Dealflow | February 25, 2019

Indian bond offering launches to lower rates on loans to rural women

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, February 24 – The World Bank, U.N. Women, and the Small Industries Development Bank of India (SIDBI) have launched a bond to improve access to credit and debt for rural women in some of India’s poorest states.

India ranks among the lowest in the world for women’s economic participation and earned income. The country has been pushing financial inclusion initiatives, like the National Rural Livelihoods Mission, which encourage women to join cooperatives and village-based savings groups as an antidote. Microfinance institutions then partner with these groups to improve rural women’s access to finance.

The Women’s Livelihood Bond aims to go a step further by enabling individual women’s direct access to credit and debt. Proceeds from the bond offering will be loaned to microfinance institutions that otherwise charge high interest rates—20% to 24%—to entrepreneurs directly seeking small business loans up to 500,000 rupees ($7,000). Parter microfinance institutions will commit to issuing business loans between 100,000 and 150,000 rupees at interest rates of 13% or less.

The bond will focus on women with businesses in manufacturing, services and agriculture and food sectors in states with large rural populations like Bihar, Jharkhand, Madhya Pradesh, Maharashtra, Rajasthan, and Uttar Pradesh.

The five-year bond—which has received “interest” but no publicly disclosed commitments—is looking to raise three billion rupees ($42.2 million). Bond holders will receive a 3% annual return.

Other social impact bonds designed to support livelihoods for underserved populations have been launched by the Impact Investing Exchange (targeting women in Asia) and Kois (supporting refugees in Lebanon and Jordan).