IFMR Capital has initiated the first capital market transaction for MUDRA. The deal marks MUDRA’s maiden exposure to securitization. MUDRA has invested Rs. 50 crore in the securitised MSME loan portfolio of Janalakshmi Financial Services, a leading microfinance company based in Bengaluru. IFMR Capital has exclusively arranged and structured this transaction for MUDRA. Through this partnership, Mudra will gain exposure to over 100 plus high quality microfinance companies and NBFCs working towards financial inclusion.
In the landmark initiative, IFMR Capital, a leader in providing capital market access to financial institutions serving the bottom of the pyramid, has facilitated the first ever capital market transaction for MUDRA (Micro Units Development & Refinance Agency), the institution focused on providing low cost loans to microfinance and non-banking financial institutions.
IFMR Capital has exclusively structured and arranged a securitization transaction Mjolnir IFMR Capital enabling Mudra to invest Rs 50 crore in the A (-) rated senior tranche of securitised MSME loan portfolio of Janalakshmi Financial Services, the Bangalore-based micro finance company.
This will be a short term transaction with a tenure of 1.5 years. This also marks the first of many such capital transactions for MUDRA, which in turn will gain exposure to over 100 high quality MFIs and NBFCs in the country that IFMR Capital currently works with.
Traditionally served only by public sector banks, a large proportion of small enterprises across the country continue to lack access to institutional credit. This is despite nearly 80% of the total estimated demand of Rs 32,50,000 crore originating from the informal sector.
There is clearly a significant “missing middle” segment, left out by the mainstream credit delivery channels and institutions like Janalakshmi are building specialised models of lending to small businesses and enterprises to actively bridge the gap. IFMR Capital serves as the irreplaceable bridge for such institutions, enabling them to raise funds from the capital market.
The MUDRA-IFMR Capital association would facilitate accelerated impact on the sector by leveraging MUDRA’s capital and risk appetite. IFMR Capital’s initiatives have fuelled the growth of microfinance and SME financing asset class among capital market investors. IFMR Capital has facilitated over Rs 28,000 crore of debt for its MFI and NBFC partners, attracting newer class investors.
The latest deal with MUDRA is a shot in the arm for structured finance and testimony to a widening investor base, for enterprises catering to the underserved. It reinforces a vision of a financial system where the role of apex institutions is to facilitate market development through structures which best leverage its capital.
Speaking about the landmark deal and the partnership with MUDRA, Kshama Fernandes, MD &CEO of IFMR Capital said “With this transaction, MUDRA demonstrates a crucial facilitating role in ensuring that NBFCs providing microfinance and small business finance are able to access domestic capital in an efficient manner. Going forward, with the benefit of MUDRA’s rating and support in capital market structures, these NBFCs’ ability to provide last mile support to small borrowers / MSMEs through sustainable financing structures will receive further impetus.”
The association between IFMR Capital and MUDRA commenced early August 2015. The teams jointly developed products and processes to harness the power of capital markets for financial inclusion. The first securitization by MUDRA is a significant step towards deepening the market’s confidence in the MSME finance sector.
Jiji Mammen, CEO, MUDRA, said “MUDRA was created to meet the credit needs of the unfunded micro enterprises by providing refinance support to Banks and MFIs, who lend to micro enterprises. I am happy to announce our association with IFMR Capital as it offers a new dimension to micro financing lending for MUDRA loans by providing default guarantee support and also investment in the securitized loan portfolio of the MFIs. Structured financing, we believe have a greater impact in enabling financial institutions to access funds from capital market at a lesser cost, without a charge on their limited capital. We hope to participate in more such transactions facilitated by IFMR Capital.”
IFMR has structured a total of 18 securitization and assignment transactions till date with Janalakshmi Financial Services, to raise over Rs. 2,000 crores. Speaking on the latest transaction, V.S Radhakrishnan, MD &CEO, Janalakshmi Financial Services Limited said, “At JFS, we continue to be bullish in accessing the power of capital markets to further our growth ambition. Securitization has been a key enabler in our journey and we are happy to have benefited from IFMR Capital’s efforts and MUDRA’s initiative in the MSME or the ‘missing middle’ space.”