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.