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Capital markets access for the Microfinance sector

capital markets

Between April and June, Standard Chartered India completed landmark deals for two of the country's largest microfinance institutions (MFIs) - SKS Microfinance and Spandana Sphoorty Financial.

In April, SKS Microfinance completed the country's first listed non-convertible debentures (NCD) by a microfinance institution. SKS Microfinance, which is the fastest growing microfinance institution in the world with more than five million clients, raised INR750 million ($15 million) through a one year NCD paying a coupon of 10 per cent.

Spandana Sphoorty Financial, India's second largest microfinance institution with more than 2.5 million clients located over nine states, raised INR800 million ($16 million) through a one year NCD with a yield to maturity of 10 per cent. Standard Chartered India was the sole book runner and lead arranger for both issues, which are listed on the Bombay Stock Exchange.

Suresh Gurumani, managing director and chief executive of SKS Microfinance, said, "This transaction enables us to diversify the sources base and access capital markets funding. By listing the NCDs on the stock exchange, SKS raises the bar on transparency and governance standards for the sector as a whole."

Padmaja Reddy, managing director of Spandana, said, 'We have one more funding route open now. This is a great beginning to diversify our funding sources and this will enhance our ability to reach out to low income households in seven new states we are planning to expand into.' She added that the compliance requirements to issue NCDs and list on the Bombay Stock Exchange would improve Spandana's corporate governance.

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Annual Report and Accounts 2009