NEW DELHI, July 9, 2010: A Credit and Loan Agreement of $300 million equivalent for the Scaling up Sustainable and Responsible Microfinance Project was signed today by the representatives from the Government of India, Small Industries Development Bank of India (SIDBI) and the World Bank.
The signatories to the Agreement were Mr Anup K. Pujari, Joint Secretary, on behalf of the Government of India, Mr Rakesh Rewari, Deputy Managing Director, SIDBI and Mr N. Roberto Zagha, World Bank Country Director in India.
The funding from the Scaling up Sustainable and Responsible Microfinance Project will be used by SIDBI for on-lending to Indian Microfinance Institutions (MFIs).The funding to MFIs is designed to support their operations and growth, enhance their financial strength, and enable them to leverage private commercial funds to on-lend larger amounts to the under-served. The Project will also support responsible finance initiatives such as the establishment of a microfinance information platform and promotion of adherence to a code of conduct for MFIs, as well as for capacity building and monitoring
While India has a well-developed banking system and there has been significant progress in banking sector reforms, performance, and stability, a significant portion of its population is still estimated to have only limited or no access to financial services.
“Increasing access to finance for millions of India’s financially under-served people remains a challenge,” said Niraj Verma, World Bank Senior Financial Sector Specialist and project team leader. “India’s microfinance sector has grown exponentially in recent years and has contributed to reducing the gap between the unmet demand and supply of financial services for households and microenterprises – but there is still a long way to go. In addition to providing funding for Microfinance Institutions to help them scale up their operations particularly in under-served areas, this Project also promotes transparency, good governance, and responsible microfinance, to ensure that microfinance continues to expand in a sustainable manner.”
While $100 million for the Scaling up Sustainable and Responsible Microfinance Project is a credit from the IDA (International Development Association), the World Bank’s concessionary lending arm which carries a 0.75 percent service fee, a 10-year grace period, and a maturity of 35 years, the remaining $200 million for this Project is a loan from the International Bank for Reconstruction and Development (IBRD). It has a 25 year maturity which includes a 14.5-year grace period.