Mumbai, Dec 2 (KNN) International Finance Corporation (IFC), part of the World Bank Group, is said to have invested 200 million dollars in Mahindra & Mahindra Financial Services Ltd (Mahindra Finance) to create a dedicated pool of financing for Micro, Small and Medium Enterprises (MSMEs) in low-income states.

At least 100 million dollars will be earmarked for women owned MSMEs. IFC has invested 75 million dollars from its own account and is mobilizing another 125 million dollars as parallel loans.

The 100 million dedicated to women will be supported by blended finance from the IFC-Goldman Sachs’ Women Entrepreneurs Opportunity Facility. Mahindra Finance has further committed 225 million dollars to this pool.

Non-Banking Financial Companies (NBFCs) are an important source of credit for India’s MSME sector. The sector feeds crucial industrial value chains and employs 124 million people, including semi-skilled and unskilled workers. MSMEs account for more than 80% of industrial enterprises and over 45% of exports. The biggest constraint they face is access to finance.

According to an IFC study, conducted in 2018, estimates the total credit gap for MSMEs in India to be 397.5 billion, around 15% of GDP. The financing gap for MSMEs is more acute in low-income states. Targeted lending to women-owned MSMEs is even less prevalent.

“To expand financial services for MSMEs, IFC has been systematically supporting India’s NBFC sector," said Hemalata Mahalingam, manager, financial institutions group, South Asia at IFC.

“Although the financing needs of rural and women-owned enterprises are not radically different, the level of financial exclusion is higher. The dedicated gender line and focus on unreached segments will contribute to addressing these gaps and demonstrate the commercial viability of investing in women and low-income groups,” she added.

Ramesh Iyer, Vice Chairman & Managing Director, Mahindra Finance, said, “Mahindra Finance has been powering inclusive growth in rural communities for over 25 years. Our experience in these markets reveals that to achieve true financial inclusion, access to formal credit for financially under-served segments is a necessity. Availability of credit for income generation, especially to women and low-income households, will further accelerate financial inclusion." 

In 2018, IFC invested an equivalent of 100 million in Mahindra Finance to increase loans to farmers to buy tractors, commercial vehicles, and other equipment for modern farming. IFC also invested an equivalent of 25 million in Mahindra Rural Housing Finance Ltd (MRHFL) for housing loans to the rural poor. Both Mahindra Finance and MRHFL are a part of the USD 20.7 billion Mahindra Group, whose relationship with IFC goes back to 1963.