Rural MSME lender Optimo Loan has raised $10 million in seed funding led by Blume and Omnivore, with additional contribution from Optimo’s Founder, Prashant Pitti. Pitti, also the co-founder of travel company EaseMyTrip, had announced the lending platform in a post on X in July last year. The lending operations began in November last year.
“We are scaling swiftly yet prudently. Our top management team comprises individuals with extensive experience of 10-15 years in MSME lending. We aim to establish an asset-light company by primarily leveraging co-lending agreements with banks and larger NBFCs,” said Pitti.
Optimo aims to bridge the $530 billion credit gap in MSME lending, by facilitating credit access for MSMEs in India’s rural areas through a co-lending model.
The funding will be used to expand Optimo’s operations, enhance its technology, recruit new talent, and broaden its presence to twenty locations in rural India by the end of this year, the company said in a statement.
Ashish Fafadia, Partner at Blume Ventures, said, “We believe in Optimo’s mission to democratize access to finance for MSMEs in rural India, especially considering their significant contribution of 29% to GDP. To achieve the ambitious goal of elevating this contribution from 4 to 15 trillion over the next 15-20 years, it’s imperative to explore more effective collaboration avenues.”
Optimo offers working capital, equipment financing, merchant cash advances, expansion loans, and invoice financing solutions with a repayment period of 12 to 24 months.
Importantly, loans given by non-banking financial companies (NBFCs) to the MSME sector have been more than three times that of banks, indicating a growing preference for NBFCs among small businesses to raise credit.
As per an RBI report on the performance of the banking sector during 2022-23 and 2023-24 (till December), in comparison to the 12.7 per cent and 12.4 per cent year-on-year (YoY) growth in MSME credit by banks as of March 2022 and March 2023, the credit growth by NBFCs to MSMEs stood at 21.2 per cent and 42.4 per cent respectively.
In February this year, the central bank had mandated all lenders to provide the ‘Key Fact Statement’ (KFS) to their retail and MSME loan borrowers to enhance transparency in lending and help borrowers in making informed decisions.
KFS has been among the measures in the past by the RBI to foster greater transparency and disclosure by the regulated entities (REs) or lenders in the pricing of loans and other charges levied on the customers.