Mumbai: The International Finance Corporation, an arm of the World Bank that supports private sector initiatives, has extended a $500 million credit line to HDFC Bank to provide finance to women through microloans in rural areas.
The private lender will use the money to finance microloans to self-help groups and joint liability groups that are enrolled in the sustainable livelihoods initiative. According to HDFC Bank, the financing will enable the beneficiaries to graduate to individual lending schemes.
The financing will support lending for income generation and is part of IFC’s objective of fostering financial inclusion and socio-economic development.
Arup Rakshit, Group Head of Treasury at HDFC Bank, said, “As a bank, we have been committed to empowering women, especially by targeted lending to Self-Help Groups (SHGs) and Joint Liability Groups (JLGs), which further helps take banking to the underbanked and unbanked. This longer duration credit facility from IFC will further boost these efforts.”
Currently, non-banking financial companies, including microfinance institutions (MFIs) and small finance banks, are the major lenders to women seeking loans for income generation purposes, accounting for nearly 65.7% of the total microfinance lending in India. Collectively, they reach approximately 47 million clients with an aggregate gross loan portfolio of $31.6 billion as of December 31, 2023.
However, MFIs are fragmented, have limited capacity, and face higher funding costs. Banks, with extensive distribution networks and lower funding costs, can help increase women’s access to microloans and promote self-employment, HDFC Bank said in a statement. Although banks provide 40% of the country’s microlending, microloans remain a small part of their lending portfolios.
“Access to financial services is key to empowering women and strengthening the economy. IFC aims to promote greater inclusiveness of underserved women borrowers by showing the viability of scaling up microlending to this segment,” said Imad Fakhoury, IFC’s Regional Director for South Asia.
