Investment firm SAIF Partners and global non-profit organisation that supports microfinance institutions Accion, through its fund Venture Lab, have co-invested an undisclosed amount in Delhi-based non-banking finance company (NBFC) Aye Finance, according to a press release.
Aye Finance offers loans to micro enterprises with investments in plants and machinery of less than Rs 25 lakh and services enterprises with investments not exceeding Rs 10 lakh.
"The 40 million organised micro-businesses are the fastest growing industrial segment, nourished by the aspirations of the Indian working classes. We offer the much-needed loans and financing to micro-businesses through our insightful, segmented origination processes. Our use of new-age mobile and cloud computing lowers the delivery cost and our understanding of industry segments continue to attract a rapidly growing and loyal customer base," said Sanjay Sharma, MD, Aye Finance Pvt Ltd.
Aye Finance was founded by two former executives of microfinance institution Ujjivan Financial Services— Sharma and Vikram Jetley. Prior to this, Sharma was COO of Ujjivan while Jetley was responsible for leading the microlender’s business in the north region and individual lending across India. Sharma is an alumnus of IIT Bombay and IIM Bangalore, while Jetley is a management graduate from FORE School of Management, Delhi.
According to a report by Intellecap and IFC, the debt funding gap for MSMEs in India is estimated to be $198 billion and is increasing at 11 per cent per year. By formalising the lending process and offering secured loans as low as $1,000 at market rates, Aye Finance seeks to address an important need gap.
"Aye Finance will address that 'missing middle,' providing borrowers with the capital that all businesses need, no matter their size. Ultimately, this access to credit will help more than the MSMEs – it will also benefit the clients and employees who rely on these entrepreneurs and the local economies that grow along with successful enterprises," said Accion’s president and CEO Michael Schlein.
Accion is a global non-profit organisation and has helped build 64 microfinance institutions in 32 countries since its inception.
Last August it co-invested in housing finance provider Shubham Housing Development Finance Company.
In the last six months, Aye Finance has opened four branches and has already provided finance to over 300 micro businesses.
Last year in April, early stage impact investment firm Contrarian Drishti Partners, along with its founder Somak Ghosh, invested an undisclosed amount in the NBFC.
"By getting to know these businesses that 'cluster' together in specific neighbourhoods or districts in urban areas, we believe Aye can uniquely acquire and assess customers in a low cost manner that mainstream financial institutions have so far found uneconomical. This is a subtle but powerful innovation that will transform the approach to small businesses' finance," said Vishal Sood, MD, SAIF partners.
SAIF Partners, a leading venture capital firm with over $4 billion under management, provides seed, early, and growth stage capital for emerging companies in India and China. It has backed companies like MakeMyTrip, JustDial, PayTM, BookMyShow and Urbanladder in the country.
(Edited by Joby Puthuparampil Johnson)