The objective of Aavishkaar Goodwell is to create both social and economic value for its investments and their clients, and consequently for its investors.
Benefits of scale
Aavishkaar Goodwell provides patient risk capital (equity) and active support to entrepreneurial microfinance institutions (MFIs) in India. 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.
On the ground presence 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 works closely with local banks, that fund the portfolios and with donor organizations that help build capacity. In addition, Aavishkaar Goodwell forms strategic alliances with international finance institutions and large scale investors in microfinance.
Smart capital investments to accelerate growth of MFIs
Our investment strategy is to develop new entrepreneurial MFIs and support the growth of existing MFIs. We provide long term risk capital as well as guidance and support, to accelerate the growth of the MFI and to support their integration into the mainstream financial industry, whilst maintaining their social focus. We are building a portfolio of USD 25 million of smart capital investments in 30-40 start ups and 8-10 fast growing MFIs.
For MFI start-ups we apply an innovative franchising approach, as preferred equity partner in the Intellecash franchising program. This partnership between Intellecap and Cashpor enables start- ups to cut down start up time and experience rapid growth at comparatively lower costs and risks. The franchising programme aims to reach out to 10 million clients, and estimates adding US$1 billion of outstanding loans through 60 IntelleCash franchisees across India by 2010.
The strategy for fast growing MFIs is to provide risk capital to fund further growth and form a basis for financial leverage. We team up with MFIs who have high growth ambitions, such as India's leading MFI Share Microfin Ltd. Our India based team of microfinance experts will work closely with Share's management to help Share reach an additional 5 million customers over the next 5 years.
Patient risk capital and active support
We seek to build value as an active stakeholder in the underlying businesses, holding significant stakes (up to 50%) and board presence to have real influence. 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.
Backing by private and public investors
Aavishkaar Goodwell is backed by international finance institutions, commercial banks and private investors. The launching investor Goodwell Microfinance Development Company is funded by private investors, foundations and pension funds. Our investors share our vision that entrepreneurial development in microfinance creates both social and financial value.
Why India?
About 350-400 million people in India live below the poverty line (1 dollar a day). The Indian microfinance market has grown to more than 1 billion dollars in outstanding assets of MFIs. Estimates of the potential size of the Indian microfinance market range from USD 15 billion to USD 30 billion. Unlike in many other countries, there is a substantial supply of commercial money for onlending by MFIs.
The leading commercial funder of microfinance in India is ICICI, the second largest bank in the country. They expect their microfinance lending portfolio to be around USD 10 billion by 2010. This requires some 200 new MFIs that must be started across India.
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.
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.
