2024.03.14
On December 22, the Japan International Cooperation Agency (JICA) signed a loan agreement with L&T Finance Holdings Limited (LFH), a financial institution in the Republic of India, for up to 125 million US dollars to improve financial access in the country’s lagging states(*1) and held the signing ceremony on March 12, 2024 in Mumbai, India. The project was arranged by the Asian Development Bank (ADB) who co-financed for 125 million US dollars.
The rural India is home to about 65% of the country’s total population and widely supports the Indian economy, sustaining about 46% of the national GDP. At the same time, about 90% of its total impoverished population resides in the rural area, where the income growth rate has been decreased further, especially post COVID-19, thus poverty reduction in the area is a pressing issue.
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JICA (left) and CFO of LFH
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Signing Ceremony（LFH, ADB and JICA）
Access to finance for women, micro, small and medium enterprises (MSMEs) and farmers is also a major challenge in the area. For example, more than 90% of all MSMEs owned by women rely on informal financing sources and own financial risks like an unfair debt collection. In addition, about 70% of small-scale farmers do not have a bank account and lacks in access to loans, which makes capital investments to agricultural machines difficult, and hampers increasing productivity. In recent years, the Government of India and the Reserve Bank of India have been promoting lending to socially vulnerable groups nationwide, particularly in the rural areas.
LFH, one of the country's leading financial institutions, promotes lending in the lagging states with leveraging its strengths of nationwide branch office network. This project will address to rural disparities and sustain economic development in the country through LFH’s lending to women-owned businesses, farmers, MSMEs, etc. in the lagging states, thereby contributing to SDGs Goals 1 (No poverty), 5 (Gender equality), 8 (Decent work and economic growth) and 17 (Partnerships for the goal).
Furthermore, this project will contribute to "2X Challenge: Financing for women” (*2), an economic empowerment initiative for women, by the development financial institutions of the G7 nations and others, and at least 40% of this loan amount is allocated to women-owned businesses. The loan is signed as part of the Facility for Accelerating Financial Inclusion (FAFI) (*3), which was established in May 2023.
(*1) Ten states with poverty rates above 10%, namely Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Tripura, Uttar Pradesh and West Bengal.
(*2) “2X Challenge: Financing for Women”: initiative adopted by national development finance institutions, including JICA, at the G7 in June 2018. The initiative aims to mobilize 3 billion US dollars by 2020 for projects that contribute to women's economic empowerment, more than doubling the 7 billion US dollars mobilized. “2X” represents a target to double the volume and impact of investments in women.
(*3) Facility for Accelerating Financial Inclusion is established as one of Japan's contribution initiatives that Japan would contribute to the sustainable development of partner countries through public and private infrastructure investment.
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