IFC, the private sector arm of the World Bank Group, is investing up to US$5mn in Financial Information Network & Operations, a technology service provider offering end-to-end IT solutions that help banks reach underserved rural banking markets in India.
The IFC investment consists of common equity of up to US$2.5mn equivalent and convertible preferred shares of up to US$2.5mn equivalent. FINO’s target market is the urban and rural poor in India, who have limited financial literacy or poor access to financial services.
An estimated 600mn rural poor in India are either not served or are underserved by the formal financial sector. Insurance, depositary services, remittances and other financial services are either unavailable or inaccessible.
The project is expected to have an important impact on improving microfinance institutions” financial and operational management systems, efficiency, scale, and financial transparency. It will also support mobile banking solutions that enable rural banks, cooperatives, and microfinance institutions to provide cost effective services in rural India.
Manish Khera, CEO of FINO, says, “Rural outreach is integral to FINO’s strategy. With long term financial support from IFC, we will be better equipped to become an independent technology vendor and encourage other banks and microfinance institutions to adopt our technology and reach underserved rural geographies.”
Farida Khambata, IFC’s regional vice-president for Asia and Latin America, says, “The projects fits well with IFC’s strategy in India, as it enhances the financial intermediation capacity of microfinance institutions by providing technology solutions that improve their operating efficiency and ability to scale. It also improves rural productivity by extending credit and other financial services into rural India and strengthens the Indian IT sector as a platform for better business services and product development.”
FINO came into existence two years ago to address the need for a more cost effective approach in serving the rural and urban poor in India. The venture was originally funded by ICICI Bank.
In India, IFC’s current held portfolio is US$1.3bn (as of June 2006) making it IFC’s fourth largest country of operations. Since 1956, IFC has committed financing to projects in India, amounting to US$3.3bn. IFC focuses on supporting the private sector-led development through direct investment and advisory services that promote growth and competitiveness in India. In FY06, IFC committed over US$400mn in new investments in India.
Infrastructure is central to IFC’s strategy in South Asia. In recent years, IFC has supported manufacturing companies aspiring to global competitiveness. IFC also supports innovation in financial services, including expansion of consumer and housing finance for lower-income groups. IFC provides advisory services and equity finance to microfinance institutions that provide loans to farmers and small non-farm enterprises in rural areas.
IFC is helping companies overcome the limited availability of long-term financing by using its strong credit rating and financial structuring expertise to encourage domestic investors to buy longer-term commercial paper. IFC has also focused on the innovative application of technology by backing IT companies whose products offer potential for important contributions to economic development.