Alternative Financing for Indian MFIs

Unlike traditional methods of funding (debt and equity), MFIs can use alternative financing measures that are not reflected on their balance sheets, and are thus referred to as “Off-Balance Sheet Financing” (OBSF). Portfolio buy-out, the ‘partnership model’ and securitisation are some examples of OBSF. Though not evident in the financial statements, these unaccounted assets and liabilities have real cash-flow consequences. This Focus Note analyses different forms of alternative financing, their advantages, disadvantages and feasibility issues with regard to implementation for Indian MFIs.