In India, the demand for microfinance in poor communities far exceeds its supply. More than 65 million poor households have no access to microfinance, which is largely due to an ineffective delivery of financial services to them. The poor continue to lack access to formal credit and have mainly relied on informal sources to meet their needs. Microfinance institutions (MFIs) are trying to bridge the gap between demand and supply but they have been unable to get adequate capital.
Grameen Foundation saw this gap in service and resources as an opportunity to create an intermediary -- an innovative approach to supporting the growth of MFIs. In 2008, Grameen Foundation, IFMR Trust and Citicorp Finance India Ltd. formed Grameen Capital India Ltd. (GCI). Its mission is to tap affordable capital for MFIs through groundbreaking financing initiatives. By opening doors to affordable capital, MFIs and other poverty-focused organizations are now able to grow and serve more of India’s poor, especially women. GCI’s success has surpassed expectations. In about four years, it has generated more than $127 million in financing for Indian MFIs, which will fund more than 1 million microloans for poor people that country.
Nobel Peace Prize winner Professor Muhammad Yunus, founder of Grameen Bank and microfinance revolutionary, recognized the important role GCI plays in reaching India’s poor communities. “Local banks cannot lend to MFIs because MFIs cannot provide collateral,” he wrote in his book, Creating a World Without Poverty. “However, if an international or domestic organization steps forward to act as a guarantor, local banks are happy to provide the money. This is a market-based solution already being practiced by such organizations as Grameen Capital India.”