Startup India Northern Arc raises Rs 40 cr debt from Kotak Mahindra Bank to help small businesses

To support small businesses and households hit by the pandemic, digital debt platform Northern Arc Capital has raised Rs 40 crore debt from Kotak Mahindra Bank. The debt is backed and partly guaranteed by the Michael & Susan Dell Foundation and the Rockefeller Foundation, it said.

The money will be lent to small businesses, micro-entrepreneurs and under-banked households with a monthly household income of under Rs 25,000, Northern Arc, formerly IFMR Capital Finance, said on Monday. The transaction is part of the pandemic-response package of both these impact institutions and the debt is the latest in a series of sanctions received by Northern Arc from development finance institutions (DFIs).

Over the past year, Northern Arc has attracted debt financing from an array of global DFIs and impact investors such as the US International Development Finance Corporation, Asian Development Bank, Calvert Impact Capital, and the Dutch government impact investor FMO, Bama Balakrishnan, chief operating officer Northern Arc said.

The COVID liquidity fund will help cover a portion of the working capital needs of thousands of women entrepreneurs, along with mini-grid companies and micro-enterprises, said Deepali Khanna, managing director of Asia regional office at the Rockefeller Foundation.

As of March, Northern Arc has enabled debt financing of Rs 95,000 crore for its clients across microfinance, small business finance, affordable housing finance, vehicle finance, agriculture finance, consumer finance, fintech and mid-market corporates. Over 140 reputed investors such as banks, asset managers, insurance companies, DFIs, and private wealth have invested in transactions structured and arranged by it.

Northern Arc is backed by marquee private equity players like Leapfrog, IIFL, Accion, Affirma Capital (erstwhile Standard Chartered Private Equity), Dvara Trust, Eight Roads and Sumitumo Mitsui Banking Corporation. The Michael & Susan Dell Foundation is focused on enabling children and youth from low-income communities through improved education and employment opportunities. It has invested over USD 200 million over the past 15 years in the country, impacting over 12 million lives.

The Rockefeller Foundation is a science-driven philanthropy focused on building collaborative relationships with partners and grantees