Northern Arc Capital, a Chennai-based non-banking finance company (NBFC), today announced that it has received ₹40 crore of debt financing from Kotak Mahindra Bank, one of the country’s largest private banks. The proceeds from this investment will be used to lend to retail households and microentrepreneurs with a household monthly income of less than ₹25,000.
The debt-financing platform has been on a fundraising spree over the last few months. Last week, Northern Arc raised $25 million in debt from Dutch impact investor FMO. In March, the NBFC raised $10 million debt funding from US-based Calvert Impact Capital. Over the last year, it also attracted debt financing from an array of global DFIs and impacted investors such as US International Development Finance Corporation (DFC) and Asian Development Bank (ADB) .
In a press release, the debt-financing platform said that the deal is the latest in a series of sanctions received by Northern Arc from Development Finance Institutions as a recognition of its critical role in enabling debt for underbanked retail households, small businesses, and financial institutions.
“The transaction is a unique result of our structuring & product development capabilities combining with our extensive investor reach to help raise funding for our own balance sheet,” Bama Balakrishnan, COO, Northern Arc, said, adding, “While we usually adopt this approach to benefit smaller partner institutions, this deal is proof that it can help larger and higher rated NBFCs raise debt at better pricing.”
The current facility is backed by partial guarantees from The Michael & Susan Dell Foundation (MSDF) and The Rockefeller Foundation. The transaction is part of the Covid-response package of both these impact institutions, that aims to alleviate the economic and social impact of the pandemic.
“The Covid Liquidity Fund demonstrates the power of catalytic capital to harness effective solutions for Indian micro-entrepreneurs who are facing critical challenges...It will cover the working capital needs of thousands of women entrepreneurs, along with mini-grid companies and micro-enterprises supported by Smart Power India,” Deepali Khanna, Managing Director of Asia Regional Office at The Rockefeller Foundation was quoted in the release.