RGVN, one of the 10 recipients of the small finance bank (SFB) license, will raise around $20 million (approximately Rs 130 crore) from the International Finance Corporation (IFC).

IFC, the World Bank’s investment arm, said that it would invest up to $20 million in RGVN in the form of a senior debt investment.

Besides, its investment would help the company support growth and manage its liability during the early years as it transitions to becoming an SFB.

It would also help RGVN diversify its product suite by offering longer-tenor loans to its mature microfinance clients for micro and small enterprises. IFC, through its global experience with microfinance institutions (MFIs) and other low-income financing entities, is uniquely positioned to help the company in its plan to become a comprehensive financial services provider for low-income households and smoothly transform into SFB.

We can also help the RGVN to gear up to become an SFB by sharing best practices in corporate governance, product design and other key functional areas such as treasury management, risk management and SME advisory, said IFC.

RGVN operates through 133 branches in six northeastern states, including Sikkim, Meghalaya, Tripura, Nagaland, and Assam and the northern part of West Bengal. The Company is headquartered in Guwahati, in the state of Assam, with more than 75 per cent of RGVN’s portfolio being in that state.

RGVN has an asset under management amounting to Rs 610 crore ($89 million) across six northeastern states and West Bengal. It has 133 branches and an outreach of 300,000 women clients.

RGVN is one of the 10 recipients of the SFB license awarded by the Reserve Bank of India in mid-September 2015.

The proposed investment would provide long-term liquidity support to RGVN while it starts building its retail savings base post transformation and would help it to continue its efforts towards financial inclusion. The proceeds of the loan would be utilised to extend microfinance and microenterprise loans in the northeastern states of India.

Microfinance was initiated in Northeast India through the Rashtriya GraminVikas Nidhi – Credit & Savings Programme (RGVN-CSP) with revolving fund assistance from SIDBI in 1995. RGVN (NE) MFI was incorporated as a public limited company in 2008, registering as a non-banking finance company with the Reserve Bank of India in 2010.

Currently, the largest shareholder in RGVN is Dia Vikas Capital, the Indian arm of an Australian impact investing firm, at 19.36 per cent; followed by NMI (15.59 per cent), which is a Norwegian microfinance fund; and Oiko Credit (12.89 per cent), a Dutch investment firm. The Company has recently raised fresh capital from new investors which include SIDBI Trustee Company Ltd (14.40 per cent), RNT Associates Pvt Ltd (10.2 per cent), Ratan Tata’s investment and Pi Ventures LLC (7.20 per cent) ahead of its transformation into an SFB. Other investors include SIDBI (8.4 per cent), NEDFi (5.04 per cent) and ESOP Trust (1.68 per cent).

Source: Business Standard