SKS Microfinance to Offer Home Loans

December 08, 2009: Even as realty markets are trying to shake off the downturn impact, SKS Microfinance, the largest microfinance company in terms of assets, is set to offer its customers loans for their housing needs. The company on Thursday said it has joined hands with the Housing Development Finance Corporation (HDFC) in its attempt to bridge the critical gap in the housing finance needs of the poor. The pilot project will be conducted in Andhra Pradesh among credit members who have been with SKS for at least three years. These loans will be towards extension and improvement of dwelling units which double as income-generating units like eateries, kirana shops, papad and agarbathi-making units, among others. Most microfinance clients belong to the low-income category and do not have any documented source of income.

HDFC will provide technology support and the first tranche of funding worth Rs 10 crore. This loan to SKS would help fund about 1,250 members, considering an average ticket size of Rs 80,000. “While SKS will borrow at variable rates, we are lending at fixed rates of interest for a five-year period,” said Suresh Gurumani, CEO, SKS. SKS member clients can avail loans ranging from Rs 50,000-1 .5 lakh, with tenure between three and five years, which will be delivered at their doorstep. However, unlike other products of SKS, the liability would not be at the group level and it would be offered as individual mortgage-backed loans. “The launch of our housing microfinance initiative follows massive demand from our members who have no access to formal institutional funding. The interest rates charged are risk-adjusted rates that compare well with industry rates for urban self-employed and non-formal sector clients,” said Mr Gurumani.