Aye Finance that provides innovative & customer centered financial services to micro & small businesses, has received about $2.9 Mn (INR 20 Cr.) in follow-on investments from Accion – a pioneer in financial inclusion, and venture capital firm SAIF Partners.
The company will utilise the capital to help the financial services startup that offer India’s Micro & Small Enterprises (MSMEs) with expanded access to financing. Currently, India’s MSME sector represents about 58 Mn businesses, which is creating over 150 Mn jobs, and accounts for 45% of the country’s industrial output.
Through use of technology, credit assessments and a new ‘Industry Cluster Enablement’ (ICE) model of lending, the startup helps MSMEs meet working capital and capex* requirements as they look to grow their businesses.
“We must find more efficient ways to provide Indian small businesses with the capital they need to grow. If we succeed, we can help entrepreneurs launch, sustain and expand their businesses. Aye Finance’s industry cluster approach is an exciting innovation that can help open up great opportunity for those small businesses unlikely to get bank financing,” said Michael Schlein President and CEO at Accion.
In its second year of operations, Aye Finance has expanded to 16 cities across northern India.
“Aye Finance’s creative approach has helped India’s micro and small businesses obtain the financing that they need, and has unlocked credit for entrepreneurs who are typically locked out of the financial system,” said Vishal Sood, Managing Director, SAIF partners.
Despite the fact that their borrowers often have little credit history. Aye Finance assesses ‘thin-file’ customers using an insightful underwriting approach. Its ‘industry cluster’ approach allows the startup to develop thorough expertise in particular micro-industries and better understand what a prospective borrower’s financials should be, assess their creditworthiness, and evaluate their reputation, ultimately helping the lender get loans between INR 0.5 lakh and up to INR 25 lakhs faster, better, cheaper, and with less risk.
The firm has already raised debt funds from a diversified group of top tier funding organisations like IFMR, Intellegrow, MAS Financial Services and a number of Banks. An optimal mix of equity and debt will go a long way in sustained scale up of the lending business.
*Capex is money invested by a company to acquire or upgrade fixed, physical, non-consumable assets, such as buildings and equipment or a new business.
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