“The IFMR Capital’s multi-originator securitisation (MOSEC) allows small and medium sized microfinance institutions(MFIs) to combine their microloan portfolios in a single pool to achieve the required critical size.”

1. “MULTI ORIGINATOR SECURITIZATION”
MOSECTM
“The IFMR Capital’s multi-originator securitisation
(MOSECTM) allows small and medium sized MFIs to combine
their microloan portfolios in a single pool to achieve the
required critical size.”
By:
Abhinav Sood

2. Smaller MFIs find it difficult to provide a critical
size portfolio from single-originator securitisation
Small MFIs (assets< 1bn) accounted for less
than 15% of the funds raised
During FY 2011-12, Indian MFIs raised more than
INR22bn through securitisation transactions
FACTS

3. More than 40% of households do not have an access to financial
services from formal channels (Roy,2011)
Microfinance Institutions (MFIs) provide a gamut of financial services
to low-income households and play an important role in financial
inclusion (Sane & Thomas, 2011)
Indian MFIs have traditionally relied on banks and development
financial institutions (DFIs) for their funding requirements (Stieber,
2007)
MICROFINANCE INSTITUTIONS (MFIs)

4. IFMR CAPITAL
Founded in 2008 and
headquartered in
Chennai, Tamil Nadu
is part of the IFMR
Trust group of
companies, which were
specifically created to
drive financial
inclusion in India
connects high quality
Originators impacting
financially excluded
households and
businesses, such as

5. IFMR Capital’s MosecTM
 The MosecTM structure is an example of IFMR Capital’s
pioneering work towards enabling financial inclusion and capital
market access to small, high-quality originators.
 From the first transaction closed in January, 2010, it has
 structured, arranged and invested in 22 MosecTM transactions
 providing access to more than INR 800crores of financing to
originators
 serving low-income households across over 20 states and 300
districts.

6. MOSECTM
MosecTM is a Multi-Originator
Securitisation transaction ,
where
portfolios of
multiple MFIs are
combined
A unique structure is then designed so as to
fit the requirements of different investors
from the point of view of liquidity, return,
risk, tenor and ratings
securities are issued
backed by the
receivables from
these portfolios.

7. MOSECTM
 MosecTM transactions are designed to ensure that
incentives of all parties to the transaction are well-aligned
 As a servicer, the originator contributes the first-loss in
the transaction
 As structurer and arranger, IFMR Capital invests in the
subordinated tranche in turn signalling to investors its
confidence and commitment to this asset class
 IFMR Capital has helped in creating capital markets’
appetite for investments in microfinance, through its role
as a subordinate investor

8. MOSEC 1
First ever multi-generator
microfinance securitisation in
India
Four participating MFIs
Avg. size of total loan assets –
INR330mn (CRISIL, 2010)

9. SECURITIES
 are backed by cash flows from the pool serviced by the
originating MFIs
 structured into ‘tranches’ based on default risk
 Senior tranches – first to be paid off
 Junior tranches – subordinate in nature, get paid only when
Senior tranche in fully repaid
 The junior tranche provides additional credit enhancements to the
Senior tranche
 To ensure incentive alignment, IFMR Capital invests in the Junior
tranche of all transactions structured and arranged by it

10.  via IFMR Capital multi-originator securitisation
(MosecTM) structure:
• Small and medium originators combine loan
pools
• Attain a critical portfolio size
• Enhance diversification
• Reduce overall risk of the transaction

11. Diversification across Servicer
 Pools from multiple originators are combined and each
contributor acts as a servicer to its securitised pool
 Allows investors in MosecTM transaction to diversify
across multiple originators-cum-servicers
 Pool size per originator is a small portion of total
transaction size
 Diversification across servicer reduces the overall servicer
risk of the transaction

12. Diversification across Geography
 Typically small MFIs have regional focus limited to certain
geographies
 MosecTM transactions
offer high degree of geographic diversification in
portfolio
Allows investors to reduce geographical concentration
risk
Allows regional originators to focus on operational
efficiencies
 Diversifying across states and districts helps to reduce
political and event risks in a transaction