HDFC, SKS Micro in rural loan tie-up

Housing Development Finance Corp Ltd (HDFC), India’s largest home loan provider, has joined SKS Microfinance in a pilot project to provide loans for improvement of dwellings primarily to low-income women clients.

The loans will be in the range of Rs50,000-1.5 lakh, for a tenure of three to five years.

The project “will provide loans mainly for extension and improvement of dwelling units which double up for income-generating activities like eateries, kirana shops, papad and agarbathi-making,” the companies said.

“We are piloting this in Andhra Pradesh. These loans would be given to borrowers who have a good credit history of three years with us,” said Suresh Gurumani, chief executive officer of SKS Microfinance.

SKS Microfinance will charge a 2% processing fee and an interest of 21% fixed on a monthly reducing basis.

Renu Sud Karnad, joint managing director at HDFC, said the first tranche of funding of Rs10 crore will be given to SKS Microfinance.

“We will be happy to give more. The tenure for the loan is three to five years. The market there
(microfinance industry) is such that it is better to recover the loan as fast as possible. In case of a default it will not be the same as in urban market where the property can be sold and the money can be recovered,” she said.

The buyers for houses and the value in the rural market would be limited, she indicated.
HDFC will provide technology support to SKS Microfinance and the first tranche of funding worth Rs10 crore. The funds for the project are being provided to HDFC by KfW, a German development bank, under a special arrangement. (With NW18)