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.
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, the 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.”