India's Finova gets $55m in equity, debt funding

This is Sequoia’s fourth investment in the company since 2017, according to AVCJ Research, including a $15 million round last year alongside Faering. It brings total funding to date to more than $75 million.

Finova targets micro, small and medium-sized enterprises (MSME) and related service providers in small towns and rural areas, assessing creditworthiness by analyzing informal documentation and borrowers’ cash flows using proprietary software. The company is said to have 11,000 micro-entrepreneurs and semi-skilled professionals as customers and INR4.6 billion ($62 million) under management.

There are about 30 million MSMEs in India, largely taking the form of relatively unorganized mom-and-pop neighborhood stores, known locally as kirana. This sector represents about 8% of national GDP, 45% of manufacturing output, 40% of the exports.

Efforts to facilitate MSME credit checks have been supported by a government push to improve the access and scope of fintech-ready datasets. This has entailed various tax number and voter identity registries, rules that formalize previously untraceable commercial transactions, and financial digitization initiatives such as banknote demonetization.

Sequoia India estimates the country has a $380 billion credit gap in this space. The Bengaluru-based firm has made at least three other MSME-focused investments around the broader region in recent weeks with early-stage rounds for India’s Khatabook, Bangladesh’s ShopUp, and Indonesia’s BukuKas.

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• Topics
• South Asia
• Financials
• Early-stage
• Credit
• India
• Sequoia Capital
• SME
• Financial Services
• NBFCs