GuarantCo collaborates with Axis Bank to provide INR 3.25 billion (c. USD 40 million) to Northern Arc ensuring increased access to finance for underbanked borrowers in India

  • Date written
  • March, 2023

GuarantCo, part of the Private Infrastructure Development Group (PIDG), collaborates with Axis Bank, India’s third largest private sector bank, to provide Northern Arc Capital with INR 3.25 billion (c. USD 40 million) to ensure increased access to finance for underbanked borrowers in India.

Northern Arc

GuarantCo’s transaction will support Northern Arc to sustainably grow its loan portfolio within specific sectors such as microfinance, small business enterprises, commercial vehicle financing, affordable housing and education.

The proceeds, mobilised by GuarantCo, will be leveraged around five times over the five-year period of the facility, multiplying the number of borrowers benefiting from this initiative. Therefore, an estimated 200,000 low income and rural borrowers in India will ultimately benefit from an increased  access to finance. Given that the Northern Arc will exclusively focus on female borrowers, it is expected that at least 50 percent of the beneficiaries will be women. Additionally, a large number of small and medium-size enterprises will benefit through increased access to finance via small business loans.

GuarantCo’s and Axis Bank’s credit facility to Northern Arc will in turn be passed through and benefit Northern Arc’s borrowers. The transaction demonstrates the benefits of offering longer tenors to Non-Banking Finance Companies which can be replicated in the future to benefit the local people and the economy.

Over the last decade, Northern Arc has positively impacted the lives of over 66 million underserved and unbanked customers. The company uses proprietary technology and data analytics platforms to enable credit access to underserved households and businesses and has facilitated over 8 million loans to retail customers, individuals, households and small businesses so far.

Layth Al-Falaki, CEO of GuarantCo, said:

“We are happy to partner with Northern Arc and Axis Bank to develop and execute an innovative finance solution to help Northern Arc grow its loan portfolio. The easier access to finance and longer terms offered to borrowers will not only benefit the local economy but also improve the lives of an estimated 200,000 people in India. The transaction will make a direct contribution to SDG 8.10: Strengthen the capacity of domestic financial institutions to expand access to banking and SDG 5.5: financial services with a focus on providing women equal opportunities.”

Ashish Mehrotra, MD and CEO of Northern Arc Capital, said:

“We are excited to partner with GuarantCo and Axis Bank and build on our track record of delivering innovative credit solutions for the underserved. Together, we aim to expand access to credit to thousands of underserved households and businesses in India, especially women, and help create more entrepreneurship and employment opportunities. With our combined expertise, we are confident of making a meaningful impact and drive financial inclusion in India.”

Layth Al-Falaki, CEO GuarantCo and Ashish Mehrotra, CEO & MD, Northern Arc Capital

NOTES TO EDITORS

In May 2022, GuarantCo and Axis Bank, started their partnership by signing a framework guarantee agreement to provide the third largest bank in India with an USD 200 million INR equivalent guarantee, allowing mobilisation of funds between USD 300 and 400 million in local currency to finance the e-mobility ecosystem in India

About GuarantCo

GuarantCo mobilises private sector local currency investment for infrastructure projects and supports the development of financial markets in lower income countries across Africa and Asia. GuarantCo is part of the Private Infrastructure Development Group (PIDG) and is funded by the governments of the United Kingdom, Switzerland, Australia and Sweden, through the PIDG Trust, the Netherlands, through FMO and the PIDG Trust, France through a stand-by facility and Global Affairs Canada through a repayable facility. GuarantCo is rated AA- by Fitch and A1 by Moody’s. GuarantCo’s activities are managed by GuarantCo Management Company which is part of Cardano Development.  www.guarantco.com

About PIDG

The Private Infrastructure Development Group (PIDG) is an innovative infrastructure project developer and investor which mobilises private investment in sustainable and inclusive infrastructure in sub-Saharan Africa and south and south-east Asia. PIDG investments promote socio-economic development within a just transition to net zero emissions, combat poverty and contribute to the Sustainable Development Goals (SDGs). PIDG delivers its ambition in line with its values of opportunity, accountability, safety, integrity and impact. Since 2002, PIDG has supported 190 infrastructure projects to financial close which provided an estimated 220 million people with access to new or improved infrastructure. PIDG is funded by the governments of  the United Kingdom, the Netherlands, Switzerland, Australia, Sweden, Germany and the IFC. www.pidg.org

About Northern Arc Capital

Northern Arc is a diversified financial services platform that provides credit to MSMEs, households, financial institutions and emerging businesses. Through technology and data, it provides a diverse set of solutions to cater to the credit requirements of emerging segments and small businesses. Its business model is diversified across offerings, sectors, products, geographies, and borrower segments. By leveraging its deep data insights & scorecards, Northern Arc has cumulatively raised over INR One Trillion in funds for its clients since inception of its platform in 2009. It is backed by marquee equity investors like Sumitomo Mitsui Banking Corporation (the world’s fourteenth largest bank), LeapFrog, IIFL, Accion, Augusta Investments (known as Affirma Capital), Dvara Trust and Eight Roads (proprietary arm of Fidelity). Along with its asset management subsidiary that manages seven AIFs, the company manages a total AUM of over INR 10,000 crore. It has disbursed a total of over 8 million loans to retail customers across individuals, households, and small businesses. Through the AltiFi platform, it offers fixed income investments to affluent and retail investors. Its exposure is spread across 657 districts in 28 states and 7 Union Territories in India. www.northernarc.com

About Axis Bank

Axis Bank is the third largest private sector bank in India. Axis Bank offers the entire spectrum of services to customer segments covering Large and Mid-Corporates, SME, Agriculture and Retail Businesses. With its 4,849 domestic branches (including extension counters) and 15,674 ATMs across the country as on 31st December 2022, the network of Axis Bank spreads across 2,734 cities and towns, enabling the Bank to reach out to a large cross-section of customers with an array of products and services. The Axis Group includes Axis Mutual Fund, Axis Securities Ltd., Axis Finance, Axis Trustee, Axis Capital, A.TReDS Ltd., Freecharge and Axis Bank Foundation.

For further information on Axis Bank, please refer to the website: www.axisbank.com