Norwegian Microfinance Initiative fund, Incofin-Rural Impulse invest $4.5M in Fusion Microfinance

Norwegian Microfinance Initiative’s (NMI) Frontier Fund, along with existing investor Incofin-Rural Impulse Fund II, put in Rs 25 Crore ($4.5 million) in Delhi-based Fusion Microfinance Pvt Ltd in a Series B round of investment.

The MFI is currently active in north-central India and post the funding, the company will increase its presence in the underserved rural areas of north and central India – namely, in Uttar Pradesh, Madhya Pradesh, Uttarakhand and Delhi.

Fusion started its operations in 2010 – the same year when the Andhra government issued an ordinance to rein in the microfinance institutions in the state. However, the MFI had kick-started its operations by then and raised nearly $1 million from Incofin in June that year.

The company later acquired the microfinance division of Aajeevika (a NGO operating in Delhi). In addition to microfinance, Fusion has also set up the individual lending business in the underserved commercial truck financing space, the company said.

Commenting on the investment, Aditya Bhandari, regional director of Incofin South Asia, said, “Fusion’s resilient management team and an unperturbed clear focus on controlled growth have not only allowed the company to weather the Andhra crisis but also led it to set a strong platform for future growth. Our follow-on investment reinforces the faith in the much-deserving microfinance sector and strong prospects of Fusion taking the leadership position in the north-central geography.”

Incofin’s other portfolio companies include Annapurna Micro Finance Pvt Ltd, Hope MicroCredit Finance India Pvt Ltd, Grameen Financial Services Pvt Ltd and Asomi Finance Pvt Ltd.

“This investment from NMI and our existing partner Incofin reflects their faith in our team, which has shown resilience in the most difficult phase of the Indian microfinance sector,” said Devesh Sachdev, CEO of Fusion Microfinance.

“We are rightly poised to increase our penetration and this investment will allow us to serve more number of poor households in north and central India. We are happy to partner with like-minded investors such as NMI and Incofin, who have a long-term focus and are committed to double bottom line,” he added.

“With the series B round, we are excited to extend our partnership with NMI and Incofin. A new era for microfinance has just begun in India. This is the era where we will see controlled growth, inorganic growth and a positive regulatory framework,” said Fusion COO Ashish Tewari.

Fusion mainly offers group loans, based on the Grameen-JLG (joint liability group) model. The company will also come up with an individual lending model based small ticket vehicle loans, which will help it diversify the revenue streams. At the end of January 2013, Fusion’s gross loan portfolio amounted to Rs 53.8 crore ($10 million). Through its network of 22 branches spread across Uttar Pradesh, Uttarakhand, Madhya Pradesh and Delhi, Fusion serves more than 60,000 borrowers.

“NMI is pleased to partner with Incofin to invest in this fast-growing microfinance institution. The investment into Fusion underscores NMI’s belief in Fusion’s management team and the India market,’’ said Njord Andrewes, investment director at NMI.

NMI is a partnership between the Norwegian public and private sectors that invest in microfinance institutions in developing countries and provide professional assistance & technical support for these MFIs. In the past, the fund invested in Utkarsh Micro Finance Pvt Ltd and Belstar Investment and Finance Pvt Ltd.

(Edited by Sanghamitra Mandal)

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