Northern Arc India Impact Fund

Equity : November 2022

BIO has made a contribution of INR 650 M to the Northern Arc India Impact fund, a private debt fund focused on India.

Amount

€ 7,890,744.00

Type of investment

Equity

Development impacts

Local economic growth
Financial inclusion
Promotion of ESG best practices
Gender

Beneficiary locations

Asia: India

Investment field

Investment Companies & Funds

Activity

KK.64.302 FI Fund

Organisation

Northern Arc India Impact Fund

Website

https://www.northernarcinvestments.com/

Domicile

India

NAIIF is a closed-end private debt fund with a corpus of USD 100M, investing in entities across impact oriented financial inclusion sectors such as microfinance, affordable housing, vehicle finance, small business loans, and agri-lending. The Fund aims to address the funding gaps through reliable and sustainable access to finance for the unserved population in India.

The Fund Manager, Northern Arc Investments (NAIM) was set up in 2014 and is a wholly owned subsidiary of Northern Arc Capital, a NBFI with more than a decade of impact investing experience across India. Over the years, NAIM has become one of the leading impact-focused private debt fund managers in India, managing around USD 500M of investor commitments through 10 funds.

Development impacts

Local economic growth
The fund will invest in 25+ promising early-stage companies in the lending and MSME space which find it difficult to access mainstream debt finance (e.g. from banks), for end use as growth capital. These companies are innovators in terms of product / target segment / geographical reach / operations, setting them apart from the mainstream.
Financial inclusion
The Fund strives to not only provide loans for income generating purposes, but also to improve lives through opportunities for homeownership / home improvement / access to sanitation / vehicle ownership, amongst others. This is achieved through investments in MFI, agri-lending, vehicle-finance entities, and to MSMEs for business expansion. This also enhances credit access to new-to-credit customers and first-time buyers of commercial vehicles.
Promotion of ESG best practices
Being the first European development finance institution to invest in funds managed by NAIM, BIO can play a role in promoting E&S best practices.

An Environmental and Social Action Plan (ESAP) has been drafted and contains the adoption of the EDFI exclusion list, a recommendation to conduct Client Protection Principles (CPP) assessments at the level of the MFI investee companies, the implementation of an upgraded environmental and social (E&S) management system, and the hiring of a dedicated E&S Officer at the level of the Fund Manager.
Gender
Beyond 2X eligibility on all criteria, the Northern Arc Group, in cooperation with IFC, is working towards adopting a Gender Lens Investing Framework which aims to help the organization integrate gender considerations in its credit and underwriting process.

E&S Impact

NAIIF will develop an Environmental and Social Management System with a clear process to manage both E&S and Client Protection Principles risks.

BIO will provide guidance on training and talent development within the fund.

Current situation

The fund has integrated certain E&S tools in their investing approach and has an adequate E&S capacity.
However, their investment process is not fully aligned with EDFI and CPP standards.

Risk Category: B