Mumbai: The private sector lending arm of the World Bank group is sharpening its focus on the bottom of the pyramid.
New strategy: IFC executive vice-president and CEO Lars Thunell says the ‘countryside is still under-represented’ in its India portfolio. Abhijit Bhatlekar / Mint
The International Finance Corporation (IFC) will increase lending to enterprises in seven north Indian states that lag the rest of the country in average incomes and has set up a separate unit that works in these poorer states, the lender’s top manager said on Monday. “We have shifted focus to areas where we can contribute,” said Lars Thunell, executive vice-president and chief executive of IFC.
India is currently the biggest recipient of IFC funding, overtaking Russia, and accounts for around one-tenth of its global portfolio, but Thunell said “the Indian countryside is still under-represented” in its India portfolio. IFC will continue to fund large projects, but its new drive to invest in companies serving the needs of the poorest will lower the size of its median financing deal. The new strategy entails some changes in the way the lender is structured.
IFC has set up offices in Mumbai, Chennai and Kolkata in addition to its main India office in New Delhi, a process that Thunell describes as “massive decentralization”.
He added that employees will no longer be evaluated, incentivized and promoted only on the basis of “big fancy transactions”.
The drive to fund enterprises that touch those living at the bottom of the income pyramid also means that IFC is stepping up investments in areas such as microfinance and agro-industry.
Over the past few months, it has made investments in microfinanciers such as Shree Pathrakali Finance Co. Ltd in Varanasi, Belstar Investment and Finance Ltd in Bangalore and Asomi Finance Pvt. Ltd in Assam.
Venture capital portal www.vccircle.com reported that IFC had invested $1.2 billion (Rs5,532 crore) in at least 140 microfinance institutions in 60 countries by the end of June.
Thunell and his colleagues have been trying to get a feel of the situation on the ground by visiting places such as Barmer, Rajasthan, and meeting women who have borrowed from microfinance institutions in Kancheepuram, Tamil Nadu, where Belstar Investment funds silk handloom artisans who make the famous Kanjivaram saris.
“Those who argue that microfinance forces people into a poverty trap do not understand the reality on the ground. They should meet the women who become productive after getting access to loans, and see the way their income helps families put children in school or invest in health,” said Paolo Martelli, director of IFC’s South Asia operations.
IFC is also taking a close look at private sector initiatives in climate change mitigation and better water use practices, especially in agriculture.
Thunell believes India can be at the forefront of innovation: “Indians can think out of the box. Just look at examples such as the Nano car, Apollo Hospitals, Aravind Eye Care and mobile phone costs.”