Financial resources of the microfinance sector: Securitisation deals – Issues and challenges Interview with the MFIs Grameen Koota and Equitas

Abstract

Securitisation has emerged as an innovative and structured product that meets the funding requirements of microfinance institutions (MFIs). This paper provides a contextual note on the microfinance sector and the financial sources of MFIs. The note is followed by interviews with senior executives of two microfinance institutions on the securitisation deals of microfinance institutions. We argue in our note that the microfinance sector needs to be revived to meet the broader goal of financial inclusion. Banks and MFIs have to collaborate with each other to meet this objective. Banks have to encourage MFIs to shift over to low cost finance either by giving direct loans or through innovative deals like securitisation. Commercial banks have to leverage MFIs for their origination and recovery capabilities in small loans.