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India Microfinance Equity Fund (IMEF)

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March 17, 2025

Why in the News?

Sa-dhan, the self-regulatory organisation for microfinance institutions (MFIs), has recently sought the setting up of a new refinancing body and greater flexibility in the India Microfinance Equity Fund (IMEF).

  • Created by – Ministry of Finance, Department of Financial Services with an initial corpus of Rs.100 crore in 2012, focused on smaller microfinance institutions (MFIs).
  • Objective – To alleviate poverty and achieve long term sustainability of operations in un-served and under-served parts of the country.
  • Aids borrowers – The fund is utilized for extending equity, quasi equity or subordinated debt to Tier II (between 50,000 to 2,50,000 borrowers) and Tier III (less than 50,000 borrowers) MFIs.
  • Issues with IMEF:
    • Limited utilization (only Rs 19 crore sanctioned to 10 MFIs).
    • Restrictive cap of Rs 5 crore per MFI.
    • Need for increased corpus beyond current Rs 300 crore.
  • Proposals by – Sa-dhan (self-regulatory organisation for MFIs).
  • Micro Units Development and Refinance Agency Bank (MUDRA Bank) – To be converted into an exclusive provider of refinance for dedicated microfinance institutions (MFIs).

MUDRA is a refinancing Institution and does not lend directly to the micro entrepreneurs / individuals.

MUDRA Bank lends at low interest rates to MFIs and non-banking financial institutions (NBFCs), which, in turn, finance small businesses.

  • Funding Architecture Challenges – Strengthening and expanding the existing financial resource system for MFIs to reduce dependence on banks for funding.

Sa-Dhan

  • Objective – To develop, promote and support ecosystems of Impact Financing institutions which enable Inclusive Growth, equity, gender equality and sustainable development in the society.
  • MFIs – It includes both, for Profit and Not for Profit MFIs, SHG promoting institutions, banks, rating agencies, capacity-building institutions etc.
  • Presence – Sa-Dhan has about 220 members working in 33 states/UTs and over 600 districts.
  • National Support Organization (NSO) – Sa-Dhan is also recognized as a NSO by National Rural Livelihood Mission (NRLM).

References

  1. The Business Standard| Sa-dhan’s India Microfinance Equity Fund (IMEF)
  2. PIB| India Micro finance Equity Fund (IMEF)
  3. Sa-Dhan| Sa-Dhan & its Objectives
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