With a focus to expand microfinance lending from self-help groups to individual women entrepreneurs, World Bank, UN Women and Small Industries Development Bank of India (SIDBI) have come together to raise Rs 300 crore Women's Livelihood Bonds (WLB).
The bonds will enable individual women entrepreneurs to borrow over around Rs 1 lakh at an annual interest rate of 13 percent or less.
The proposed multi-tranche WLB will be raised by SIDBI with the support of the World Bank and the UN Women and through a private placement to impact investors.
The WLB will be unsecured, unlisted bonds with a fixed coupon rate of 3 percent per annum and a five-year tenure.
“We are bringing global private market finance to individual women borrowers. The biggest worry is to lower interest rates so as to incentivise microfinance institutions to extend credit to individuals borrowers as well,” said Junaid Kamal Ahmad, country director, World Bank.
Even as financing channels, both banking and non-banking sectors, have expanded in rural and small-town India, they have stayed close to group lending. Individual borrowers in rural India who have limited or no credit history, find it difficult to raise funds as the interest rates tend to be high, often over 20 percent.
Bringing private market finance into the hands of enterprising individual women entrepreneurs is an opportunity to create more jobs, said Ahmad.
“In the jobs debate, the biggest problem today is declining women’s labour force participation. We feel these bonds and the opportunities may help reverse this decline,” he said.
A few wealth management agencies such as Centrum, ASK, Avendus Capital, Ambit, Kotak Finance and Aditya Birla Capital have reached out to high net worth individuals and impact investors to raise funding for the livelihood bonds. In addition, companies such as Tata Communications, Tata Chemicals, Trent, the retail arm of Tata Group, and Voltas have also expressed their interest in investing.
Ahmad also spoke about India’s need to sustain its efforts on improving ease of doing business in favor of small and medium enterprises (SME). “On-ground improvements in the regulatory framework in favour of SMEs has pushed India higher up in the rankings. A sustained effort over the next 5-6 years is needed for these efforts to start reflecting in GDP growths as well.” Ahmad said.
With India economy growing over 7 percent, Ahmad said the country has a steady, sustainable and diversified growth. “In the long run India will sustain a 7-7.5 percent GDP, however, aspirations to achieve over 8.1 percent will need structural changes,” he added.
While talking about the recent debate on recalibrations of GDP growth data multiple times, Ahmad said time has come for India to reinvest in its statistical infrastructure. “India has diversified and changed so much that it now needs to relook at how statistics are gathered and managed,” Ahmad added.
