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Janalakshmi Financial Services

 



"Each of us has much more hidden inside us than we have had a chance to explore. Unless we create an environment that enables us to discover the limits of our potential, we will never know what we have inside of us."
- Muhammad Yunus


Spandana Sphoorty Financial

 


"If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value conscious consumers, a whole new world of opportunity will open up.”
- C.K. Prahalad


Satin Credit Care Network



Arohan



Jagannatha Financial Services



Ujjivan Financial Services

 
 
   
 

 

Our Approach

Lok Capital has concluded that any intervention intended to help the MF sector should aim to (i) mobilize for profit equity capital (in an environment in which there does not appear to be any shortage of debt financing); (ii) back and nurture MFI managerial talent; and (iii) contribute to institution building. These three aims being very similar to the objectives of investors in early stage companies, we believe that a “venture capital approach” suits the needs of the Indian MF sector. The idea is to create an appropriate entity/platform that would allow investment in a selection of suitable Indian MFIs, with the objective of bringing equity capital to the table and subsequently nurturing these “investee companies” to grow and evolve along commercial lines.

However, Lok has also come to the conclusion, having reviewed a significant number of potential investment opportunities in the Microfinance sector in India, that venture funding by itself is unlikely to be sufficient. This is essentially because venture investors by themselves cannot resolve the problem of the lack of management capacity and skills. They need a pool of skilled managers to back and to nurture. The development of such a pool of skills has a strong public good element to it and so requires financing from not-for-profit sources of funding. A parallel capacity building facility financed through grant financing is therefore also required to help deliver long term technical assistance and training support to those MFIs that would be the recipient of equity investments from the venture fund.

 
     
 

 
 


In summary, the Lok Capital model is an attempt to forge a constructive partnership between for-profit and not-for-profit entities to deliver a “public good”, i.e. affordable financial services to women from low-income households, but on a large scale and in a commercially sustainable manner.

In effect, the not-for-profit capital source in this model would be funding the cost of a “smart subsidy”, which in this case would absorb a portion of the cost of building capacity within investee MFIs, such that

 
 
  • The interest rates charged by these MFIs to the ultimate client remain affordable without
    ---compromising their profitability
  • The providers of equity capital to these MFIs are able to reap some reasonable return on their investment
  • The not-for profit Foundation would act a catalyst for
  •  
    Attracting, through the Fund, profit driven equity capital for MFIs
     
    Securing the long-term profitability and scalability of these MFIs