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NABARD Introduced a Debt and Credit Guarantee Product, ‘Structured Finance and Partial Guarantee Programme to NBFC-MFIs’

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Nabard-launches-credit-guarantee-programme-for-NBFC-MFIsThe National Bank for Agriculture and Rural Development (NABARD) has introduced, ‘Structured Finance and Partial Guarantee Program for Non-Banking Finance Companies (NBFC)-Micro Finance Institutions (MFIs)’, a dedicated debt and credit guarantee product to ensure uninterrupted flow of credit to the last mile  in rural areas hit by the COVID-19 pandemic.  NABARD has signed a pact with Vivriti Capital and Ujjivan Small Finance Bank on 14 August 2020 to introduce the initiative, which will enhance sustainable finance access to  microenterprises and low-income households.

Major Highlights

  • The program entails to provide a partial guarantee on pooled loans extended to small and mid sized MFIs. 
  • It will help to facilitate Rs 2,500 crore funding in the initial phase and is expected to be scaled up. It is expected to cover over 1 million households across 28 states and 650 districts.

Key Info

i.NABARD has collaborated with Vivriti Capital, a technology-led credit platform, to build the facility. 

ii.Vivriti Capital manages and operates CredAvenueTM,  a marketplace for enterprise debt, which enables companies to raise debt from loan, bond and  securitisation markets.

iii.NABARD and  Vivriti Capital have partnered with Ujjivan Small Finance Bank for  the first transaction under the programme.

Gist about the Program

Beneficiaries

The beneficiaries of the program are small and mid-sized MFIs(average rating of BBB and average size of Rs 500 crore of assets under management), which operate in the rural hinterlands and serve farmers, traders, rural businesses and households.

Pooled Loan Issuance structure

i.The Pooled Loan Issuance (PLI) structure  provides the lending bank adequate comfort through partial credit protection of NABARD, minimises the cost of capital as the loans rating is notched up and helps lenders meet priority sector goals.

ii.It will combine the risk of multiple borrowers and add a layer of partial first loss credit enhancement from a highly rated guarantor (NABARD).

Note– As NABARD is a guarantor and a convincing product construct, the programme has helped attract a number of major banks and small finance banks to participate.

Additional Info:

NABARD has disbursed around Rs 2000 crore to MFIs and NBFCs since the beginning of the pandemic.

Recent Related News:

i.NABARD launched development projects of Rs 44 lakhs in Andaman and Nicobar Islands to strengthen the Atmanirbhar Bharat through rural entrepreneurship.

ii.NABARD has announced Rs 5,000 crore of refinance scheme for banks and financial institutions and also earmarked another Rs 5,000 crore for turning Primary Agricultural Credit Societies (PACS), into multi service centres.

  • On July 12, 2020, National Bank for Agriculture and Rural Development (NABARD) celebrated its 39th Foundation day. 
  • On July 13, 2020, NABARD has organized its first “digital choupal”, a video conference which brought together farmers from across the country who have been associated with NABARD in 7 development projects in rural India

About NABARD:
Headquarters– Mumbai, Maharashtra
Chairman– G R Chintala

About Ujjivan Small Finance Bank:
HeadOffice– Bengaluru, Karnataka
MD & Chief Executive Officer(CEO)– Nitin Chugh
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