Northern Arc, one of India’s leading digital debt platforms, today announced that it has received USD 25mln debt financing from FMO, one of the world’s leading impact investors. This is the fourth transaction in a series of large-scale investments made by global development financial institutions and impact investors in Northern Arc in FY 21. In the last 12 months, Northern Arc has attracted debt financing from an array of global DFIs and impact investors such as US International Development Finance Corporation, Asian Development Bank, and Calvert Impact Capital.
The funds raised so far have been instrumental in enabling Northern Arc to provide finance to micro-loan borrowers and SMEs in India, who were severely impacted by the pandemic in the last one year. The latest investment from FMO will be utilised for on-lending to financial institutions that focus on women borrowers, micro-entrepreneurs and SMEs.
Microfinance borrowers in both urban and rural areas will be key beneficiaries of FMO’s investment. A sizable part of the fund deployment will be towards MFIs whose loans are primarily targeted at women. The loans will play an important role in providing credit to the under-banked households and small businesses, who have been worst hit due to the crisis. Similarly, high quality NBFCs, which lend to micro-entrepreneurs and SMEs with emphasis on small ticket sizes will benefit from the facility too.
Announcing this landmark deal, Bama Balakrishnan, COO, Northern Arc said, “Defined by an engagement spanning over eight years, Northern Arc and FMO are natural partners in furthering the cause of financial inclusion in India. With a shared philosophy of catering to borrowers hard hit by Covid-19 pandemic, the facility from FMO is timely and would specifically be used for lending to women, micro-entrepreneurs and SMEs.”
Over the last decade, Northern Arc has been instrumental in strengthening financial inclusion in India and has been at the forefront in addressing the credit requirements of the under-banked in India. As of March 31, 2021, the company has enabled significant debt financing of around INR 95,000 crore for its clients across microfinance, small business finance, affordable housing finance, vehicle finance, agriculture finance, consumer finance, fintech and mid-market corporates. Over 140 reputed investors (banks, asset managers, insurance companies, DFIs, private wealth etc.) have invested in transactions structured and arranged by Northern Arc Capital. The latest investment from FMO is a strong vote of confidence in the resilience of Northern Arc’s business model and its ability to serve clients through different phases of the economic cycle. It is also a testament to the underwriting capability of Northern Arc, which has been built through deep understanding of its sectors, a large repository of data and proprietary analytics models.
Huib-Jan de Ruijter, Chief Investment Officer (a.i.), FMO said, “We are very pleased to work again with our long-term partner Northern Arc. Northern Arc acts as catalyst to NBFCs without effective access to capital markets. The new transaction fits with FMO’s ambition to accelerate financial inclusion with a focus towards women-run businesses and (M)SMEs. With this transaction, FMO supports an excellent partner who continues to service its clients during these challenging COVID-19 times.”
About Northern Arc:
Northern Arc Capital Limited (formerly IFMR Capital Finance Limited) is a leading digital debt platform that addresses the credit requirements of the under-banked in India. These include financial institutions, mid-market enterprises, small businesses and individuals. Through its deep credit-insights, varied risk-models, structuring capability and agile technology, Northern Arc offers suitable debt products that meet the requirements of borrowers and lenders.
Northern Arc acts as a critical bridge between emerging sectors and reputed investors, covering the wide gamut of credit opportunities through innovative products and structures. It has developed several innovative structures in the Indian market including the Multi-Originator Securitisation (MosecTM), the Covered Bond, the Pooled Loan/Bond Issuance and the Single Issuer Partially Credit Enhanced (SPiCETM) Bond.
Since inception, Northern Arc has enabled around INR 95,000 crore of financing to its partner institutions through reputed domestic and global investors. Northern Arc’s exposure is spread across over 570 districts in 35 states and union territories in India, as on March 31, 2021. It is backed by marquee private equity players like Leapfrog, IIFL, Accion, Affirma Capital (erstwhile Standard Chartered Private Equity), Dvara Trust, Eight Roads and Sumitumo Mitsui Banking Corporation.