SKS Microfinance on Wednesday said it has received a loan of Rs 100 crore from Micro Units Development and Refinance Agency (Mudra), a government initiative to help micro-entrepreneurs.
The Hyderabad-based microfinance firm said that the Mudra loan, which comes at a 10% annual rate of interest, is cheaper than loans from financial institutions. This would help it bring down the cost of interest-bearing liabilities, the company said.
The development helped the company’s shares move up by 6.37% to R425.65 on BSE on Tuesday.
Microfinance firms such as SKS typically borrows from banks and financial institutions and provide small loans for individuals and small businesses. The company said it has brought down its interest rates by 3.8% to 20.75%. The interest-bearing liabilities have come down to 11.9% in the first quarter this fiscal year from 13.6% in FY14 because of downward adjustments in risk premium. Since October 2014, interest rates have dropped thrice.
“At a rate of 10%, this is lower than regular term loans from conventional lenders, and reinforces our assertion in the recent past that the non banking financial company – micro finance institution (NBFC-MFI) structure does not preclude us from availing dedicated refinance lines at a lower rate of interest. We are already the lowest cost lender in the MFI segment, and will pass on this benefit to our microfinance borrowers,” said Dilli Raj, president, SKS Microfinance. “This is the first refinance line availed by us,” Raj said.
According to Digant Haria of Antique Stock Broking, SKS is the lowest cost micro lender, has the best liability profile, operates mostly in rural areas and follows the most rigorous customer interaction process.
“The next 18 months would be the transition phase for MFIs who have been awarded small bank licenses as they comply with RBI’s cap on inter-bank lending limits, CRR and SLR. This could potentially provide opportunity to a formidable player like of SKS, who is well capitalised. Business momentum was exceptionally strong with gross portfolio growing 14% QoQ. The strong growth was achieved through a combination of higher ticket sizes (9% sequential growth) and newer customer acquisition (4% sequential growth). Growth was uniformly spread across the states where it operates,” he said.
Mudra from its inception earlier this year has financed a host of MFIs including Ujjivan Microfinance, Equitas Holdings, Satin Creditcare and Aarohan Financial Services.
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