless work helps uplift the downtrodden. BFL, ESAF and RGVN (NE) complement our thought process and commitment to serve people in the backward areas of India.

The fresh round of investment will help all of them to march ahead with their commitments to the people of those areas where they are actively working," she added.

Since October, 2010, most of the investors and lenders have stepped back to reconsider their investment stance with deepening microfinance crisis. However, Dia has made fresh investments worth $13.5 million in their partners through a combination of equity, subordinated debt and term loans. Dia Vikas, a leading social investor in the microfinance space, has cumulative investments of around $29 million in 16 socially focused MFIs.

Following the Andhra Pradesh ordinance and the resultant credit squeeze, the microfinance sector is facing severe liquidity crunch. This liquidity crisis not only threatens to derail all growth and expansion plans of the MFIs but also makes it difficult for them to maintain their current portfolio.

In the wake of such macro conditions, Dia has made these investments to ensure that its partners manage their cash flows while restoring the confidence of other stakeholders in the sector, Ranjani added.
 

By: Madhav Chanchani