To tide over liquidity squeeze, the microfinance industry is expected to come up with a Rs 8-billion pool of saleable securities by the first week of December. This is for the first time that the microfinance industry is coming up with a common pool.
According to a senior official in the MicroFinance Institutions Network (MFIN), the representative body of microfinance institutions, the initial size of the pool was estimated at around Rs 5 billion. However, given good participation from small and large MFIs, the size of the pool is expected to be around Rs 8 billion.
The pool will be bundled with a mix of small and big MFI portfolios across geographies, will be credit rated and sold to banks.
MFIs, especially small and medium-sized ones, have been facing acute liquidity crunch ever since the IL&FS crisis broke out.
Most securitisation deals in the sector take place in the final quarter of a financial year, as banks need to meet their yearly target of giving at least 40 per cent of adjusted net credit to the priority sector. Lending to MFIs comes under priority sector lending. Under the deal, the loan is transferred from the books of MFIs to those of banks but monitoring of the loans is still done by the MFIs.