CDC Group partners with Northern Arc to invest in Rs 320-crore PBI to fund 6 MFIs

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April 1, 2021 1:00 AM

CDC’s investment in the transaction is supported by partial guarantee provided by Northern Arc. It is a milestone for CDC as it is the first transaction structured by CDC under a PBI structure, a statement by Northern Arc said.

The Rs 320-crore fund will support six domestic microfinance institutions – Annapurna Finance, Arohan Financial Services, ASA International, Asirvad Microfinance, Chaitanya India and Fusion Microfinance.The Rs 320-crore fund will support six domestic microfinance institutions – Annapurna Finance, Arohan Financial Services, ASA International, Asirvad Microfinance, Chaitanya India and Fusion Microfinance.

British government-funded developmental finance institution CDC Group and Chennai-based digital debt platform Northern Arc have jointly structured a pooled bond issuance (PBI) transaction worth Rs 320 crore in India.

The Rs 320-crore fund will support six domestic microfinance institutions – Annapurna Finance, Arohan Financial Services, ASA International, Asirvad Microfinance, Chaitanya India and Fusion Microfinance. They will use the money to support female and rural borrowers, CDC Group said in a statement.

CDC’s investment in the transaction is supported by partial guarantee provided by Northern Arc. It is a milestone for CDC as it is the first transaction structured by CDC under a PBI structure, a statement by Northern Arc said.

This investment is expected to support MFIs in providing over 6.3 lakh new micro loans to low-income households, primarily female and rural borrowers, increasing their access to finance and enabling them to manage cash flow and maintain or grow their businesses.

Srini Nagarajan, MD and head of Asia at CDC, said: “This exciting partnership with Northern Arc marks CDC’s first pooled bond issuance in India, and comes at a time when systemic liquidity is critically needed to mitigate the impact of Covid-19 on vulnerable population in India. We are pleased that our investment will facilitate access for small businesses and will especially ensure that more women in India have improved access to finance, helping to uplift their livelihoods, households and communities.”

The PBI product, developed by Northern Arc, pools together for one investor a set of debentures issued by diverse entities. These debentures are partially guaranteed by Northern Arc.

Kshama Fernandes, CEO of Northern Arc Capital, said: “Northern Arc’s forte has been to introduce impact sectors to investors through its innovative products and structures. CDC’s first investment in a pooled bond issuance in the microfinance sector in India is testament to this…”

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