The Overseas Private Investment Corporation (OPIC), a U.S. government agency, has signed a $5 million loan guarantee with India’s IndusInd Bank. The money will support Grameen Impact, a non-bank financial institution (NBF) backed by Grameen Capital India (GII) in its focus on the growth of local small and medium enterprises.
The financing guarantee from OPIC will enable the bank to pay an equivalent loan of ₹335 million to GII. The major advantage of this transaction is that it eliminates foreign exchange rate fluctuation risk, a challenge often faced by borrowers in the emerging market.
Grameen Impact is planning to invest the money in various sectors with high social impact including financial services, affordable healthcare, affordable education, renewable energy, and sustainable agriculture.
“OPIC has a strong commitment to impact investing. By supporting lending to high-impact businesses in local currency, this project will help businesses in India overcome one of the main challenges to obtaining financing,” said Ray W. Washburne, OPIC President and CEO.
“India has rapidly become a global leader in impact investing, with over $5 billion of investments in this space. However, the bulk of this is equity; even today social enterprises struggle to raise debt financing, which is critical for scale,” said Royston Braganza, CEO of Grameen Impact Investments.
Mercom reported recently that the Reserve Bank of India (RBI) has amended the guidelines with regards to investments made in the country by foreign portfolio investors (FPI). Under the amended guidelines, FPIs are now free to buy corporate bonds with at last one year of residual maturity, against three years earlier. This will benefit FPIs who invest with short term intent.
Recently, the National Bank for Agricultural and Rural Development (NABARD) also announced that it will receive a $100 million loan from the Green Climate Fund (GCF) for the development of rooftop solar. With the provided financial assistance, NABARD also plans to create better livelihood opportunities by providing proper energy access for the most vulnerable areas including micro, small, and medium-sized enterprises (MSMEs) which have poor energy access. The grant is expected to help NABARD modernize Indian agriculture through the utilization of rooftop solar systems.