March 7 2017

LeapFrog invests in Fincare, a distinctive platform for financial inclusion

  • LeapFrog co-invests with True North, TA Associates, Tata Capital, SIDBI, Kotak Mahindra Old Mutual Life Insurance Ltd, and Edelweiss Tokio Life Insurance – $75 million transaction
  • Disha Microfin, a Fincare group company, is one of only ten institutions approved as a Small Finance Bank as part of Indian Prime Minister Modi’s significant push for financial inclusion
  • Demand for financial services in the two most underserved segments (women and rural communities) drives Fincare’s annual growth rate of 79 per cent
  • The World Bank estimates that to-date only six per cent of Indian adults over the age of 15 have borrowed from a financial institution

London and Bangalore, 07 March 2017

LeapFrog Investments, the specialist investor in emerging markets and pioneer in profit with purpose investing, today announces its acquisition of a stake in Fincare. Fincare is one of the largest and fastest-growing financial inclusion platforms in India, reporting a 79 per cent annual growth rate in assets under management over the last three years.

The new investment in Fincare represents a significant commitment by leading global investors, to India’s banking industry. LeapFrog’s stake is part of an overall $75 million transaction by investors including Tata Opportunities Fund, Kotak Mahindra Old Mutual Life Insurance Ltd, Edelweiss Tokio Life Insurance offices, TA Associates and True North.

Disha Microfin, a Fincare group company, is one of only ten institutions in India to receive in-principle approval from the Reserve Bank of India to become a Small Finance Bank, a centrepiece of the government’s financial inclusion agenda. Small Finance Banks are required to guarantee at least 50 per cent of their loan portfolios are comprised of loans and advances below $37,500, ensuring underserved consumers can access smaller sums of credit, thereby driving financial inclusion.

“This investment is testament to the scale of the opportunity for financial inclusion in India, and underscores the ability of Fincare products to drive significant revenue expansion alongside social impact for India’s underserved rural communities”, said Rajeev Yadav, Group CEO for Fincare in Bangalore. “Today’s announcement will enable us to continue to build the infrastructure required to accelerate our growth, in line with our mission to facilitate a lifetime of progress at the base of the pyramid through financial and social inclusion.”

“Fincare sits firmly at the intersection of profit with purpose. Its excellent management team has built an outstanding high-growth, profitable and customer-centric model that reaches underserved people with essential financial services,” said Michael Fernandes, Partner at LeapFrog. “This is a perfect example of a company improving the lives of emerging consumers and delivering strong returns.”

Fincare advances financial inclusion for two of India’s most underserved demographics: rural communities and women. The company currently provides financial services to over 1.2 million emerging consumers, defined as people living on under $10 per person a day, the majority of whom are women, and 95 per cent of its total customer base lives in rural areas. LeapFrog’s investment will support Fincare in scaling to reach millions of first-time consumers with vital financial products.

India is one of the fastest-growing emerging economies, with a developed financial sector. However, there is significant progress to be made on furthering financial inclusion. According to the World Bank, just 6 per cent of Indians over the age of 15 have borrowed from a financial institution, while only 9 per cent have accessed credit for a farm or other business.

India’s microfinance industry is projected to experience significant growth in the coming years to meet demand for financial tools, with the sector already reporting a 34 per cent compound annual growth rate (CAGR) in lending in 2015-16, according to Sa-Dhan, the country’s self-regulatory organisation of microfinance institutions.

Recent demonetisation policies led by the Indian government, as well as the introduction of ID cards for over 1 billion citizens, are aimed at facilitating the growth of a secure, digital and mobile-centric banking system across the country.

LeapFrog has been the partner of choice for several of India’s preeminent financial companies – including Mahindra Group, Shriram Group, Magma Fincorp and IFMR Holdings – working to seize this historic social and commercial opportunity.

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