The CDC Group, an UK-based development finance institution (DFI) and impact investor, has partnered with Chennai-based NBFC Northern Arc Capital to create its first-ever pooled bond issuance (PBI) transaction in India. The PBI worth ₹320 crore will provide systemic liquidity to six Indian microfinance institutions (MFIs).
In a press release, the debt financing platform Northern Arc Capital said, the investment is expected to support MFIs in providing over 630,000 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.
“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,” Kshama Fernandes, CEO, Northern Arc Capital, was quoted in the statement.
Annapurna Finance, Arohan Financial Services, ASA International, Asirvad Microfinance Limited, Chaitanya India and Fusion Microfinance are the six MFIs which will get liquidity under the PBI structure.
“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,” Srini Nagarajan, MD and Head of Asia at CDC, said in the statement.
“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,” he added.
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 the Northern Arc.