US firm sets up NBFC to finance urban poor

Aug 2007
Chennai, India, August, 23 2007 - The US-based Development Innovations Group has set up a company in India, Capstone Financial Services Pvt Ltd, with a view to providing/facilitating loans to the urban poor.

Capstone will soon be registered with the RBI as a NBFC. The company’s first office in India was inaugurated here today.

Addressing a press conference here, Mr Franck Daphnis, President & CEO, Development Innovations Group, said that Capstone would essentially be a ‘service’ company that will provide loans to the urban poor. He said that for starters, Capstone would give loans for housing, home improvement and micro-finance.

Micro Finance

It is not clear how the loans would be funded. Mr Daphnis spoke of Capstone being “supported by Bill Gates Foundation” and that refinance arrangements are being worked out with Indian entities—ICICI Bank is one of them. Capstone is looking at lending between Rs 20 crore and Rs 25 crore in the first year, but plans a quick ramp up.

Capstone, which will set up two more offices in Chennai, will have about 30 “loan officers” who will “work into the community”, Mr Daphnis said. He observed that the Indian urban poor are as yet largely under-financed. While some efforts are on towards rural micro finance, urban micro finance is a market waiting to be tapped.

Today, according to Mr Daphnis, there is no one in India who provides a less-than-Rs 3-lakh housing loan for a self employed urban resident. Capstone will provide such loans—at 15 per cent compounded. It also intends to give consumer and personal loans to the urban poor—hence ‘micro finance’—at a monthly rate of 1.7 per cent, flat.

Delivery Channel

Over time, providers of other types of financial services—such as insurance—could piggy ride on the delivery channel created by Capstone.

Answering a question, Mr Daphnis said that issues such as small ticket size, risks and higher costs of operations are factored into the pricing of loans.

He said this model would be expanded into other Indian cities—typically those with a population of around 80 lakh.

Source : IBEF

Research Analysis Tools

The fund indexes, institution benchmarks and other market information displayed here are all Symbiotics designed analysis tools, created in-house by our analysts and experts. Symbiotics has one of the oldest track records in microfinance investment analysis dating back to the late 1990s; its indexes and benchmarks have been regularly used as markers by investors, asset managers, financial institutions and practitioners. These, as well as several other research products, are available through the Research Account. Click on the link below to find out more.

Learn More