A Closer Look at Consolidation: The Sonata-Jeevika Acquisition
This paper takes an in-depth look at the first acquisition in Indian microfinance, Sonata Finance's purchase of Jeevika Livelihood Support Organization's microfinance operations in August 2007. As the sector matures, and funding constraints continue to hit the Indian microfinance industry in 2009, there might be an increase in consolidation across the sector. Acquisitions can create a base for further expansion for private microfinance practitioners. For a non-profit MFI struggling to find funding, linking up with a like-minded NBFC could reduce liquidity constraints and allow the team to concentrate on service and operations. The paper also highlights some problems that consolidation could throw up, such as integration of operations and aligning the missions of the two entities. Finally, Bellwether's role in Sonata's acquisition of Jeevika's loan portfolio demonstrates that there can be a real role for private equity in acquisitions within the Indian microfinance sector.