[Funding alert] Fintech startup Prayaan Capital raises $1.2M in Seed round from Accion Venture Lab

Prayaan Capital Private Limited, a South India-based NBFC that lends to micro, small, and medium-sized enterprises (MSMEs) in India, has announced the closure of a $1.2 million seed investment round led by Accion Venture Lab, Accion’s seed-stage inclusive fintech investment initiative.

Accion President and CEO Michael Schlein said,

“With credit needs that are too small for traditional financial institutions and too large for microfinance lenders, many of India’s entrepreneurs remain unable to access the credit they need to sustain and grow their businesses. Accion Venture Lab exists to help inclusive fintech startups like Prayaan Capital leverage technology to meet this need.”

Prayaan will use this new influx of capital to invest in technology and expand their operations.

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Founded by two seasoned bankers, Madhan Mohan and Akash Chelvam, Prayaan Capital has strategically positioned its base in South India, which has a plethora of small scale manufacturers and unorganised tier-III and IV traders, all of whom are potential consumers of its products. With six operational branches in Tamil Nadu, Prayaan claims to have already disbursed Rs 8 crore to a varied customer base of small-scale entrepreneurs. 

Madhan Mohan, MD and CEO of Prayaan Capital Private Limited, said, 

“We have a vision to make a difference for Indian MSMEs by providing a holistic financial journey that addresses all of their business needs and brings them into the formal financial ecosystem.”

While access to credit for entrepreneurs in India is beginning to improve, there is still an estimated MSME credit gap of $400 billion, according to the IFC. Prayaan Capital said it works to meet this need through an innovative business model that leverages Brick and Mortar branches and both back-end and customer-facing digital tools in order to help small businesses digitize their operations and gain access to credit.

“Prayaan Capital not only helps entrepreneurs gain access to credit, but also helps accelerate the digital transformation of their businesses,” added Tahira Dosani, Managing Director of Accion Venture Lab. 

Accion Venture Lab provides capital and supports fintech startups that improve the reach, quality, and affordability of financial services for the underserved and have the potential to scale. Backed by commercial and impact investors since the launch of its third-party fund in 2019, Accion Venture Lab has invested in more than 40 early-stage startups that operate in 30 countries worldwide.

Founded in December 2018, and granted the NBFC Certificate of Registration in June 2019, Prayaan Capital offers small business loans from $1,500 to $30,000 and focuses on micro and small businesses, often referred to as the “missing middle.” The company said this segment is not serviced by formal financial institutions, neither microfinance companies due to their small ticket size or by banks due to their need for  documentation and higher ticket size.

(Edited by Megha Reddy)