First Mutual Fund Investment in Microfinance in India

CHENNAI, India, November 20 - A recent micro-loan securitisation, completed by IFMR Capital and Equitas
Micro Finance, has enabled the first ever mutual fund investment into the
Indian microfinance sector. The Rs. 480 million ($10.4 million) transaction
is backed by over 55,000 micro-loans originated by Equitas Micro Finance, a
Chennai-based microfinance institution with approximately 700,000 low-income
clients. The transaction was structured by IFMR Capital, which operates as a
financial guarantee company for sectors impacting low-income households, and
which co-invested in the junior tranche of the securitisation.

"We are pleased to be the originator in the first ever microfinance
securitisation programme to reach capital market investors," remarks Mr. S.
Bhaskar, COO, Equitas. "This is an important milestone in diversifying the
sources of funds for microfinance companies, and will benefit a large number
of microfinance borrowers over time."

The transaction has been structured into three separately rated tranches
to match investor risk-return profiles, thus expanding the range of
institutions that can invest in the asset class. CRISIL (subsidiary of
Standard & Poor's) rated the tranches P1+ (so) (AAA equivalent), AA (so), and
BBB (so).

ICICI Prudential Asset Management, India's second largest mutual fund,
subscribed to a majority of the securities. Axis Bank, Dhanalakshmi Bank, and
IFMR Capital also subscribed.

"We have invested in the senior A1 tranche based on our analysis of risk
and reward. We believe the issue is fairly priced, provides adequate security
and is highly rated," says Nilesh Shah, Deputy Managing Director, ICICI
Prudential Asset Management.

By investing in micro-loan backed securities, mutual funds and other
institutional investors can own an asset that is both high in quality and low
in correlation to other asset classes. Micro-loan securitisation also
provides banks an attractive way to increase their investment in the
microfinance sector through rated, tradable securities.

Manish Saraf, Head Treasury, Dhanalakshmi Bank, said, "Microfinance has
always been a focus area for the bank. It was logical for the bank to
participate in a transaction that allows banks to engage in direct Priority
Sector lending in a tradable form. While the structure permits MFIs to raise
funding from non-banking channels over a period of time, the rated
instruments will also lower capital charge for banks."

Primary credit enhancement is provided by Equitas in the form of cash
collateral, and will absorb any realised losses up to 10.6% of the portfolio
cash flows. For the senior and mezzanine tranches, additional credit
enhancement is provided by the junior tranche, to which IFMR Capital
subscribed. This transaction structure is designed to align the interests of
the originator and structurer with the interests of end investors.

"This transaction has allowed Equitas to access funding at a rate
significantly lower than its average cost of funds," said Sucharita
Mukherjee, CEO of IFMR Capital. "It also sets a new benchmark for other
microfinance institutions that have robust systems and high levels of
transparency."

As the market develops for micro-loan backed securities, more
microfinance institutions will be able to access mainstream capital markets.
This will allow them to deliver more-affordable financial services to clients
who have traditionally been excluded from the financial system.

About IFMR Capital

IFMR Capital is a non-banking finance company based in Chennai, whose
mission is to provide efficient and reliable access to capital for
institutions that impact low-income households. IFMR Capital acts as a
bridge to mainstream capital markets for under-served sectors such as
microfinance, small enterprise finance, and agri-commodity backed financing.

About Equitas

Equitas Micro Finance India (Pvt) Ltd aims to extend micro credit to
people who are otherwise unable to access finance from the mainstream
banking channels. Equitas commenced business in December 2007 with the
objective of making available finance at reasonable cost and in
a transparent manner to women who are engaged in micro enterprise activities.
Equitas has 98 branches with portfolio outstanding of Rs 4,304.7 million as
on September 30, 2009.

For press queries, please contact: Susmitha Chakkungal
(Susmitha.Chakkungal@ifmr.co.in), +91-90030-62231

For press queries, please contact: Susmitha Chakkungal (Susmitha.Chakkungal at ifmr.co.in), +91-90030-62231