SKS Microfinance announced the securitization of receivables worth Rs 550cr ($12.3 million) from microfinance (MFI) borrowers.
This amount comprises two transactions of Rs 310cr and Rs 240cr, with both offerings rated 'PR1+ (SO)' by CARE, with the assignees being banks. The deals will further augment SKS Microfinance's liquidity position. The transaction worth Rs 310cr represents the single largest rated pool assignment in the Indian MFI sector.
Instruments that have a 'PR1+ (SO)' rating are seen as having a strong capacity for timely payment of short-term debt obligations while also having the lowest credit risk.
The SKS securitization is backed by receivables from 750,000 microfinance borrowers. The pool is well diversified with a single branch accounting for less than 1% of the pool, with the average loan amount being Rs 12,000.
“In keeping with its leadership role, SKS Microfinance is delighted to bring back the assignment/ securitization of microfinance receivables, which had virtually ceased post the AP MFI Act," said S Dilli Raj, SKS Microfinance CFO in a press release.
Andhra Pradesh, a state located he southeastern coast of India, introduced a law last year to address the aggressive measures adopted by microfinance firms to collect money from borrowers. These were so extreme that, according to several news reports,in certain cases, it led borrowers to commit suicide.
The law, which is called the Andhra Pradesh Microfinance Institutions (Regulation of Money lending) Act, 2010, regulates the sector by monitoring the state's MFIs lending and collections. It prohibits MFIs from lending to the self help groups that are already covered by the formal banking system without seeking prior approval of the banks.
SKS operates across 19 Indian states. These include: Andhra Pradesh, Karnataka, Maharashtra, Orissa, Madhya Pradesh, Bihar, Uttar Pradesh, Rajasthan, Uttaranchal, Himachal Pradesh, Haryana, West Bengal, Jharkhand, Chhattisgarh, Gujarat, Kerala, Tamil Nadu, Punjab and Delhi.