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World Bank, Sidbi launch Rs 300 crore social impact bond

This will help rural women set up or scale up their own businesses

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A large section of the country's vast hinterland, which makes up for almost 70% of India's population, still lack access to credit. On Tuesday, the World Bank, UN Women, and Small Industries Development Bank of India (Sidbi) came together to launch the Rs 300-crore social impact bond – Women's Livelihood Bonds – to help the rural women to set up or scale up their own businesses.

The new bonds will help individual women entrepreneurs in sectors such as agriculture, manufacturing, services and food processing to borrow around Rs 1 lakh to Rs 1.50 lakh at an annual interest rate capped at around 13% or less, almost half the rate charged currently by microfinance institutes (MFIs).

The microfinance institutes have been trying to catering to this segment of people by forming self-help groups (SHGs), however, the credit limit is usually capped at Rs 50,000 or Rs 1 lakh.

The World Bank and UN Women will support Sidbi to raise the bonds. It will also see support from around 10 wealth managers and corporate. Sidbi will act as the financial intermediary.

According to Junaid Ahmad, country director for the World Bank in India, in the first tranche it looks to raise around Rs 300 crore over the next three months, which will be given to the MFIs for the small and medium women entrepreneurs through Sidbi.

The new bonds will not just enable SHG women to graduate from "group borrowing" to "individual borrowing", it will also allow them to shift from development assistance towards more market-financed programmes.

The Women's Livelihood Bonds will be unsecured, unlisted bonds with a fixed coupon rate of 3% per annum with a five-year tenure.

Some of top wealth management firms including Centrum, ASK, Ambit, Aditya Birla Capital have reached out to high net worth individuals (HNI) and impact investors to raise the funds. Companies like Tata Communications, Tata Chemicals, Trent and Voltas have also expressed interest in investing, World Bank said in a press release.

World Bank is also looking raise impact bonds in sectors such as education, small and medium enterprise, green bonds and livelihood bonds.

Meanwhile, Sidbi has also put in Rs 1,000 crore for social impact fund Prayaas in the past 3 months to address women's livelihood. It has already run pilot in Uttar Pradesh and Karnataka covering 1,500 women entrepreneurs, according to Mohammad Mustafa, chairman and managing director, Sidbi.

EMPOWERMENT

  • The new bonds will help individual women entrepreneurs in sectors such as agriculture, manufacturing, services and food processing
     
  • World Bank and UN Women will support Sidbi to raise bonds
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