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India, Shriram Transport Finance

Supporting an innovative financing initiative which enables Indian owner-drivers to purchase affordable trucks

Thanks to an innovative finance scheme in India, thousands of poor truck owner-drivers can now afford to purchase their own vehicles, generating income for themselves and their families. This not only benefits the drivers, but increases the number of safer and more environmentally friendly trucks on the country’s roads.


At present around 65% of India’s freight traffic is carried by road, the majority of it by small operators. With their unstable incomes and lack of credit record, they find it difficult to access India’s conventional banking system.

Shriram Transportation – India’s largest financier of commercial vehicles – provides affordable loans to individuals who cannot raise finance from commercial banks and would otherwise depend upon unregulated and high-cost money-lenders. Tens of thousands of low-income truck drivers have accessed finance to purchase their own vehicles, transitioning from employee to owner/employer.

However, credit is in short supply in India, and Shriram struggled to raise funds to able to provide such small loans at affordable rates. PIDG company GuarantCo was able to step in, offering a ground-breaking credit enhancement product to assist in meeting Shriram's funding requirements.


One of Shriram’s key funding strategies – a product familiar in more developed countries – is securitisation. This involves gathering many small truck loans into a large pool that can attract funding from established banks and other financial institutions. However, done inefficiently the cost of finance for Shriram would rise, and in turn be passed on to the small truck owners, with the risk that the loans become unaffordable. To avoid this, Shriram required access to affordable mezzanine credit guarantees that would back the loans it makes – for which there was no investor appetite in India in 2008.

In 2008 GuarantCo and FMO partially guaranteed Deutsche Bank to provide affordable mezzanine funding to Shriram. The guarantee was cancelled before maturity (in March 2012) as Shriram’s excellent performance allowed the credit enhancement guarantees to be released early.

In 2010, GuarantCo, again jointly with FMO, provided support for Tier II Capital raising by Shriram Transport.


GuarantCo’s and FMO’s intervention illustrated the commercial viability of mezzanine guarantees in the embryonic Indian securitisation market, and allowed the viability of such a credit enhancement product to be established. Shriram is now better able to access similar guarantees from the domestic commercial market – because the market now recognises the viability of these loans, and has stepped in to service Shriram’s needs at a lower cost. With this guarantee product, GuarantCo has helped the development of India’s financial markets, and it continues to work with Shriram and other similar companies on ways to continue such development.


Private Sector investment

Phase 1 (2008)

Phase 2 (2010)




Fiscal benefits

64,000 affordable loans to small scale truck owner-operators during Phase 1.

GuarantCo and FMO’s innovative credit enhancement product helped demonstrate Shriram’s viability; the domestic commercial market is now better able to service Shriram’s needs with similar products.

Job Creation

Phase 1 (2008)

Phase 2 (2010)


128,000 people

32,000 people

Additional Benefits

Each truck provides a livelihood to an average of two persons per vehicle.

The Shriram group is an Indian corporate leader in HIV awareness and reduction programmes; the Shriram Transport business delivers health and education initiatives targeting truck drivers (a high risk group).

Increases the number of safer and more environmentally friendly trucks on Indian roads.