International Finance Corporation (IFC), a member of the World Bank Group, has announced an investment of Rs 1.6 billion ($25 million) in Mahindra Rural Housing Finance Ltd (MRHFL). The proceeds will be used to give loans to low-income borrowers in villages.
MRHFL has 85 per cent of its portfolio in rural areas, with an average loan size of only $1,200. It has demonstrated its ability to serve economically weak segments in a commercially sustainable manner. Its customers include farmers, micro-entrepreneurs, and salaried workers in the unorganised sector, who often do not have documentary evidence of income and lack a proven credit history.
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, said IFC. In recent times, IFC has made nearly $2 billion available, including mobilisation, 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," he added.
MRHFL Managing Director Anuj Mehra said, "MRHFL has extended loans to more than 700,000 households in rural India. This investment will be a further boost to our mission to expand and reach out to under-served customers in rural markets, thus transforming rural lives."
Last month, IFC committed Rs 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 part of the Mahindra & Mahindra Group, whose relationship with IFC goes back to 1963.