USAID and DFC Introduce $50 Million Loan Guaranty Fund to Empower Women Entrepreneurs in India

The United States Agency for International Development (USAID) and the US International Development Finance Corporation (DFC) have announced a $50 million loan guaranty fund for Kotak Mahindra Bank (KMBL). This initiative aims to support women entrepreneurs and micro, small, and medium enterprises (MSMEs) throughout India. The partnership will assist MSMEs affected by COVID-19 in accessing loans to rebuild and expand their businesses.

Kotak Mahindra Bank will provide loans to Non-Banking Financial Companies (NBFCs) in the MSME and Microfinance (MFI) sectors. This approach will ensure essential credit reaches end borrowers, promoting sustained economic growth. Notably, at least 50% of these loans will be directed towards women-led or managed MSMEs, or those employing a significant number of women.

This program is expected to benefit over 30,000 individual women borrowers and 7,500 MSME firms. It aims to empower women economically by providing them with necessary financial resources. The initiative highlights the importance of gender equality as a core aspect of development, especially in the wake of the pandemic's impact on women's livelihoods.

Chennai-based NBFC, Vivriti Capital, will support the program with a $1 million first loss guaranty. Additionally, CredAvenue will offer analytical and sourcing support through its debt platform. The DFC will provide KMBL with a pari passu guaranty financially backed by USAID, covering up to 50% of the remaining uncovered line, amounting to $24.5 million.

D Kannan, Group President - Commercial Banking at Kotak Mahindra Bank, stated that the bank is dedicated to fostering financial inclusion. The program aims to make credit accessible from formal sources to MSMEs and women entrepreneurs from lower socio-economic backgrounds. This initiative will help these groups scale their businesses and generate employment opportunities.

Veena Reddy, USAID/India Mission Director, emphasised that gender equality and women's empowerment are central to development. She noted that women in India have faced significant economic challenges due to COVID-19, impacting their families and communities. USAID supports this initiative to provide financial resources to women-owned businesses and entrepreneurs.

Inclusive Growth and Recovery

Algene Sajery, Vice President of the Office of External Affairs and Head of DFC's Global Gender Equity Initiatives, highlighted the importance of empowering women-owned MSMEs for inclusive growth in India. She stated that this effort would aid India's post-pandemic recovery by amplifying the reach and impact of their loan guaranty.

Anita Ferreira, Chief Capital Markets Officer at CredAvenue, expressed pride in supporting this initiative aimed at empowering women entrepreneurs. She noted that CredAvenue's ability to bring together the entire ecosystem for such a large-scale programme provides partners with a unique advantage.