Hyderabad: The Indian microfinance sector, which is increasingly attracting funding from global venture capital investors, has thus far reached out to around 40 million borrowers. According to a report by the Ford Foundation, Indian microfinance institutions (MFIs) had distributed $770 million in loans till March. Technology products company Financial Information Network and Operations Ltd (FINO) aims to forge alliances with around 200 MFIs. Founded last year, the company supplies microfinance technology products such as smart cards and hand-held card readers to MFIs and banks for enabling transactions in unbanked areas.

FINO aims to cover around 25 million borrowers through 200 MFIs in the next five years, according to its president and chief financial officer, Rishi Gupta. ICICI Bank Ltd has lent around Rs2,500 crore of loans to these 200 MFIs. In an interview with Mint, Gupta speaks on FINO and its role in reaching out to the unbanked sector. Edited excerpts:

What is the current size of the Indian smart cards market and at what rate is this industry growing in the country?

The market will be around seven-eight million in the next one year. The smart card industry is growing at the rate of 30-35%.

Reaching out: Financial Information Network and Operations president and chief financial officer Rishi Gupta.

Who are the major users of smart cards in the country and what is your market share in the business?

The major users of the smart card are the identity card, retail, banking, government, insurance and financial services players in the country.

It would be difficult to figure out market share as the market is growing rapidly.

How many banks are currently associated with FINO? Are you negotiating with any more banks to use the FINO platform for their microfinance initiative?

There are currently six banks (Corporation Bank, Indian Bank, Union Bank of India, Punjab National Bank, Seva Bank and ICICI Bank Ltd), 10 MFIs, three insurance firms (ICICI Lombard, ICICI Prudential and Life Insurance Corp. of India) and two state governments (Andhra Pradesh and Tamil Nadu) that are associated with FINO.

Yes, negotiations are on with several other banks both in the public and private sector for using the technology.

Fifteen more MFIs are expected to join the FINO platform by the end of March 2008. FINO is working closely with both ICICI Bank and directly with MFIs to bring in 200 MFIs on to the solutions platform by 2011.

These MFIs might have a cumulative membership of 20-25 million (borrowers) in the next five years. More than 2.5 lakh cards have been issued and the target is to issue more than two million cards by end of March 2009.

How much investment has gone into FINO operations so far? Are you looking at tapping further funds?

So far, Rs80 crore of investment has gone into FINO. Around 30% equity each is held by private institutions (ICICI Bank, ICICI Lombard and IFMR Trust) and public sector units (Union Bank of India, Corporation Bank, Indian Bank and Life Insurance Corp.), while 40% is held by foreign institutions (IFC Washington, Legatum and Intel Capital).

Currently, FINO has adequate funds for its operations.

What role is FINO playing in National Rural Employment Guarantee Programme in Andhra Pradesh?

We are paying National Rural Employment Guarantee Programme wages through smart card. It is being implemented on a pilot basis in eight mandals of Warangal and Karimnagar districts in Andhra Pradesh, which will be extended to the entire state by August 2008.

FINO has been able to disburse wages every week from Andhra Pradesh government, as against a fortnightly disbursal earlier. We are talking to both the Tamil Nadu and the central government to extend a similar network.