Accion and SAIF Partners Co-Invest in India-Based Aye Finance

$1 million investment will address growing need for capital in India's MSME 'middle market'

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Feb 23, 2015, 01:30 ET

WASHINGTON, Feb. 23, 2015 /PRNewswire/ -- SAIF Partners and Accion today announced co-investments in Aye Finance, an India-based lender that will serve thousands of profitable micro, small, and medium enterprises (MSMEs), which are often locked out of both traditional microfinance and commercial capital. Accion made its investment through Venture Lab, a $10 million initiative dedicated to providing seed capital and management support to innovative startups expanding financial access to the poor and underserved. SAIF provides seed, early, and growth stage capital for emerging companies in India and China. For over 13 years, it has been investing in India, and its portfolio includes a number of financial institutions. SAIF continues to partner with strong teams and pursue innovative business models across sectors and stages of investments.

"MSMEs represent a highly underserved 'missing middle' market in India," said Accion President and CEO Michael Schlein. "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. Ultimately, 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."

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 attempting to serve this sector, alongside the Indian Government's renewed focus on supporting MSMEs. By formalizing the lending process and offering secured loans as low as $1,000 at market rates, Aye Finance will address an important need, and help India's burgeoning economy on its growth path.

Aye Finance, based in northern India, was founded by two veteran bankers, Sanjay Sharma and Vikram Jetley. 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 seen tremendous demand for its services since launch, opening 4 branches in the last 6 months, and has already financed over 300 micro businesses. Aye Finance's clients represent a number of industries – including shoemaking, garments, textiles, leather, auto components, and others.

"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," says Vishal Sood, Managing Director, SAIF partners.

Sanjay Sharma, Managing Director, Aye Finance Pvt Ltd said, "The 40 million organized micro-businesses are the fastest growing industrial segment, nourished by the aspirations of the Indian working classes. We offer much-needed loans and financing to micro-businesses through our insightful, segmented origination processes. Our use of new-age mobile and cloud computing lowers the delivery cost and our understanding of industry segments continue to attract a rapidly growing and loyal customer base."

About Accion

Accion is a global nonprofit dedicated to building a financially inclusive world with economic opportunity for all, by giving people the financial tools they need to improve their lives. We are building the next generation of top-tier microfinance institutions, and over the last 50 years have helped create 64 such institutions in 32 countries on four continents that today reach millions of clients. Our impact investing initiatives are pushing beyond microfinance to catalyze more than 20 innovative start-ups dedicated to improving the efficiency, reach and scope of financial services for the poor. And our Center for Financial Inclusion is helping to build a stronger industry with high standards and broad engagement. Currently, our work spans nearly two dozen countries, including the U.S., where we are the nation's largest nonprofit microfinance network. For further information, visit www.accion.org.

About SAIF Partners

SAIF Partners is a leading venture capital firm with over $4B under management. SAIF provides seed, early, and growth stage capital for emerging companies in India and China. SAIF began partnering with entrepreneurs in India in 2002 and has backed over 40 companies since then including MakeMyTrip, JustDial, PayTM, BookMyShow, and Urbanladder. SAIF's financial services portfolio spans across established businesses such as NSE, Edelweiss and Karur Vysya Bank as well as emerging tech-enabled ventures such as Capital Float. For further information, visit www.saifpartners.com

About Aye Finance P Ltd

Aye Finance (Aye) is a young modern organization that believes in delivering customer centered and yet affordable finance facilities to its rapidly growing clientele of small and micro businesses across India which are presently locked out of the financial system. The company aspires to build a large scale business in a sustained and profitable manner, while attracting a lasting social dividend.

Use of new age technology with low fixed overheads and an innovative credit appraisal methodology helps the company build a quality financial portfolio with optimal costs. The company's spirit of innovation and achievement is an apt foil to the small and micro Indian businesses that are famous for their frugal innovation or 'jugaad'.

Managed by experienced professionals from banks and some of the best microfinance organizations in India, Aye brings the best of both the worlds - sound international business practices and a deep understanding of microenterprises in India. For further information, visit www.ayefin.com

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SOURCE Accion