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.

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