SKS Launches Housing Microfinance Initiative with HDFC Support
Dec '2009
  • Aims to provide loans for extension and improvement of dwelling units to existing members who are primarily low-income women clients
  • First phase of pilot launched in select branches of Andhra Pradesh
  • Loan amount ranges from Rs.50,000 to Rs. 1,50,000/- with a tenor of 3 – 5 years.


SKS Microfinance, India’s largest and world’s fastest-growing Microfinance institution today announced the launch of a housing microfinance pilot jointly with the Housing Development Finance Corporation Limited (HDFC), the country’s premier housing finance company, to bridge a critical gap in housing finance needs of the poor.


The company will provide loans mainly for extension and improvement of dwelling units which double up for income-generating activities like eateries, kirana shops, papad and agarbathi-making etc. SKS member clients with at least three years of credit history will be eligible for these loans. Most SKS member clients belong to the low-income category and do not have any documented source of income.


HDFC is providing technology support to SKS and the first tranche of funding worth Rs 10 crore. Towards this end, HDFC is utilising funds available under a special arrangement with KfW, a German development bank. This loan to SKS would help fund about 1250 members, considering an average ticket size of Rs 80,000/-. 


The pilot of this initiative is being conducted in select branches of SKS in Andhra Pradesh. SKS member clients can avail loans ranging from Rs 50,000/- to Rs 1,50,000/- with a tenure between three and five years and the loans will be delivered at the borrowers’ doorstep. Unlike other products of SKS, the liability would not be at the group level, rather these would be offered as individual mortgage-backed loans. After studying the results of the pilot programme and fine tuning the systems and processes, the initiative will be rolled out in several branches.


“The launch of our housing microfinance initiative follows massive demand from our members who have no access to formal institutional funding. The interest rates charged are risk-adjusted rates that compare well with industry rates for urban self-employed and non-formal sector clients,” Suresh Gurumani, Chief Executive Officer, SKS Microfinance explained.


“The operational costs and risks are much higher since we are funding rural and semi-urban properties of borrowers who would not have any income papers or bank accounts and all transactions are in cash. Also, while we borrow at variable rates we are lending at fixed rates of interest for a five year period,” he added.


“We are happy to support SKS in this initiative. This association helps HDFC to contribute to the financial inclusion story of India by reaching services to the grass-root levels. We hope that similar efforts of other MFIs would facilitate in shaping the housing microfinance sector,” Renu Karnad, Joint Managing Director HDFC said.


About SKS Microfinance


SKS Microfinance is a non-banking finance company (NBFC) registered and regulated by  the Reserve Bank of India, whose mission is to eradicate poverty by providing financial services to the poor. Established in 1998, SKS Microfinance is India’s largest microfinance organization. As per audited results of September 30, 2009, we have served 53 lakh members across 19 Indian states and have a loan outstanding of INR 28,011.08 million in loans with a 99.1 % repayment rate.


SKS operates in the states of Andhra Pradesh, Karnataka, Maharashtra, Orissa, Madhya Pradesh, Bihar, Uttar Pradesh, Rajasthan, Uttaranchal, Himachal Pradesh, Haryana, West Bengal, Jharkhand, Chhattisgarh, Gujarat, Kerala, Tamil Nadu, Punjab and Delhi.


SKS has previously received  awards which includes the Social and Corporate Governance Award issued by BSE and Nasscom Foundation for Best Corporate Social Responsibility Practice (2007), Social Performance Reporting Award (MFIs) - Silver Category for Social Performing rating conducted by MIX market (2009). It was founded by Dr Vikram Akula, who is one among the Young Global Leaders selected by World Economic Forum.  He was named by TIME magazine as one of the 100 Most Influential People in the World (2006).