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June 27, 2019

Finnfund funds microloans for poor women in rural India

Finnish development financier Finnfund will make a EUR 15 million investment in Indian company Annapurna Finance Pvt Ltd, which offers microloans and related financial literacy education, mainly to poor women in rural India. The loan makes it possible for Annapurna to offer its services more widely in India.

This is Finnfund’s first project eligible for the 2X Challenge, which is an initiative by the G7 countries aimed at mobilising USD 3 billion to finance businesses that promote the status of women. Finnfund joined the initiative among the first development financiers in May.

From NGO to one of the most important microfinance institutions in India

“We became interested in Annapurna because the company has a strong social mission that aims to empower women”, says Ulla Huotari, Investment Manager at Finnfund. The company’s roots go back to the early 1990s, when an NGO called People’s Forum launched a microfinancing programme in Odisha, one of the poorest states in India.

“Although the microfinancing business was separated from the NGO operations in 2009, the company’s willingness to act in the interests of society and women, stemming from its NGO roots, is well reflected in the company’s operational culture”, says Huotari.

The company became a licensed microfinance institution in 2013 and, now, Annapurna is among the most important microfinance institutions in India. Today, Annapurna has approximately 1.4 million active loan customers. The average loan is approximately 17,000 rupees (approximately EUR 210), and the maximum loan is 80,000 rupees (approximately EUR 1,000). The loans are mainly group loans that allow people to engage in a trade. The company also offers loan products designed specifically for the most vulnerable, such as transgender people, single parents, unmarried women and the casteless. For example, the company offers a small discount on the interest rate for village loan groups if a disabled person is admitted as a member.

“Women with microfinancing mostly work in their own village, from their own homes. With the loans many of them have bought sewing machines or dairy cattle, among other things. Many small shops have also been opened,” says Huotari. Of the Indian population, 67% live in rural areas. It is still difficult for them to access financial services, as most banks and financial institutions operate in cities and growth centres. The majority of Annapurna’s loans (88%) are granted in rural areas.

Microfinancing brings equality

In India, women have fewer opportunities to participate in economic and working life: for example, women own only 4% of Indian companies and represent approximately 17% of the country’s national product. The proportion of women in the workforce is 26%, which is one of the lowest in the world.

Strengthening the position of women is one of the key objectives of Finnish development cooperation. The possibility of using a microloan to generate more income contributes to the economic independence of women and those in vulnerable positions.

To protect customers, the microfinancing sector is now strictly regulated in India. Licensed microfinance institutions are not allowed to provide any services other than microloans. In addition, the central bank defines the target customers of microfinancing based on their income level. The margin that the microfinance institution is allowed to earn is set by the regulator. Annapurna is committed to the principles of responsible microfinancing, and the company is certified by the SMART Campaign.

Annapurna is an important employer. The company employs more than 5,000 people and provides training and advancement opportunities for every employee. The company has a plan to promote gender equality. One of the aims of the plan is to increase the number of female workers among employees and management.

For more information:

Investment Manager Ulla Huotari,  tel. +358 50 594 2296, ulla.huotari(a)



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