Diversified financial services platform, Northern Arc Capital, has concluded a $25 Mn External Commercial Borrowing (ECB) transaction with Proparco. For the uninitiated, ECBs are loans in India made by non-resident lenders in foreign currency to Indian borrowers.
Proparco is the private sector financing subsidiary of Agence Française de Développement Group (AFD Group). The AFD Group is a public financial institution that is owned by the French Government and implements France’s policy on international development and solidarity by supporting projects.
Northern Arc, on the other hand, provides credit to MSMEs, households, financial institutions, and emerging businesses. Technology and data, it provides a set of solutions to cater to the credit requirements of emerging segments and small businesses. Its business model is diversified across offerings, sectors, products, geographies, and borrower segments.
It said, by leveraging its deep data insights and scorecards, Northern Arc has cumulatively raised over INR One Trillion in funds for its clients since the inception of its platform in 2009. It is backed by marquee equity investors including Sumitomo Mitsui Banking Corporation (the world’s fourteenth largest bank), LeapFrog, IIFL, Accion, and Augusta Investments (known as Affirma Capital), Dvara Trust, and Eight Roads (the proprietary arm of Fidelity).
According to the company, Northern Arc will use the proceeds to serve MSMEs and women entrepreneurs, especially among the next billion. The capital will be used to provide differentiated credit solutions to these customers both directly and through partners.
Northern Arc said the funding from Proparco will improve access to financing for around 21,000 micro-borrowers and MSMEs in India.
Northern Arc serves these critical customer segments through its digital n-POS platform, which helps NBFCs, fintech, digital lenders, and investors co-lend to retail borrowers. The platform provides fully integrated systems for partners and investors, with real-time KYC validation and instant disbursement features.
It also provides investors access to the NAC score, a credit score that is based on the assessment of a borrower’s financial strength and propensity to repay, that has been developed by Northern Arc.
“We are very pleased to partner with an institution like Northern Arc which has been working for Financial Inclusion in India for more than a decade. The Company’s mission to enable access to finance for the underbanked in an efficient, scalable, and reliable way is in line with Proparco’s Financial Inclusion strategy in India. Northern Arc’s role as a bridge between originators serving financially excluded customer segments and debt capital market with the use of technology creates multiplier impacts. ” said Diane Jegam, Regional Director – South Asia, Proparco.
Commenting on the ECB Transaction, Ashish Mehrotra, MD & CEO of Northern Arc Capital, said, “This transaction is proof of Northern Arc’s ability to forge partnerships with and attract funding from reputed global DFIs. We are excited to partner with Proparco to cater to the diverse financial requirements of the next billion and emerging segments. The usage of proceeds will be towards enabling the next billion customers to access financial services directly through digital channels as well as serving them through partnerships.”
Over the last three years, Northern Arc has raised funds from a spectrum of reputed international investors including USDFC, ADB, FMO, Calvert Impact Capital, and JICA.