Hyderabad: Asian Development Bank (ADB) and IFMR Capital have joined hands to provide loans of around $20 million to microfinance institutions (MFIs) in the country through IndusInd Bank.

The loans fall under a partial guarantee programme, where a proportion of the risk will be guaranteed by ADB and IFMR. This is the second time that the companies are providing such loans.

“ADB’s partial guarantee facility is designed to enable flow of credit to deserving microfinance companies across Asia. Under the programme, ADB has so far supported $207 million in local currency loans to 1.23 million individuals, a majority of whom are women. We now look forward to further scaling it up by providing access to finance to over 200,000 households in the country through IndusInd," said Hasib Ahmed, head of microfinance at ADB, in a statement on Friday.

Through this programme, MFIs which typically cater to the lowest income households can be benefited. “This alternative source of debt financing can expand their loan book and outreach.The guarantee allows banks to leverage their risk appetite and significantly increase their lending to MFIs while diversifying their exposure across new geographies and districts," said Kshama Fernandes, managing director and CEO, IFMR Capital.

IFMR would also provide portfolio monitoring and surveillance support to ADB and IndusInd Bank. Prior to this agreement, the partial guarantee programme was structured and arranged by IFMR Capital in partnership with ADB in September 2012. IFMR says the programme has since enabled financing to approximately 270,000 households in rural and semi-urban parts of India.

Also, MFIs covered under the programme have passed the credit underwriting standards of IFMR Capital and ADB and have also already established a repayment track record of being 100% on time.

“Efforts would be to grow in underdeveloped markets in India, including MSME finance, microfinance, agricultural finance, affordable housing and other similar sectors," said Suhail Chander, head–corporate and commercial bank at IndusInd Bank.