BAJAJ ALLIANZ INVESTS EQUITY IN SKS MICROFINANCE
Bajaj Allianz, one of India’s leading insurer offering general and life insurance products , has announced a strategic investment of INR 50 crore ($10 million) in SKS Microfinance, India’s largest microfinance institution. .
The equity deal claimed to be the first-ever investment by an insurance company in an Indian microfinance institution (MFI) and signals an important step in the evolution of SKS Microfinance, one of the fastest-growing MFIs in the world.
Announcing this milestone, SKS Microfinance Founder and Chairperson Dr. Vikram Akula said, “An investment in SKS by a mainstream investor such as Bajaj Allianz is a vote of confidence in the company and in microfinance. Investment from a leading private insurer gives SKS greater stability and credibility, as well as a stronger capital base to extend our reach to serve more poor customers.”
MFIs traditionally start off as non-profit organizations and then convert to non-banking finance companies in order to achieve scale. In the initial phase, they attract financing from development banks followed by venture capital and private equity funds. Investment from Bajaj Allianz, marks the next phase in the evolution of microfinance as a safe and mainstream asset class.
SKS Microfinance and Bajaj Allianz Life Insurance partnered in April 2008 to launch India’s first micro-insurance product for the rural poor.
“We are happy with SKS and its unique business model that makes it an ideal vehicle for serving customers at the bottom of the pyramid. It is also in line with our objective of providing security and protection to the most disadvantaged sections of the society through micro-insurance products,” said Kamesh Goyal, Country Manager, Allianz & CEO Bajaj Allianz Life Insurance. Mr Goyal added that the investment follows rigorous due diligence which has created confidence that the investment would generate shareholder value and help build a secure society.
With this investment, SKS Microfinance will further improve its Capital Adequacy Ratio requirements. In recent months, SKS Microfinance has introduced a range of mainstream financial instruments into microfinance. It has issued Non-Convertible Debentures worth INR 250 million that were fully subscribed by YES Bank and also completed a rated pool securitization deal worth INR 1 billion (the pool was rated P1+ by Crisil signifying ’highest safety’). SKS also issued Commercial Papers worth INR 250 Million and tied up with Standard Chartered to raise Rs 750 million from the Debt Capital Market and became the first MFI to list its debt security raising the bar on ‘accountability”.
SKS Microfinance currently has a membership base of 4.5 million households and has cumulatively disbursed loans worth over Rs. 8,000 crore. It has a staff strength of 14,249 across 1,439 branches in 19 Indian states.
