Matrix Partners India today announced that it has led the first institutional round of funding in Five Star Business Credits. Five Star is a small business finance company that provides secured loans to micro & small enterprise customers (‘MSME’). Further details haven’t been disclosed at the moment.
Five Star caters to customers such as small shop owners (provision stores, small restaurants, textile stores, etc), small & medium machine shop operators, self employed people etc. Five Star also provides loans for the purpose of home improvement to MSME customers. Five Star has served more than 5,000 MSME customers and is present across 30 branches in Tamil Nadu.
“MSME lending is a significantly underserved market in India not addressed by formal financial channels. We have built a unique credit assessment model for deserving customers that run small but healthy businesses. All our loans are collateral backed. This round of funding should help us further expand our branch footprint & enhance our funding base for long term expansion.” said D. Lakshmipathy, Managing Director, Five Star.
India has 29.8 million MSMEs and a further 30 million MSMEs in the unorganized sector. Formal banking and financial channels find it challenging to address the needs of MSME customers primarily due to the challenges in assessing credit quality of such customers. “Five Star has a highly differentiated, secured & sustainable lending model to address the large, underserved MSME financing opportunity,” said Rishi Navani, Managing Director, Matrix India. Five Star now plans to further expand its footprint across different states in India.
Five Star is a well established firm with a great track record and this is a low risk investment for Matrix Partners which has a global network of funds investing in the US, China and India with US $3 billion under management.
Matrix invests in MSwipe, TechMed.