In order to increase its microfinance reach, HDFC has tied up with SKS Microfinance. HDFC will provide loans aimed at extension and improvement of dwelling units that double up for income-generating activities like eateries, Kirana shops, papad and Agarbathi making.

SKS Microfinance customers with a minimum of three years of credit history will be eligible for these loans. Most of these come from lower income group and do not have any documented source of income.

The largest mortgage lender is providing technology support to SKS and the first tranche of funding would be worth Rs. 10 crore. The loan would help about 1250 members with an average ticket size of Rs 80,000.

The clients can take loans within the range of Rs 50,000 and 1,50,000 with tenure varying between three and five years.

"These loans would be offered as individual mortgage-backed loans instead of group loans," said Suresh Gurumani, CEO and managing director with SKS Microfinance, adding that the MFI charges an interest rate of anywhere between 26-28%.
Renu Karnad, joint MD with HDFC Ltd said they are keen on getting into the microfinance sector. "We hope that this initiative would benefit 1,500-2,000 people in the lower income category," she added.

SKS is planning to set up 100 branches by March 2010. At present, the number of branches spread across 19 states in the country is 1,354.
The microfinance institution had a net profit of Rs 80 crore last financial year and expects a 120% growth this fiscal.