ADB and HSBC set up $100 mn partial guarantee programme for microfinance in India

The Asian Development Bank (ADB) and HSBC India (HSBC) on Thursday signed an agreement to establish a $100 million partial guarantee programme to support more than 400,000 micro-borrowers and mostly women-run micro-enterprises across India.

As per the agreement, HSBC will expand its lending to microfinance institutions (MFIs) and nonbank finance companies, with ADB partially guaranteeing the loans.

This will expand HSBC's risk appetite and deployed capital, helping to enhance private sector financing and improve financial inclusion in India.

It is ADB's first partnership with HSBC. Under the agreement, to give impetus to this partnership, aggregated financing of an equivalent of $30 million is being initially disbursed to three MFIs in India by April 2022.

"MFIs have emerged as lifelines for underserved clients such as low-income households and small businesses as they struggled to access finance during the pandemic," ADB Microfinance Programme Lead Anshukant Taneja said in a statement.

"This programme will strengthen microfinance as a tool to build economic resilience, reduce gender disparities, and support economic recovery across India," Taneja said.

The partial guarantee arrangement will help MFIs to access funding for on-lending activities as they expand operations after the pandemic.

"Microfinance in India has had a massive impact on people's lives as they struggled to cope with the global pandemic and has a further critical role to play as we slowly emerge from it," said HSBC India Head-Commercial Banking Rajat Verma.

"We are excited by the opportunity and the developmental impetus we can provide by working with ADB. We believe microfinance plays a critical role in enabling financial inclusion and ensuring last-mile delivery of microcredit," Verma added.

Launched in 2010, ADB's Microfinance Programme has provided more than $1.8 billion in loans and helped mobilize $881 million in co-financing. It has provided access to microloans for more than 8 million borrowers, 98 per cent of them women. Microfinance has improved livelihoods, reduced poverty, promoted gender equity, and spurred the growth of microenterprises and employment, according to a statement released by ADB.

( With inputs from ANI )