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CHAPTER 8
Financing: Developmental
A. Apex Financing Institutions: Growing
the Seeds and Saplings
The broad division of labour that has emerged among the apexes is that NABARD lends to MFIs
(under its Model II) only in areas where bank branches are sparse on the ground and therefore
unable to extend linkage loans to SHGs. Also, such lending is provided only to MFIs financing
SHGs. As noted in Chapter 2, the share of NABARD lending under Model II is rapidly declining,
in view of increases in bank lending, and its role will therefore not be dealt with further in
this chapter. 1
This chapter will deal with wholesale lending to MFIs by the (i) SIDBI Foundation for Micro
Credit (SFMC), (ii) the Friends of Women's World Banking (FWWB), (iii) the Rashtriya Mahila
Kosh (RMK), and (iv) the Rashtriya Gramin Vikas Nidhi (RGVN). SIDBI/SFMC is described very
briefly, since it lends only to large and medium MFIs, as is RGVN which is a relatively small
regional apex for the North and East. 2 The bulk of the chapter is devoted to FWWB and RMK
since the concern here is with growing small nascent MFIs, the so called "seeds and saplings."
Among the four AFIs, FWWB is the only non-public sector bulk lender. The respective size of
loans outstanding to MFIs of the four institutions in March 2006, along with that of the
banks, is shown in Table 8.1
Table 8.1 MFI loans outstanding to the apex funding institutions
and banks (Rs crores)
SIDBI
FWWB
RMK
RGVN
Apex financing
institutions and
comercial banks
Commercial banks
Outstanding loans
to partners in
March 2005*
37
6
Outstanding loans
to partners in
March 2006
329
67
2,000 (approximately)
Source: Annual reports for AFIs. Broad order of magnitude figure for commercial banks based on
Table 7.1, included for purposes of comparison. *RMK and RGVN figures available only for March
2005.
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