SAIF, Accion invest in India’s Aye Finance
SAIF Partners and Accion - a global non-profit organization - have invested $1 million in Aye Finance, an India-based lender that serves profitable micro, small, and medium-sized enterprises (MSMEs).
Accion, which typically invests in micro-finance institutions, made its investment through Venture Lab, a $10 million fund dedicated to providing seed capital and management support to start-ups.
Founded by two bankers - Sanjay Sharma and Vikram Jetley - in 2014, Aye Finance, based in northern India and offers loans to micro enterprises with annual turnover between INR 1-10 million ($16,053-$160,536). In the last six months, it opened six branches and has already financed over 300 micro businesses including shoemaking, garments, textiles, leather, auto components and others.
Aye Finance said that the 40 million organized micro-businesses are the fastest growing industrial segment. The firm will use mobile technology and cloud computing which lowers the delivery cost to attract a growing customer base.
The debt gap for MSMEs in India is estimated to be $198 billion, and is increasing at 11% per year, according to a report by Intellecap and the International Finance Corporation (IFC). Aye Fianance addresses this need by formalizing the lending process and offering secured loans as low as $1,000 at market rates.
"MSMEs represent a highly underserved 'missing middle' market in India," said Michael Schlein, Accion's president and CEO, in a statement. "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."
Over the last 50 years, Accion have helped build 64 micro-finance institutions in 32 countries.
SAIF started investing in India in 2002 and has backed over 40 companies since then. The VC firm's financial services portfolio included established businesses such as NSE, Edelweiss and Karur Vysya Bank, as well as emerging tech-enabled start-up such as Capital Float.
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