Necessity is the mother of invention. It was the need of IFMR Capital’s clients that gave birth to the MOSEC product – the world’s first Multi Originator Securitization of micro-loans. IFMR Capital works with a large number of small and mid-sized Micro Finance Institutions that require constant access to debt markets. However, many of them had never accessed the capital markets because of their small size, the non-availability of credit ratings and other operational reasons.
IFMR Capital decided to take multiple such originators to the market in a single structure. It pooled together loans from multiple MFIs – hundreds of thousands of granular loans of sizes between INR 10,000 and INR 20,000. This achieved two purposes – a critical deal size that was acceptable to investors; and it provided all the benefits of diversification and risk mitigation across geographies, underlying individuals and firms. For each transaction, IFMR Capital provided skin-in-the-game, as a subordinate investor. Central to the proposition was the implementation of a robust diligence framework for identifying high quality institutions, a structuring capability for investors with varying risk and ratings appetite and a robust risk analytics and monitoring framework. Launched in January 2010, the MOSEC program has unlocked financing of over INR 45 billion (USD 700 million), transforming the lives of more than 4 million low-income households with income levels ranging between INR 200 – 500 per day.
Total financing – INR 45 billion
No. of households impacted – 4 million