IFMR Capital operates across a number of sectors, giving access to a diverse opportunity set.
The Indian Microfinance sector has shown significant progress over the last four years. Indian MFIs have taken significant steps towards strengthening their operations and reducing costs while maintaining portfolio quality. Indian MFIs now serve over 70 million borrowers, by far the largest in any country across the world, and growing at almost 50% year on year1
1 Survey conducted by Microfinance Institutions Network (MFIN).
Small enterprise financing in India has traditionally been the preserve of banks – especially the public sector banks. However, a large proportion of small enterprises are excluded by this institutional credit. Of the 260 million enterprises in India, only 5% have access to formal finance. The total demand for finance is estimated to be INR 32,500 billion or USD 530 billion with a staggering 80% of the demand originating from the informal sector. An estimated 67% of enterprises remain untouched by the formal financial sector2
2 Sources: Small Industries Development Bank of India (SIDBI) and International Finance Corporation reports (IFC)
Affordable Housing Finance
Despite the network of banks, low income groups in India continue to lack access to home finance. The National Housing Bank was set up to accelerate housing finance activity in India and promote Housing Finance Corporations (HFCs). Home loans below INR 1 million or USD 16,275, categorised as low income housing market, provide huge opportunity for the existing as well as new HFCs. The estimated size of the market in India as of 31st March 2014 is around INR 9 trillion or around USD 16,25,0003
3 Estimates of the technical group constituted by Ministry of Ho using and Urban poverty alleviation (MHUPA).
According to reports published by Credit Rating Agency in India (ICRA), the total commercial vehicle market in India is estimated to be around INR 1163 billion or USD 19 billion. The market is mainly dominated by private sector banks, NBFCs and captive financiers. NBFCs account for around 74% of the total vehicles financed. While banks mostly target large fleet operators, NBFCs have a greater market share of Light Commercial Vehicles and Used Commercial Vehicles with the relatively small operators. This is a niche segment which holds great promise in terms of growth potential.
It is estimated that total demand for agriculture credit is ab out INR 7558 billion or USD 123 billion4
. However only 60% of this has been met so far. Close to 40% of the credit needs of the agricultural sector are met through non-institutional sources out of which over 25% are catered for by informal sources of finance. Reasons for lack of access include seasonality, volatility in prices, lack of collateral and perishability.
4 Reserve Bank of India estimates