14 September 2024: Annapurna Finance Pvt. Ltd., one of India’s leading Non-Banking Financial Companies and Microfinance Institutions (NBFC-MFI), has entered into a landmark partnership with British International Investment (BII), the UK’s development finance institution and impact investor, and FinReach Solutions, a guarantee facilitation partner dedicated to enhancing credit availability to viable MSEs. This strategic alliance aims to empower India’s Micro and Small Enterprises (MSEs), which form the backbone of the country’s economy.
This partnership is particularly significant as it marks the first time a Development Finance Institution (DFI) has extended a credit guarantee to an NBFC-MFI in India. The agreement entails BII providing a first-of-its-kind credit guarantee to Annapurna Finance, with FinReach Solutions playing a pivotal role as the key enabler. The credit guarantee is expected to increase Annapurna Finance’s loan book by INR 100 crore, thereby enhancing its capacity to provide financial services to over 4,000 underserved MSEs, particularly in regions where traditional financial services are limited, such as Eastern India.
Mr. Gobinda Chandra Pattanaik, Managing Director of Annapurna Finance, expressed his enthusiasm for the collaboration, stating, “This partnership with British International Investment and FinReach Solutions represents a major milestone not only for Annapurna Finance but also for the broader financial inclusion landscape in India. The introduction of BII’s credit guarantee enables us to expand our reach to underserved micro and small enterprises, empowering them with the credit they need to scale their operations and achieve sustainable growth. These businesses, often located in regions with limited access to traditional financial services, are the backbone of our economy. Providing these enterprises with the means to grow will contribute to creating a more dynamic and resilient economy, enhance local livelihoods, and support sustainable development in their communities. We are excited to see the substantial impact this partnership will have on driving inclusive economic progress.”
The credit guarantee scheme is a financial arrangement under which BII partially guarantees the repayment of retail loans extended by Annapurna Finance to MSEs. This arrangement notably reduces the lending risk for Annapurna Finance, enabling the company to extend credit more confidently to businesses that might otherwise face challenges in accessing finance. As a result, this initiative will not only promote financial inclusion by improving access to credit but also support job creation, entrepreneurship, and poverty reduction by empowering small businesses to grow and contribute meaningfully to the economy.
Mr. Gaurav Malhotra, Director and Head of Financial Services Equity at British International Investment, highlighted the strategic importance of the initiative, articulating, “The credit guarantee under our MSME Finance Guarantee program, developed in close collaboration with FinReach Solutions, is a pioneering effort designed to address the systemic challenges faced by micro and small enterprises in accessing finance. This initiative is not solely about mitigating risk for Annapurna Finance but also about creating a more inclusive financial ecosystem where underserved businesses can thrive. We are proud to partner with Annapurna Finance in this endeavour as it aligns perfectly with BII’s mission to promote sustainable and inclusive economic development. Facilitating greater access to credit allows these businesses to unlock new growth opportunities, contribute to the economy, and improve the livelihoods of countless families.
Ms. Suvalaxmi Chakraborty, Managing Director of FinReach Solutions, emphasized the broader impact of the partnership, asserting, “At FinReach Solutions, access to credit is seen as a fundamental enabler of economic empowerment, especially for micro and small enterprises that drive local economies. Our role in this partnership with Annapurna Finance and BII is to facilitate a credit guarantee program that not only addresses the immediate financial needs of these businesses but also contributes to building a more inclusive financial system in India. The innovative structure of this credit guarantee is a game-changer as it reduces the perceived risks associated with lending to smaller enterprises, allowing them to access the capital they need to grow and scale. We are confident that this program will set a new standard in the credit guarantee market, paving the way for future initiatives that will further empower underserved businesses across the country.”
The historic agreement between Annapurna Finance, British International Investment, and FinReach Solutions exemplifies the profound impact that collaborative partnerships can have on social and economic development. Annapurna Finance, deeply embedded in delivering financial services to underserved populations, is uniquely equipped to harness this credit guarantee to reach thousands of micro and small enterprises throughout India. British International Investment, with its extensive expertise in impact investing and development finance, contributes not only financial support but also strategic insight to ensure the initiative’s success. FinReach Solutions, leveraging its proficiency in credit guarantee facilitation, bridges the gap between financial institutions and underserved market segments. Collectively, these organizations are advancing beyond mere support for individual enterprises; they are fostering the development of a more resilient, inclusive, and sustainable financial ecosystem