By IANS,
Mumbai : Leading Indian financial institutions and a non-profit organisation Thursday launched a new micro-finance initiative that will help mentor fresh business plans and cottage enterprises for rural households.
The pact was signed among credit rating agency Crisil, the ICICI Foundation for Inclusive Growth and non-profit organisation IFMR Trust that will develop viable commercial enterprises targeted at low-income households.
The enterprises will help low-income households to augment their incomes and create assets, Crisil’s managing director and chief executive officer Roopa Kudva told reporters later.
Under the agreement, Crisil will develop evaluation frameworks for micro-finance institutions, urban local bodies and vocational training institutes, enabling better analysis and a deeper understanding of these entities.
Crisil will also publish and disseminate rating criteria for such entities.
IFMR Trust will facilitate this process by providing access to enterprises working in these areas, while ICICI Foundation will help in dissemination of finance for products developed under the pact.
Kudva said micro-finance, small and medium enterprises (SMES) and low-income households in rural areas are fast becoming the “in-thing amongst financial institutions in India”.
“In the first six months of 2008 we have come across a growing appetite amongst financial institutions for low rated papers,” she said.
“The rural canvas is vast but in the initial phase, these are the few sectors which we intend to bring into the framework for evaluation and later on we will encompass other sectors,” she added.
ICICI Foundation for Inclusive Growth president Nachiket Mor said the bank wants to see the financial markets in this segment perform better, adding “the sector is going to pose a challenge.”
“While ratings play an important role in identifying good projects for funding, the IFMR Trust is well versed with micro-finance,” Mor said.
IFMR Trust president Bindu Ananth said commercial projects in the areas of rural development and poverty alleviation have “typically been characterised by a lack of adequate structuring, and inadequate risk mitigation.”
Elaborating, Ananth felt sponsors often fail to appreciate the risks inherent in these projects. “As a result, such projects do not find funding at reasonable cost, thereby impairing their chances of commercial success,” she added.
The ratings and evaluation process will help to solve this problem, she said.