IFC invests 25 million in Mahindra Rural Housing Finance for housing loans to rural poor
Posted on: 03/Aug/2018 6:20:12 PM
IFC, a member of the World Bank Group, is investing INR 1.6billion ($25 million) in Mahindra Rural Housing Finance Ltd. (MRHFL), one of the largest finance companies, focused on rural housing. MRHFL will use the proceeds to give loans to low-income borrowers in villages.
The demand for affordable homes in India is rising at an unprecedented pace due to economic growth and urbanization. The National Real Estate Development Council estimates the housing shortage in the country to touch 114 million units by 2022, of which 68 million will be in the rural areas.
MRHFL has 85 percent of its portfolio in the rural areas with an average loan size of only $1,200, and demonstrates its ability to serve economically weak segments in a commercially sustainable way. Its customers include farmers, micro-entrepreneurs, and salaried workers in the unorganized sector, who often do not have documentary evidence of income and lack a proven credit history.
“MRHFL is the pioneer of rural housing finance in India. Most of the housing finance in rural areas is for incremental construction or completion of homes and lack of appropriately designed product options is a key challenge. We identified this need and built an innovative business model around it. There is great potential for growth in this segment. This association with IFC will help us capitalize on these opportunities, while making a huge social impact,” said Ramesh Iyer, Vice-Chairman & Managing Director, Mahindra Finance.
Bridging the housing gap in India is a strategic priority for IFC and aligned with the World Bank Group’s twin goals of eliminating extreme poverty and increasing shared prosperity. In recent times, IFC has made available nearly $2 billion, including mobilization, for purchase and construction of affordable homes. According to estimates, every house built creates up to 13.5 direct and indirect jobs.
“There is high demand for affordable housing, particularly in rural and semi-urban areas. The supply is beginning to increase. IFC`s investment will send a positive signal to investors, increasing confidence and encouraging potential creditors to provide long-term debt to this sector,” said Arun Kumar Sharma, Chief Investment Officer, IFC. “Home ownership helps improve living standards and the housing construction industry is a significant employment generator. Both are critical to IFC’s mission.”
“MRHFL has extended loans to more than 700,000 households in rural India. We also assist our customers by providing advisory services and financial literacy campaigns. This investment will be a further boost to our mission to expand and reach out to underserved customers in rural markets, thus transforming rural lives,” said Anuj Mehra, Managing Director, Mahindra Rural Housing Finance Ltd.
Last month, IFC committed INR 6.4 billion ($100 million) in Mahindra & Mahindra Financial Services Ltd. (MMFSL) to increase loans to farmers for buying tractors, commercial vehicles, and other equipment for modern farming. Both MRHFL and MMFSL are parts of the Mahindra & Mahindra Group, whose relationship with IFC goes back to 1963.
