YES BANK has chosen to undertake the challenge of scaling up the size and reach of the Indian microfinance industry. YES Bank's microfinance initiatives enable the Bank to be at the forefront of enabling financial inclusion and mainstreaming the microfinance industry.
YES BANK's microfinance initiative will be implemented through two channels:
1) YES Microfinance India (YMI) represents the bank's direct intervention model offering holistic financial solutions including savings, credit, insurance, and transfer services to the base of the pyramid helping the poor manage risks, build assets, develop micro-enterprises, enhance income, and enjoy an improved quality of life. The Bank has entered into a technical collaboration with ACCION International to help it deliver best-in-class services and products to the target market.
2) Term-Lending encompasses the Bank's lending to microfinance clients through existing microfinance institutions. This is targeted nationwide (though by very nature of existing organizations 70-80% will be in Southern India) at artisans and indigent farmers, and is typically a short-term (less than a year) loan product. Its existing commitment towards this is approximately $20 million will plans to increase this amount to approximately $125 million by the end of March 2009. YES Microfinance India plans to distribute the $125 million as loans to 300,000 clients over a five-year period. The initiative will target Pune, Nagpur, Kolkata, and other parts of the country during this period.
As part of the pilot phase of YMI launched in Mumbai, YES BANK has made its first disbursement. YMI plans to operate in poor urban markets in Mumbai and extend operations to Delhi during the later part of the 2007 fiscal year.
According to estimates, 35 per cent of India's one billion people live below the poverty line with 80 percent based in rural areas. A large part of their demand for microfinance is currently unmet, though annual microcredit demand is estimated at $12 billion. A conservative estimate suggests that at most, only about 20 per cent of all poor people have access to formal financial institutions, MFIs, and other such service providers.
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