Aye Finance, an India-based lender for the profitable micro, small, and medium enterprises (MSMEs), has raised $1 million investment from SAIF Partners and Accion. Earlier this month, SAIF Partners also participated in the $13 million investment round of Capital Float (with Sequoia Capital).
The debt gap for MSMEs in India is estimated to be $198 billion, and is increasing at 11 percent per year, according to a report by Intellecap and the International Finance Corporation. Aye joins a number of actors like Capital Float, Mandii and many others who are attempting to serve this sector, alongside the Indian government’s renewed focus on supporting MSMEs. These enterprises are often locked out of both traditional microfinance and commercial capital. Aye Finance addresses this need by formalizing the lending process and offering secured loans as low as $1,000 at market rates.
Aye Finance, based in northern India, was founded by two veteran bankers, Sanjay Sharma and Vikram Jetley. Sanjay said that the 40 million organized micro-businesses are the fastest growing industrial segment, nourished by the aspirations of the Indian working classes. Aye claims to use new-age mobile and cloud computing which lowers the delivery cost and our understanding of industry segments continue to attract a rapidly growing and loyal customer base.
With the majority of India’s lending based in the southern states, India’s northern region is marked by sizable levels of poverty and an unorganized sector of informal moneylenders charging exorbitant interest rates. Aye has financed over 300 micro businesses till date, including shoemaking, garments, textiles, leather, auto components, and others.
Vishal Sood, Managing Director, SAIF partners,
By getting to know these businesses that ‘cluster’ together in specific neighborhoods or districts in urban areas, we believe Aye can uniquely acquire and assess customers in a low cost manner that mainstream financial institutions have so far found uneconomical. This is a subtle, but powerful innovation that will transform the approach to small businesses’ finance.
Accion made its investment through Venture Lab, its $10 million initiative dedicated to providing seed capital and management support to innovative startups expanding financial access to the poor and underserved. Accion President and CEO Michael Schlein emphasized on the fact that MSMEs represent a highly underserved ‘missing middle’ market in India. He said,
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 aims to address the ‘missing middle,’ providing borrowers with the capital that all businesses need, no matter their size. Eventually, this access to credit will help more than the MSMEs – it will also benefit the clients and employees who rely on these entrepreneurs, and the local economies that grow along with successful enterprises.
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- Managing Director
- Saif Partners
- Indian government
- Vishal Sood
- International Finance Corporation
- Michael Schlein
- Sanjay Sharma
- Vikram Jetley
- Small and medium enterprises
- ACCION International
- Center for Financial Inclusion