IFMR Capital closed its eighth microloan securitisation transaction this week, an INR 370 mn multi-originator securitisation with Delhi-based MFI Satin Creditcare, Rajasthan-based Sahayata Microfinance and Tamil Nadu MFI, Asirvad. This transaction is significant, because it has brought private wealth investors to microfinance for the first time and also for the much lower collateral requirements from the three MFIs compared to previous transactions.
The multi-originator securitisation structure pioneered by IFMR Capital is a win-win structure for both the MFIs and investors. By pooling the assets of three different entities, the structure increases the size of the total transaction and reduces the cost of accessing capital markets allowing even small high-quality MFIs to take the capital markets route to debt-financing. The same pooling feature provides greater diversity of assets to the investors without compromises on the asset quality, returns or size of investment.
By bringing unconventional investors like NBFCs and private wealth, IFMR Capital believes that the participating MFIs will be able to build a sound track record in debt-capital markets and be able to move beyond priority sector-led debt funding in a cost-effective way. To know more about these transactions, and us visit http://capital.ifmr.co.in.
4 Responses
My congratulations to the Capital team for this wonderful work. Smaller MFIs, in my view, focus more intensively on narrower geographies providing both better quality of access to their clients and stronger management of their portfolios. Their local character however exposes them to the risk that there could be regional shocks outside their control. The pooling that Capital does provides an effective protection against this concentration risk. The combination of the two (a) better local management and (b) effective diversification through pooling, produces an unambiguously superior outcome.
I notice thought the pooled portfolios are referred to as a MOSEC — I wonder if a more evocative name like MOSAIC would not be more informative and easier on the ear.
This is a great news…congratulations. Its great to see IFMR Capital bringing in varied investors into the sector which apart from diversifying the funding sources creates a larger base of entities and people in the Capital Markets build a better understanding of the Sector as a whole and how it operates.
One more feather in IFMR Capital's cap – bringing in private wealth investors to microfinance for the first time and also for the much lower collateral requirements compared to previous transactions. IFMR Capital is growing in strength and I am sure will rewrite securitisation.