Muthoot Microfin To Raise $50 Million in Overseas Funding

Muthoot Microfin, a leading microfinance lender, is actively negotiating with two European investors to secure $50 million in external commercial borrowing (ECB). The lender is aiming to reduce its overall funding costs and subsequently pass on the interest rate benefits to its bottom-of-the-pyramid customers.

Sadaf Sayeed, the chief executive of Muthoot Microfin, indicated that the overseas borrowing is anticipated to be finalised in three separate tranches by the end of September. This additional funding would complement the $113 million it has already raised from overseas investors in 2024.

Earlier this year, Muthoot Microfin successfully secured $75 million in March from RakBank, Union Bank of India UK Ltd, and Canara Bank, GIFT City. This was followed by another $38 million in June, mobilised from Union Bank of India (DIFC branch), Bank of Bahrain and Kuwait, Bank of India (DIFC branch, Dubai), and Mega International Commercial Bank Co (Labuan Branch). Standard Chartered Bank facilitated these transactions.

The $113 million raised earlier this year is set for a three-year and three-month tenure, benchmarked to a three-month term SOFR at 4.85% plus a margin of 2.85%, with an additional hedging cost of 1.9%.

The ECB will be repaid in a lump sum at the end of its tenure, unlike traditional bank loans that require monthly repayments. This feature allows Muthoot Microfin to manage its cash flow more effectively, as it typically lends for a two-year period.

“We are relying more on the ECB since it is giving us cost advantages. The cost of funds raised through ECB was around 9.6% on average against the incremental average cost of borrowing of 10.3% seen in the first quarter,” said Sayeed.

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