India: IFMR Trust to float two funds to support start-ups and MFIs

Oct 2007
Chennai, India, October, 18 2007 - The IFMR (Institute for Financial Management and Research) Trust, supported by a group of investors, including ICICI Bank, will be floating two funds- the Network Enterprise Fund, a $100 million fund that will support start-ups in a few priority sectors and the Microfinance Classic Fund, a $40 million fund which will fund start-ups in the microfinance (MFIs) space.

"The funds will be structured as domestic and offshore fund, for which the registration is expected anytime. It will be registered overseas to facilitate in-vestments from international financial bodies", said Mr Puneet Gupta, COO, IFMR Trust.

The IFMR trust will function as an incubator for these start-ups. The trust had earlier identified 14 priority sectors, where it would fund enterprises. The sectors include traditional areas such as handicrafts, food processing, diary and new areas such as rural BPO, rural tourism, waste management and skills training.

While the network enterprise fund will support start-ups in the priority sectors, the microfinance classic fund will cater to the equity needs of early-stage mi-crofinance institutions. Mr Gupta said that unlike existing microfinance funds such as Bellwether and Aavishkar that invest in established Micro-finance institutions (MFIs), the MFI classic fund will apply to early-stage MFIs.

The IFMR trust has already funded three enterprises so far- Sandhi, Earthy-goods and Strive- based in Mumbai, New Delhi and Hyderabad respectively. "We have provided seed funding of Rs 1-2 crore for these enterprises, through the trust. However, after the funds are fully structured, all the investments will be routed through the funds".

One major criterion for funding is the enterprise must have a sound social and development purpose. Mr Gupta said the enterprises would enhance ac-cess of the rural population to the markets.

The three start-ups are in line with the trust's chosen sectors. Sandhi works towards tapping markets for artisans, Earthy Goods provides business solu-tions for farmers and Strive trains people to work in the retail and hospitality sectors.

"The enterprises will not work as independent entities but work towards es-tablishing a network across the country. For example, they will work with non-profit organisations located in various regions that will help in tapping local talent", Mr Gupta said.

Mr Gupta added that presently MFIs are more focussed in the southern region, especially in Andhra Pradesh. The MFI classic fund will help entrepreneurs in regions that don't have a major exposure to micro-finance.

The trust will initially hold a majority stake in the enterprises. As the enter-prise makes profit, the entrepreneur can unlock equity and increase his/her stake in the venture.


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