Northern Arc Raises $25 Million in Debt Financing from Dutch Development Bank to Fund Institutions Serving Women, MSMEs

By: WE Staff | Wednesday, 14 April 2021

Non-banking finance company Northern Arc Capital has recently raised $25 million debt from Dutch development bank Nederlandse Financierings-Maarschappij Voor Ontwikkelingslanden (FMO), making it the second debt mobilisation from the overseas investor. It has previously raised $10 million from the US-based Calvert Impact Capital.

Northern Arc will use the funds to expand its support of institutions that help Micro, Small, and Medium-sized businesses (MSMEs), especially those owned by women. Both rural and urban areas of India are included in the coverage area.

Bama Balakrishnan, COO, Northern Arc, said, “Defined by an engagement spanning over eight years, Northern Arc and FMO are natural partners in furthering the cause of financial inclusion in India. With a shared philosophy of catering to borrowers hard hit by Covid-19 pandemic, the facility from FMO is timely and would specifically be used for lending to women, micro-entrepreneurs and SMEs.”

"Northern Arc acts as a catalyst to NBFCs without effective access to capital markets. The new transaction fits into FMO’s ambition to accelerate financial inclusion with a focus towards women-run businesses and MSMEs. With this transaction, FMO supports an excellent partner who continues to service its clients during these challenging Covid-19 times.” says, Huib-Jan de Ruitjer, Chief Executive Officer, FMO.

It does this through offering loans, securitizations, guarantees, and other credit enhancements.

Founded in 2008, Northern Arc’s mission is “to enable access to finance for the underbanked in an efficient, scalable and reliable manner.”

In 2019, the company facilitated debt worth INR 150 billion (USD 2.0 billion). It reported total assets of INR 45 billion as of September 2020. (USD 598 million). The company is also involved in agricultural, corporate, housing, and vehicle financing, in addition to MSME finance.

Northern Arc's funders include the Asian Development Bank of the Philippines, Calvert Impact Capital of the United States, Sumitomo Mitsui Banking Corporation of Japan, and the government-backed US International Development Finance Corporation.

FMO was founded in 1970 and is owned 51 percent by the Dutch government and 49 percent by private institutions. The institution contributes to the UN's Sustainable Development Goals by financing capacity development and making debt and equity investments in agribusiness, financial institutions, and oil. FMO lost EUR 205 million (USD 245 million) on a total portfolio of EUR 12 billion (USD 14.3 billion) in December 2020.