CapitalG leads $21.8m round for India's Aye Finance

Existing investors SAIF Partners and LGT Impact Ventures, the impact investment arm of LGT Group, also participated in the funding round, according to a statement. The new capital will be used to improve Aye’s technology platform and to grow its business.

As a registered non-banking finance company (NBFC), Aye provides working capital and business development loans to micro, small and medium-sized enterprises (MSMEs) that are underserved by the traditional finance industry. Recipients must be profitable businesses with INR1-10 million in annual turnover and an operating history of at least three years.

Since its launch in 2013 Aye claims to have provided over 60,000 loans to small business owners across India, with 72 branches in 10 states. Previous funding rounds include a $10 million Series B round in 2016 led by LGT Impact with participation by SAIF and Accion, a global non-profit organization that supports MFIs. The two firms also committed $1 million to Aye in 2015.

India’s traditional banks have largely failed to keep up with the needs of the country’s small business owners for financial services, and NBFCs are seen as the key to bridging this gap. GPs take a variety of routes to gain exposure to the sector; some, like KKR and Everstone, have founded their own NBFCs, while others invest in existing companies.

One common issue facing NBFCs is the difficulty of obtaining proper documentation from borrowers to prove their creditworthiness. Aye, like others in the space, claims to address this problem with proprietary underwriting methodology that uses data analytics to assess credit based on other metrics. Its exact methods have not been disclosed, but other NBFCs use information from social media profiles to supplement traditional sources such as bank statements and credit scores.

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• Topics
• South Asia
• Financials
• Technology
• Expansion
• India
• Financial Services
• NBFCs
• TMT
• Growth capital
• Google
• LGT Capital Partners
• SAIF Partners