Northern Arc raises US$ 25 million in debt financing from the Dutch development bank (FMO)

 
By Anyway Yotamu
TheHagueand Chennai – Northern Arc, one of India’s leading digital debt platforms, today has announced that it has received US$25million debt financing fron the Dutch entrepreneurial development bank (FMO), one of the world’s leading impact investors.
This is the fourth transaction in a series of large-scale investments made by global development financial institutions and impact investors in Northern Arc in FY 21. In the last 12 months, Northern Arc has attracted debt financing from an array of global DFIs and impact investors such as US International Development Finance Corporation, Asian Development Bank, and Calvert Impact Capital.
 
The funds raised so far have been instrumental in enabling Northern Arc to provide finance to micro-loan borrowers and SMEs in India, who were severely impacted by the pandemic in the last one year. The latest investment from FMO will be utilised for on-lending to financial institutions that focus on women borrowers, micro-entrepreneurs and SMEs.
 
Microfinance borrowers in both urban and rural areas will be key beneficiaries of FMO’s investment. A sizable part of the fund deployment will be towards MFIs whose loans are primarily targeted at women. The loans will play an important role in providing credit to the under-banked households and small businesses, who have been worst hit due to the crisis. Similarly, high quality NBFCs, which lend to micro-entrepreneurs and small to medium Enterprises (SMEs) with emphasis on small ticket sizes will benefit from the facility too.
 
Announcing this landmark deal, COO of Northern Arc,  Bama Balakrishnan said, “Defined by an engagement spanning over eight years, Northern Arc and FMO are natural partners in furthering the cause of financial inclusion in India. With a shared philosophy of catering to borrowers hard hit by Covid-19 pandemic, the facility from FMO is timely and would specifically be used for lending to women, micro-entrepreneurs and SMEs”, said Balakrishnan.
 
Over the last decade, Northern Arc has been instrumental in strengthening financial inclusion in India and has been at the forefront in addressing the credit requirements of the under-banked in India.
As of March 31, 2021, the company has enabled significant debt financing of around INR 95,000 crore for its clients across microfinance, small business finance, affordable housing finance, vehicle finance, agriculture finance, consumer finance, fintech and mid-market corporates.
Over 140 reputed investors (banks, asset managers, insurance companies, DFIs, private wealth etc.) have invested in transactions structured and arranged by Northern Arc Capital. The latest investment from FMO is a strong vote of confidence in the resilience of Northern Arc’s business model and its ability to serve clients through different phases of the economic cycle. It is also a testament to the underwriting capability of Northern Arc, which has been built through deep understanding of its sectors, a large repository of data and proprietary analytics models.
FMO Chief Investment Officer (a.i.),Huib-Jan de Ruijter said, “We are very pleased to work again with our long-term partner Northern Arc. Northern Arc acts as catalyst to NBFCs without effective access to capital markets. The new transaction fits with FMO’s ambition to accelerate financial inclusion with a focus towards women-run businesses and (M)SMEs. With this transaction, FMO supports an excellent partner who continues to service its clients during these challenging COVID-19 times”, said Ruijter.
 
 


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