Fusion Micro Finance, a leading NBFC microfinance company, announced on Friday that it has entered into a $25 million loan agreement with the United States International Development Finance Corporation (DFC). This significant funding aims to enhance the company’s business operations and support financial inclusion for women entrepreneurs in rural India.
About Fusion Micro Finance
Fusion Micro Finance, founded by Mr. Devesh Sachdev in January 2010, is dedicated to providing financial services to women entrepreneurs in rural and semi-urban areas. The company received its NBFC-MFI license in January 2014 and operates on the Grameen Joint Liability Group (JLG) model. This model involves forming small groups of 10 to 30 women, providing loans to the group as a whole. All the while, they ensure each member is jointly responsible for the loan. This approach fosters mutual support and accountability among clients.
The primary focus of Fusion Micro Finance is to reach unbanked women from economically and socially deprived sections of society. Over 85% of its active loan clients belong to marginalized communities such as ST/SC and OBC. The company’s commitment extends beyond financial support; it also promotes financial literacy, empowering clients to manage their finances effectively. Fusion Micro Finance adheres to robust business practices and transparent policies, emphasizing a customer-centric approach.
As part of its expansion, Fusion Micro Finance has established branches in 17 of the poorest districts in Madhya Pradesh and Uttar Pradesh under the Poorest State Inclusive Growth program of SIDBI. This initiative underscores the company’s dedication to driving meaningful change and contributing to the economic empowerment and sustainable development of the communities it serves. Through these efforts, Fusion Micro Finance aims to create a positive, lasting impact on the lives of its clients and the broader community.
Details of the Loan Agreement
Under the terms of the agreement, Fusion Micro Finance has received an initial disbursement of $20 million. This transaction complies with the current External Commercial Borrowing (ECB) guidelines. The remaining $5 million is expected to follow, further bolstering the company’s financial capacity. Gaurav Maheshwari, Chief Financial Officer of Fusion Micro Finance, highlighted the strategic importance of this partnership. “This borrowing will help in expanding our business operations and loan growth. It is an eight-year loan which will further strengthen our asset-liability mix. We are confident that this landmark transaction will open doors for larger pools of international capital to fund our future growth plans,” Maheswari said.
Focus on Financial Inclusion for Women Entrepreneurs
The funds from the DFC loan will be primarily used to support women entrepreneurs in rural areas. Fusion Micro Finance aims to enable these women to start and grow their businesses, contributing to broader financial inclusion. The company’s strategy aligns with its mission to diversify its sources of funds and liability mix. Maheshwari noted, “This partnership is in sync with the company’s strategy to tap varied sources of funds and diversify our liability mix.”
Strong Financial Performance and Growth
Founded in 2010, Fusion Micro Finance has shown robust growth over the years. As of FY24, the company boasts an Asset under Management (AUM) of Rs 11,476 crores, marking a 23.45 percent year-on-year increase from Rs 9,296.22 crore in FY23. Disbursements also saw a significant rise, jumping 19.76 percent from Rs 8,596.11 crore in FY23 to Rs 10,294.35 crore in FY24. The company’s net NPA (non-performing assets) stands at a low 0.60 percent, reflecting strong financial health. Additionally, the borrower base increased from around 35.3 lakhs to around 38.6 lakhs, showcasing the expanding reach of Fusion Micro Finance.
Broader Context of MSME Lending
Fusion Micro Finance’s growth is set against the backdrop of a broader increase in bank credit to the MSME sector. According to the latest data from the RBI, bank credit to the MSME sector under priority sector lending stood at Rs 24.67 lakh crore in March 2024. This marks a 19.2 percent increase from Rs 20.69 lakh crore in March 2023. This substantial growth in credit deployment highlights the ongoing efforts to support MSMEs in India. Total bank credit to MSMEs under priority sector lending in March accounted for 15 percent of India’s non-food credit, which totaled Rs 164.11 lakh crore.
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Future Outlook
The loan agreement with DFC is expected to significantly impact Fusion Micro Finance’s operations. By expanding their financial resources, the company can better support its borrowers and enhance financial inclusion efforts. The infusion of international capital is also anticipated to pave the way for future growth and innovation. The company’s commitment to supporting women entrepreneurs aligns with broader national goals of economic empowerment and sustainable development.
Fusion Micro Finance’s recent loan agreement with DFC marks a pivotal moment in its growth journey. The substantial investment underscores the company’s commitment to expanding its operations and supporting financial inclusion for women in rural India. Fusion Micro Finance is set to continue its positive trajectory, driving meaningful change in the microfinance sector.