Inverting the Pyramid 2008

Inverting the Pyramid, an annual publication by Intellecap, consolidates growth and financial performance data from 70 large Microfinance Institutions (MFIs) in India and perspectives from over 25 equity and debt investors who hold investments/are seeking investments in this market. Complemented by Intellecap's ground level understanding from being a key actor in this market, it provides insights on its defining market trends and performance in 2007-2008 and future outlook for entrepreneurship and investments in 2008-2013.

Why is microfinance in India interesting? Its proven track record for demonstrating high growth, high efficiency and profitability and excellent credit quality makes microfinance a sunrise industry for entrepreneurs and professionals as well as an attractive and stable asset class for financial investors. With annual growth rates of over 80 percent and a miniscule market penetration of less than 10 percent, the Indian market is constantly witnessing the entry of many more actors seeking business and investment opportunities with ambitions and business plans that surpass historical benchmarks.

Years 2007 and 2008 saw Indian microfinance emerging as a valued asset class with 15 equity investments totaling USD 0.1 billion, over 40 new institutional investors eyeing the market, changing promoter profiles and unparalleled valuations. With turbulent financial markets and changing priorities, what will future unfold for this industry? What would it take for its growth story to continue? Inverting the Pyramid explores such contemporary questions for this industry and presents:

• Key trends that defined Indian microfinance in 2007-2008
• Demand and supply statistics
• Growth and financial performance (for a sample of the 70 largest MFIs)
• Key stakeholders and their perspectives on the industry
• Estimated debt and equity capital requirements for 2008-2013
• Opportunities in the financing and business environment
• Priorities for future growth, value and sustainability
• Industry outlook in light of the ongoing global financial crisis

• Chapter1: The Year that Went By: 2007-2008
  • Increase in number and quantum of equity investments
  • Emergence of new, business-oriented start-up MFIs
  • Emergence of NBFC as the dominant legal form choice
  • Increase in pilots with technology and business correspondent model
  • Increase in professional services to MFIs
• Chapter 2: The Market: Microfinance Demand and Supply
  • Estimating demand for microcredit
    • Demand estimation based on incidence of poverty
    • Regional demand for microcredit
    • Demand across rural and urban poor
    • Demand based on occupational segments
  • Estimating demand for non-credit financial services
  • Estimating supply of microfinance services in India
    • Semi-formal providers of microcredit
    • Microcredit supply under the SHG-Bank linkage program
    • Microcredit supply by MFIs
    • Comparing the two microfinance channels: SHG-Bank linkage program and MFIs
  • Estimating supply of microfinance services in addition to credit
• Chapter 3: Indian MFIs: Sustaining amidst Challenges
  • Intellecap MFI study: methodology
  • Intellecap projected versus actual portfolio growth (2007)
  • 2003-2008 Continued, high-paced growth
  • Rising efficiency in loan operations
  • Portfolio quality and performance
• Chapter 4: The Industry: Future Directions for Growth
  • Key drivers for future growth in Indian microfinance
    • Market potential
    • Infusion of growth equity
    • Technology
    • Process improvements and efficiencies
  • Challenges for growth
    • Slow down in debt capital from commercial banks
    • Inadequate management capacities
    • Timely availability of trained HR for operations
    • Internal systems and processes
  • Expected growth trajectory of Indian MFIs (2009-2013)
  • Future demand: capital requirements for growth of Indian MFIs (2009-2013
    • Equity capital
    • Debt capital
  • Future supply: exploring the financing landscape for Indian microfinance
    • Commercial debt and Indian MFIs
    • Equity and Indian MFIs
  • How will industry operations evolve
    • The choice: rapid scale up or niche service delivery
    • The players: some old, some new
    • The structure: NBFCs to lead the industry
    • The growth strategies: likelihood of strategic alliances
    • The footprints: filling in the blank spaces
    • The product basket: deeper engagement with the client
    • The model: group or individual lending
• Chapter 5: Finding the Balance: Growth versus Sustainability
  • Understanding the risks in Indian microfinance
    • Financing risks: the volatile liability side
    • In transition: ability to manage scale
    • Portfolio risk: increasingly overlapping clients
    • Political risk
    • Rising food and energy prices and inflation: what does it mean for MFIs
  • Indian microfinance: priorities for a sustainable future
    • Institutional focus: investments for growth and risk management
    • Client focus: putting the customer at the core
    • Partnerships: opportunities for value creation
• About the Authors
• Appendices