Consolidation of MFIs – Need and Challenges

• by Sunil Bhat
• Mar 23, 2010
• 1 min
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The note outlines some of the challenges which the MFIs will have to undergo in case of consolidation.

This note focuses on consolidation of microfinance firms in India. Many would argue that the Indian microfinance sector has too many small players, and that it will move for mergers and acquisitions sooner or later. Private equity firms have been very active in Indian microfinance – indeed, Indian MFIs have comprised nearly 40% of all private equity transactions in the country during the past two years (JP Morgan-CGAP Microfinance Survey 2010). The note outlines some of the challenges which the MFIs will have to undergo in case of consolidation, and suggests that valuation and institutional cultural differences will be the major challenges.