CDC Group, the UK government-backed fund of funds with net assets of $4 billion, has invested $30 million in two microfinance funds. CDC has invested $20 million in India Financial Inclusion Fund, which is managed by Caspian Advisors Pvt Ltd. CDC has also put in $15 million in Catalyst Microfinance Investors, which invests in greenfield microfinance institutions in India, Pakistan, Nigeria and Ghana.
India Financial Inclusion Fund is aiming a final close of $100 million. It has raised another $15 million from Global Microfinance Equity Fund and $8 million from Switzerland's Social Investment Services. The fund will invest growth capital as well as provide strategic support to existing and start-up MFIs. Its investments include Ujjivan, Equitas and A Little World.
Private equity and venture capital investors are increasing their focus on the microfinance space. Hyderabad-based SKS Microfinance raised $75 million from investors led by Sandstone Capital, which was one of the biggest deals in Oct-Dec quarter. Right after that, Ujjivan MFI raised nearly $20 million in its fourth round.
"We are looking at a lot of opportunities in the financial services at the bottom of the pyramid," said Bejul Somaia, the newly appointed Managing Director of Lightspeed Venture Partners. MFIs have remained largely unaffected by the meltdown as they are not dependent on global consumption patterns.
"Investors are looking for safe investments...we hope the silver lining of global meltdown is more investors will put more money in the hands of poor through microfinance," SKS Microfinance founder Vikram Akula had said while announcing the fundraising.
Also there is large opportunity to be addressed in this space. "Whether Sensex is at 20,000 or 7,000 points, 300 million households don't have access to financial services," added Somaia.
CDC Group is one of the biggest limited partners of India-focused private equity funds. Last year it announced $250 million investment into one infrastructure and two real estate funds in India, and soon after said it would invest $185 million into six general private equity funds in the country.
"Around 400 million people do not have access to formal, affordable financial services in India. The India Financial Inclusion Fund will improve funding to microfinance institutions, bringing improved credit opportunities in much needed regions," said Hywel Rees-Jones, Managing Director, Alternative Investments, CDC.