Indian alternative finance provider wins $1m investment

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Non-banking lender Aye Finance has won a $1 million investment from SAIF Partners and Accion to supply funding to micro, small, and medium enterprises (MSME’s) in India.

Even profitable MSME’s often find themselves locked out of both traditional microfinance and commercial capital. The debt gap for MSMEs in India is estimated to be $198 billion, and is increasing at 11 percent per year, according to a report by Intellecap and the International Finance Corporation. Aye Finance addresses this need by formalizing the lending process and offering secured loans as low as $1,000 at market rates.

Six-month-old Aye Finance has financed over 300 micro businesses in a number of industries including shoemaking, garments, textiles, leather, auto components, and others. The company has four branches in northern India, where MSME’s struggle to access organised funding.

“MSMEs represent a highly underserved ‘missing middle’ market in India,” said Accion President and CEO Michael Schlein. “Too small for commercial finance and too large for traditional microfinance, these entrepreneurs must make do without the working capital they need to expand their businesses, buy bulk materials, or hire new employees.”

“Aye Finance will address that ‘missing middle,’ providing borrowers with the capital that all businesses need, no matter their size,” he added. “Ultimately, this access to credit will help more than the MSMEs – it will also benefit the clients and employees who rely on these entrepreneurs, and the local economies that grow along with successful enterprises.”

Accion made its investment through Venture Lab, a $10 million initiative dedicated to providing seed capital and management support to innovative startups expanding financial access to the poor and underserved.

Last week SAIF Partners and Sequioa Capital made a $13 million investment in Capital Float, another alternative finance startup. Capital Float raised $2 million from Aspada and $1 million from SAIF Partners last year.

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