Manila-based Asian Development Bank (ADB) has made a commitment to invest $10 million in private equity fund ShoreCap II Fund, which aims to back microfinance and small bank lending to poor, underserved groups.
ADB’s Board of Directors approved the investment in the fund which will back players in both Asia and Africa.
The investment from the global institution comes at a time when microfinance companies located in Andhra Pradesh (the hub for MFI activity in India) are facing a complete breakdown in operations due to the regulatory changes.
ShoreCap II, which is managed by US-based Equator Capital Partners, is targeting $75 million fund raise. ShoreCap will take equity stakes in regulated, small lenders with a focus on markets like Bangladesh, the People’s Republic of China, India, Indonesia, Pakistan, the Philippines, Sri Lanka, Thailand and Vietnam.
The fund will invest in deal sizes of $2 million to $10 million each. ShoreCap has also raised $10 million rom UK development finance institution CDC Group PLC earlier this year.
“ADB’s investment is ultimately intended to help increase the economic contribution of microfinance clients and small businesses to regional growth,” said Robert van Zwieten, Director of the Capital Markets and Financial Sectors division of ADB’s Private Sector Operations Department.
In India, ShoreCap has invested in Bhartiya Samruddhi Finance Ltd (BSFL), the Hyderabad-based flagship company of microfinance major BASIX Group, promoted by Vijay Mahajan.
ADB last week invested $40 million in two clean energy funds focused on India.