India’s microfinance startup SATYA MicroCapital said it has raised $60 million in debt from Japan’s Sumitomo Mitsui Financial Group.
Registered as a non-deposit-taking NBFC-MFI [microfinance institution] with the Reserve Bank of India, SATYA MicroCapital provides financial services to people generally excluded from traditional banking channels because of their low, irregular, and unpredictable income.
To date, the MFI claims to have offered microcredit services to more than 14 lakh active clients living in the rural semi-urban areas of India.
SATYA has established its footprint in more than 50,000 villages across 25 states. It has more than Rs 5,000 crore assets under management.
The microfinance company said the funding will be used to scale up its operational model while continuing to formulate innovative credit offerings, expand its product portfolio, and provide complete end-to-end business processes for its clients.
The funding will also be leveraged towards catalysing financial inclusion amongst women micro-entrepreneurs through microfinance, the firm said.
Last year, the Dutch development bank FMO proposed to invest $25 million in SATYA MicroCapital.
Prior to this, SATYA MicroCapital raised $15 million led by existing Japan-based investor Gojo and Company Inc. in June last year. While $8 million was raised in the form of debt, $7 million was allocated to equity.
In 2021, it raised $18 million through non-convertible debentures (NCDs) from impact investment fund manager responsAbility Investments and Swiss impact investor BlueOrchard Finance Limited.
Other big Japanese banks have also started promoting fintech businesses in Asia. Mitsubishi UFJ Financial Group is operating a fund for investment in fintech and other startups in Asia, while Mizuho Financial Group decided in March to invest in a company offering “buy now, pay later” services in Indonesia.
Last week, Incubate Fund, a Tokyo-based venture capital company, completed the first close of its third India-focused fund targeting to raise $50 million to invest in new as well as existing portfolio companies.
Earlier, another Japanese early-stage venture capital fund, JAFCO Asia, told DealStreetAsia that it aims to deploy $15-20 million in South Asia this year, with a firm focus on India.
SATYA MicroCapital’s debt funding comes at a time when debt continues to be a viable alternative to equity funding amid the prolonged funding winter.
Debt infusion into Indian startups stood at $206.2 million in 2022. While this was 25% below the peak of $277.3 million seen in 2021, it more than doubled from $91.7 million in 2020, according to data from Tracxn.