India has around 70 million MSMEs out of which less than 10% have access to formal sources of credit. Further, according to a 2018 IFC report titled ‘Financing India’s MSMEs’, the viable debt gap in the MSME sector is in excess of Rs 25 trillion which still needs to be addressed by financial institutions in the near term.

At Northern Arc, we extend loans to under-served MSME businesses and NBFCs engaged in MSME financing either directly or through our Originator Partners. This sector offers diverse funding opportunities across various industries, determined by the performance and potential of the businesses. Further, we facilitate debt financing for purposes including secured and unsecured small business lending, merchant financing, supply chain financing, school financing and support for micro and medium-sized corporations.

Credit underwriting is based on the cash flow of the borrower. Additionally, we leverage the digital data sets such as trade flows, banking and taxation information available in addition to credit bureau data.

As of September 30, 2023, we had 109 Originator Partners operating in this sector out of which 17 were Retail Lending Partners.

Northern Arc has been operating in this segment since Fiscal 2014. We primarily work with Originator Partners operating in the vehicle sector.These partners enable us to lend to under-served individuals and businesses exploring financing for various purposes. This includes purchase of commercial vehicles used in the transportation of goods or passengers two-wheelers, electronic vehicles (“EV”) as well as companies engaged in e-mobility, EV fleet services, EV infrastructure (battery swapping) and EV last-mile delivery.

Originator Partners who finance used commercial vehicles are primarily regional players who largely fund lightweight commercial vehicles, multi-utility vehicles and commercial passenger cars as well as three-wheelers. Heavy commercial vehicles and commercial passenger vehicles constitute a lower share in their portfolios. The loans to such end-borrowers are typically secured by hypothecation of the vehicle which can be repossessed after following due process in the event of default.

As of September 30, 2023, we had 48 Originator Partners operating in this sector.

We offer a variety of consumer finance solutions, including consumer durable loans, cash or personal loans, salary advance loans, and buy-now-pay-later financing for products and services available through both online and offline channels. In addition, our Originator Partners and Retail Lending Partners in this sector offer various digital consumer payment services, such as checkout financing and personal loans. The Originator Partners we work with in this space are largely technology platforms that rely on digital sourcing, underwriting and customer management. As of September 30, 2023, we had 34 Originator Partners operating in this sector out of which 19 were also Retail Lending Partners.

In India, the economically weaker sections and low-income group segments in the housing sector are largely under-served. However, with increasing incentives through governmental schemes for affordable housing projects, there has been a renewed thrust on organized supply of affordable housing.

We work with Originator Partners, mostly being housing finance companies, who lend to self-employed or salaried borrower segments for the purchase of residential property, home improvement and home extension. As of September 30, 2023, we had 35 Originator Partners operating in this sector.

At Northern Arc, we work with Originator Partners who provide post-harvest services and financing in the agricultural and allied segments. As of September 30, 2023, we had 13 Originator Partners operating in this sector. This includes players who provide commodity warehousing services and warehouse receipt financing. It also involves entities financing agricultural and allied activities, often working through aggregators such as farmer produce organisations or dairy cooperatives.