“The pandemic has had a deep impact on the country’s informal economy, especially on microfinance borrowers and MSMEs. NACL’s unique business model of working with the most impacted segment of MSMEs and financial institutions makes them an ideal partner,” said ADB’s private sector operations department director Christine Engstrom.
The Asian Development Bank (ADB) has signed a $40-million loan (in rupee equivalent) to Northern Arc Capital (NACL) to support the livelihoods of microfinance borrowers and micro, small, and medium-sized enterprises (MSMEs) in India.
The loan is being disbursed to NACL as part of ADB’s ongoing Covid-19 response. NACL will on-lend the loan proceeds and provide guarantees to financial institutions and individual borrowers. NACL will also on-lend to affordable housing finance companies.
“The pandemic has had a deep impact on the country’s informal economy, especially on microfinance borrowers and MSMEs. NACL’s unique business model of working with the most impacted segment of MSMEs and financial institutions makes them an ideal partner,” said ADB’s private sector operations department director Christine Engstrom.
Bama Balakrishnan, NACL chief operating officer, said, “NACL and ADB have a long-standing association and our mission is to serve the underbanked, especially during this time of crisis. This transaction is significant as it will enable us to support small and mid-sized NBFCs across microfinance, small business loans and affordable housing finance, which are facing difficulties in attracting debt funding from investors. The funding will help us design new debt product solutions for clients. We will also utilise the investment as a catalyst to attract other investors into transactions that we structure and execute.”
NACL connects NBFCs, microfinance institutions and housing finance companies to mainstream financers for debt fundraising through a variety of products, such as partial risk guarantees for capital markets issuances, multi-originator securitisation, and pooled loan/bond issuance. This enables smaller and mid-sized NBFCs to deepen their presence and improve access to financial services to millions of financially excluded households in India. Its innovative solutions have enabled around 250 partners, serving nearly 60 million customers across 680 districts across India, access funding from reputable investors.
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