UK’s BII looks to go big on India’s affordable housing, MSME sectors

"We are currently pushing funding into two big areas. One is affordable housing and the other is MSME finance. There is a third area which is ," BII's director and head of financial services business in South Asia, Gaurav Malhotra, told ET.

"We keep looking for innovations that need funding, that need patient long term funding. I would say we have a reasonably strong pipeline both on the equity and debt side to keep supporting some of these business models," he said, adding that there is no dearth of availability of funds for right business ideas.

The Indian government is pushing affordable housing through Housing for All scheme and MSME financing through credit linked subsidy scheme for technology upgradation and credit guarantee schemes among others. With recovery recovery, the asset quality stress for lenders across the spectrum has also sunsided.

BII's outstanding investment in India's stands at $740 million, while the total exposure to India is around $2 billion.

"BII has a substantial focus on financial services. It is one of the big areas where we have been investing," Malhotra, who has been with the organisation for nearly eight years.

BII makes equity investments, where it picks up direct shareholding in companies, debt investments and investments through its partner funds. Out of $740 million, $420 million is its equity investment, $230 crore is and the balance is from partner funds.

On the affordable housing side, BII has debt exposure to and equity investment in Shubham Housing Development Finance Company.

In the MSME sector, BII has equity investment in four companies. "In addition, we are looking at some innovative debt structures that can support them to grow their loan books further," Malhotra said.

A third area where BII focuses under the financial services space is microfinance. But it looks to invest in companies which offer bigger micro loans to individual borrowers, instead of providing loans to members of joint liability groups.

"We are trying to see if we work with companies that are innovating on that business model who are trying to do credit at a slightly more nuanced level by valuing individuals rather than just relying on groups," the executive said.

The JLG model is being criticised for not really assessing the need of the individual customer and not providing the amount of funding that the customer may actually need to become productive.

BII in its previous avatar as CDC supported the early days of several microfinance companies, some of which have graduated to small finance banks and got listed in the passage of time.

At present, BII is the largest shareholder in and has significant investment in Light Microfinance.

"We keep re-evaluating the role that we have to play in the sector," Malhotra said.