IFMR Trust and Grameen Capital India Reduce Cost of Capital for an Emerging Micro Finance Institution (MFI) Through a Structured Transaction.

A Huge Securitisation Deal in the Microfinance Sector for an Agricultural Loan Portfolio

CHENNAI, India -- IFMR Trust (www.ifmrtrust.co.in) has provided credit protection in the form of a guarantee to a portfolio of agricultural loans originated by BISWA (Bharat Integrated Social Welfare Agency), an MFI in Orissa. The protection is limited to 45% of the portfolio size of Rs.230mn (USD 5.75mn) and ranks subsequent to a First Loss Default Guarantee of 5% of the portfolio size provided by the originator. The tenor of the portfolio is 1 year. Grameen Capital India Ltd. (GCIL) was the arranger and structurer in the transaction which was placed in the banking sector. The concerned bank has bought out the portfolio at an interest rate of 6% - that is 150 basis points lower than the one year G-Sec rate in India. This, after taking into account the guarantee and structuring fee, resulted in a net pricing to BISWA that is very attractive in the context of emerging MFIs.

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Thus, IFMR Trust's provision of a second loss credit enhancement enabled BISWA, an emerging MFI, to obtain funding through a structured finance transaction at a rate more favorable relative to the rates that it would have otherwise got from the market. This is anticipated to open up a new set of financing options for MFIs in the country which lend to small agricultural farmers.

Bindu Ananth, President IFMR Trust said, "This is the first in a series of structured transactions that IFMR Trust has participated in that will dramatically reduce the cost of funds for MFIs and eventually microfinance clients."

Royston Braganza, CEO, Grameen Capital India, said, "There is tremendous value in the portfolio created by Microfinance Institutions. Grameen Capital will continue to enable MFIs benefit from this value, through innovative structured solutions and strategic portfolio placement."

About IFMR Trust:

IFMR Trust aims to universalize access to financial services. The IFMR Trust through its first private equity fund (the Network Enterprises Fund) proposes to invest in rural supply chain companies. The current portfolio of investments of IFMR Trust includes companies in handicraft, consumer products, drinking water, education testing and vocational training.

IFMR Trust brings to this effort expertise in the design and delivery of financial services, a deep understanding of mainstream markets, practical insights gained from action-research undertaken by its affiliate -The Institute for Financial Management and Research (IFMR) and partnerships with large companies and NGOs; all in the context of remote rural India.