ADB, Northern Arc Sign Loan to Support Microfinance Borrowers and MSMEs in India
NEW DELHI, INDIA — The Asian Development Bank (ADB) signed a $40 million loan (in Indian rupee equivalent) to Northern Arc Capital Limited (NACL) to support the livelihoods of microfinance borrowers and micro, small, and medium-sized enterprises (MSMEs) in India.
The loan is 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 in the country’s informal economy, especially among 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. “This project will provide additional support for the Government of India’s ongoing efforts to kickstart credit flow to this segment of the economy.”
“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,” said NACL Chief Operating Officer Bama Balakrishnan. “The funding will help us design new debt product solutions for clients. We will also utilize the investment as a catalyst to attract other investors into transactions that we structure and execute. “
NACL is a pioneer in the financial sector in India. It 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 securitization, 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.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.