National Bank for Agriculture and Rural Development (NABARD) has introduced ‘Structured Finance and Partial Guarantee Programme to NBFC-MFIs,’ a dedicated debt and credit guarantee product, to ensure unhindered flow of credit to the last mile in COVID-19-affected rural areas.

NABARD said it has recently signed agreements with Vivriti Capital and Ujjivan Small Finance Bank to roll out the initiative, that will enhance access to sustainable finance for micro enterprises and low-income households.

As per this programme, NABARD will provide partial guarantee on pooled loans extended to small and mid-sized MFIs. It will help facilitate ₹2,500 crore funding in the initial phase and is expected to be scaled up going forward. The program is expected to cover over 1 million households across 28 states and 650 districts, NABARD said in a statement.

G. R. Chintala, chairman, NABARD said, “The partially guaranteed loan facility will catalyse much-needed financing to millions of households, agricultural and business markets to sustain in the post COVID-19 environment. The overwhelming response to the program from commercial lenders and our partners is heartening.”

The Pooled Loan Issuance (PLI) structure provides the lending bank adequate comfort through NABARD’s partial credit protection, reduces cost of capital as the rating of the loans get notched up and helps lenders meet priority sector goals.

This structure will pool together the risk of multiple borrowers and add a layer of partial first loss credit enhancement from a highly rated guarantor. With NABARD as a guarantor and a convincing product construct in place, the programme has helped attract a large number of mainstream banks and small finance banks to participate, the statement added.

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