By developing and scaling up enterprises active in the microfinance sector and integrating them into the mainstream financial sector, Aavishkaar Goodwell aims to realize "benefits of scale": a substantial social impact and an attractive financial return.
What we Do:
Smart capital investments to accelerate growth of MFIs
Private equity approach within a mission driven setting
Benefits of scale
Geographic focus on hitherto underserved regions
Professional on-the-ground team and strategic alliances
Backing by private and public investors
Why India:
Fast growing market with a huge untapped potential
Smart capital investments to accelerate growth of MFIs
Aavishkaar Goodwell’s investment strategy is to provide smart commercial long-term capital and active support to entrepreneurial microfinance institutions (“MFIs”) either at early stage or growth stage or regional leaders looking to consolidate, next to other types of innovative enterprises active in the microfinance sector, to enable them to grow and build value whilst maintaining their social focus.
Private equity approach within a mission driven setting
Aavishkaar Goodwell seeks to build value driven enterprises in the microfinance sector by backing strong management teams that maximize value by focusing on scalability, efficiency and leverage, and by applying a rigorous private equity approach within a mission driven setting.
Aavishkaar Goodwell invests with the objective to hold the investment for the long term, averaging between 5 to 7 years. We are an active shareholder, engaged and involved in matters of financial management, governance, growth planning, technology and innovation.
Benefits of scale
By focussing on scale and efficiency, we seek to realize an accelerator effect: efficient organisations perform better, are more sustainable and can grow faster. They can provide more affordable microfinance services to more people in the 'Base of the Pyramid'. Aavishkaar Goodwell believes these "benefits of scale" will translate into a substantial social impact and an attractive financial return.
Geographic focus on hitherto underserved regions
The geographic focus is India with a special emphasis on hitherto underserved North, Western and Eastern parts of the country. The goal is to increase the outreach of microfinance organizations that understand the social return paradigm and yet can create commercial value and provide a market rate of return to investors.
Professional on-the-ground team and strategic alliances
Aavishkaar Goodwell has a strong local team in India that brings microfinance expertise and many years of relevant business development and social sector experience to the table.
Aavishkaar Goodwell is the preferred equity partner for start-up MFIs that have been groomed in the IntelleCash program. IntelleCash has been set up as a result of a joint venture between microfinance consultancy firm Intellecap and microfinance institution Cashpor . The IntelleCash Network Partners are able to cut down on start up time and experience rapid growth at comparatively lower costs and risks. Aavishkaar Goodwell has invested in several IntelleCash Network Partners and will continue to do so.
Backing by private and public investors
Aavishkaar Goodwell is backed by international finance institutions, commercial banks, pension funds and private investors. The launching investor Goodwell Microfinance Development Company is funded by private investors, foundations, pension funds and fund-of-funds. Our investors share our vision that entrepreneurial development in microfinance creates both social and financial value.
Why India: fast growing market with a huge untapped potential
About 400-450 million people in India live below the poverty line of $1.25 dollar a day. A huge unmet demand for microfinance coupled with the ambitions of existing MFIs and of expected new market entrants provide healthy growth prospects for the microfinance sector. If the sector grows as projected , MFIs in India may reach between 30 to 60 million families by 2013 and have a total outstanding loan portfolio of USD 6 to 15 billion.
The Indian microfinance sector has witnessed a huge shift in thinking and approach since 2005, when AGIMDC I was conceived. It has received tremendous support and has demonstrated consistent growth that has made it attractive to private equity investors. Despite the growth of the sector, in many respects it is still as nascent as it was in 2005: more than 1000 institutions – a mix of NBFCs, societies and Cooperatives- are serving the Indian Microfinance market. Traditionally, the microfinance industry has been a non-profit movement geared towards helping the poor rise from poverty through the provision of small loans to create or expand businesses. The need for additional funding capital and the growing popularity of the industry have spurred a growth in for-profit institutions, which have either transformed from their earlier NGO entities or started by professional teams that view Microfinance as a high-scale double bottom line opportunity.
The microfinance business model in India is highly replicable and scalable and growth rates of 300-400% per annum have not been uncommon for Indian MFIs. An estimated USD 500 mln of private equity is required over the next 5 years to finance the projected growth of MFIs.
The sector is still comparatively small with a potential to scale up by at least 10 times over the next 10 years. Demand still outstrips supply by a huge margin and current supply is geographically concentrated: 52% of the current Indian microfinance exposure is concentrated in two states that constitute less than 15% of the country’s poor population. Even within these states there are opportunities for growth, notwithstanding challenges around issues such as multiple lending and over-indebtedness.
India has an established financial services sector with a growing interest in microfinance, a favourable political climate, an entrepreneurial culture and healthy growth prospects for microfinance services. The mainstreaming of microfinance is still in its early stages. The potential size of the market will enable Aavishkaar Goodwell to build up a balanced portfolio within the country.
What is Microfinance?
Microfinance is the provision of small loans and other small scale financial services to the poor. Having access to affordable credit, a secure place to save money and insurance to protect against the unforeseen can make a world of difference for the 'unbanked,' some 2-3 billion poor people at the 'Base of the Pyramid.' Affordable microfinance services enables them to build businesses, to increase and stabalize their income and to reduce their vulnerability.
