Provide a 50% guarantee to Axis Bank for a $19.6m LYC loan to support an Indian NBFC in sustainably growing its portfolio of loans to the underbanked within specific eligible sectors including microfinance small business enterprises commercial vehicle financing and social infrastructure.
41k loans will be provided to business enterprise (42%), for microfinance purposes (35%), vehicles (17%) and affordable housing (4%) and education (2%). Impacts for people and businesses will vary depending on the loan size and sector.
SDG assessment
5.5 + 8.10 – Strengthen the capacity of domestic financial institutions to expand access to banking/financial services with a focus on providing women equal opportunities.
Challenge: There are an estimated 107m people who are underbanked (19% of the adult population) and 571m people who are unbanked (63% of the adult population). The structure and pricing of the products available is the main barrier to access credit.
Channel: Enabling a tenor extension of 3 years to enable Northern Arc to increase lending by 4.9 times than what would have otherwise been the case.
Outcome: This tenor extension will lead to an increase in the access to finance for a large number of low- income borrowers. We expect more domestic capital providers like Axis bank providing longer tenor (>2 years) to NBFCs to grow their borrowers.
Mobilised $39.3m from Axis Bank.
Microfinance products which represent 35% of the loan are deliberately targeting women.
As part of the due diligence process, 7 HSES enhancement opportunities were identified which are now reflected in the Project Environmental and Social Action Plan (ESAP). GuarantCo is supporting NorthernArc to refine their HSES due diligence process.
