Ex-Ante Evaluation
Private Sector Investment and Finance Division,
Private Sector Partnership and Finance Department,
JICA
1．Name of the ProjectCountry: Republic of India
Project: Women’s financial inclusion facility (under the “Facility for Accelerating
Financial Inclusion in Asia”)
Loan Agreement: August 25, 2021
Borrower: Northern Arc Capital Limited
2．Background and Necessity of the Project(1) Current State and Issues of the women’s financial inclusion in India
India's overall score on the Gender Gap Index, which measures gender inequality,
is ranked 112th out of 153 countries, indicating that the gender gap is extremelylarge. In particular, India ranks 149th in terms of opportunities to participate ineconomic activities, a significant deterioration from 110th in 2006, and the gender gap
in terms of economic advancement is widening. One of the factors contributing to thissituation is the lack of access to finance for women, with over 40% of the country'sfemale population (approximately 280 million people) without access to finance, andonly just over 10% of women-owned micro, small and medium enterprises (MSMEs)
receiving finance from formal financial institutions (approximately 30% of all MSMEs)
and the financing gap faced by women MSMEs is estimated at USD 20.52 billion. Inaddition, the impact of the spread of the COVID-19 has been particularly severe in theshock-vulnerable segments of the population, and support is needed more than everfor women who were already in a precarious situation before the outbreak of theCOVID-19. The Government of India has also identified improving women's access tofinance as one of the priority issues to be addressed in the National Policy for Women
being drafted by the Ministry of Women and Child Development.
Non-Bank Finance Companies (NBFCs), which have a large number of customers
in rural areas as well, play a major role in improving women's access to finance. The
role of NBFCs is significant and is expected to increase in the future. There are 9,659
NBFCs registered with the Reserve Bank of India, accounting for about 17% of India's
total credit, with microfinance playing a particularly important role in improving women's
access to finance (85% women customers), with about 67% of microfinance institutions
being NBFCs. On the other hand, the default of a major NBFC in 2018 increased therisk of credit and liquidity crises in the NBFC sector, which has increased NBFCs'
funding costs, and in addition, the country's macroeconomic downturn due to the1pandemic of COVID-19 have worsened the funding environment even for the best
NBFCs. Individual and MSME lending by NBFCs, such as microfinance and SME
lending, as well as housing loans, are more vulnerable to the deteriorating funding
environment due to their relatively higher risk profile, and the NBFC sector has been
unable to meet the huge and underserved financing needs of women while expanding
its business. There is a strong need to support the NBFC sector in securing stable
funding (longer maturities and diversification of funding sources) in order to expand its
business.
The project aims to improve women's access to finance in the country through support
to Northern Arc Capital Limited ('NAC'), which is working to diversify funding sources
for the NBFC sector, and is in line with the sector's challenges and the Government ofIndia's policy.
(2) Japan's and JICA's Policy for the women’s financial inclusion in India and thePriority of the ProjectJapan's Country Assistance Policy for India (March 2016) states that the country will
support sustainable and inclusive growth as pillar (3) of its priority areas, and will workon programmes to increase the income of the poor, and in the Points to Consider, thecountry will pay attention to gender equality in order to achieve an equal and inclusive
society. In addition, JICA pays attention to gender equality to achieve an equal andinclusive society. JICA also promotes gender equality and women's empowerment asa whole, and is working to promote women's economic empowerment as one of its
priorities. Under the 2X Challenge: Financing for Women initiative, in which a newphase of implementation until 2022 was announced at the 2021 G7 Cornwall Summit(UK) with Japan's participation, development finance institutions in G7 countries will
promote private sector investment by priming their own funding. This project is in linewith this policy. In addition, in January 2021, JICA has provided Yen Loan to India "TheCOVID-19 Crisis Response Support Loan for Social Protection" for the purpose of
reducing and mitigating the socio-economic impact of the coronavirus crisis in thecountry, and this project will expand financial assistance to women who have been
severely affected by the COVID-19. The project is also positioned as support that
contributes to the realisation of human security, which is a priority issue for JICA.
3．Project Description(1) Project Objective
The project will improve women's access to finance in India by providing loans
through NAC to non-bank financial institutions and others that provide financial
services to women in India, thereby contributing to the reduction of gender disparities
and sustainable economic growth in the country.

2(2) Project Site/Target Area
All of India (except disputed territories)(3) Project Component
Funds will be used to finance loans by NAC to NBFCs providing financial services towomen, with NAC lending only to NBFCs with sub-lending operations that meet the2x challenge eligibility criteria (as of June 2021).
(4) Environmental and Social Consideration/Gender Category① Environmental and Social Considerationa) Category: Cb) Reason for Categorization:
It is judged under the JICA Environmental and Social Considerations Guidelines
promulgated in April 2010 that the undesirable effects of the Project on theenvironment are minimized② Gender Category:■GI(P) (Gender Informed(Principal))<Reason for Categorization> Because the project aims to improve women's
access to finance.
(5) Other Important Issues
None
4. Targeted Outcomes(1) Qualitative Effects
index

standard value as oftarget value as of 2025

September 2020
Number of female clients
supported by NAC

3,839,401 people

5,712,280 people

Number of female

Confirmed upon

Value at subproject

customers of subleased
NBFCs

subproject approvalcompletion increased
since approval

Outstanding loans towomen customers ofNBFCs to which they

Confirmed upon
subproject approval

Value at subprojectcompletion increased
since approval

sublet(2) Quantitative Effects
Improving women's access to finance35. Lessons Learned from Past Projects(1) Results of Evaluation of Similar Projects
In the results of the ex-post evaluation of the Yen Loan to India "Support for SMEs
and Energy Saving" (including the Three Step Loan, which is partly the same as thisproject), lessons were learnt that going through financial institutions rooted in eachregion may have led to more efficient and effective financing by utilising a wider
network than if the implementing agency had implemented the project on its own.
The lessons learnt are that this may have led to more efficient and effective financing
through a wider network than the implementing institution alone.
(2) Lessons for the Project
The project confirms that NAC has sufficient screening and risk management
capacity at portfolio and individual counterparty level when selecting financial
institutions rooted in each region as counterparties.
6. Evaluation Results
The Project is in line with India's development challenges, development policies
and the assistance policy and analysis of Japan and JICA, and will contribute to thereduction of gender disparities and sustainable economic growth in India bypromoting financial inclusion of women. The project contributes to SDGs Goal 1(poverty reduction), Goal 5 (gender equality), Goal 8 (improved access to financialservices) and Goal 17 (partnerships).
7. Plan for Future Evaluation(1) Indicators to be used
As shown in Section 4. (1) above(2) Timing
Future evaluation is scheduled for Japanese FY2025.
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