Nuveen, a Chicago-based asset management company, has a role on the board of directors and capital to grow one of India’s largest microfinance institutions, targeting India’s largest microfinance industry.
Long before Bangladeshi economist Muhammad Yunus won the Nobel Peace Prize and mapped microfinance, it was seen as the best way to develop small and medium enterprises in developing countries.
As the investment impact takes hold, institutional investors increasingly help MFIs expand their lending, insurance, and savings capabilities to companies that have traditionally been excluded from financial markets. Currently, around 200 million people around the world are supported by microfinance institutions.
This week, Nuveen announced a “substantial minority stake” in Annapurna Finance Private (AMPL), one of India’s largest microfinance institutions. With a loan portfolio of around $ 500 million, it provides working capital loans to women entrepreneurs in rural India. Annapurna Finance, a microfinance institution supported by the Asian Development Bank (ADB) and Oman India Joint Investment Fund (OIJIF), is a $ 30 million initial capitalization operation led by an influential investor in Nuveen Global Impact Strategy.
“Nuveen has acquired a significant minority stake in the business, which drives business strategy, helps the company identify and implement potential acquisitions, and provides meaningful access to the business. It will build on and broaden our commitment to climate change. Annapurna said in a statement that Nuveen would join the board of directors. The press release adds that Unitus Capital is the only advisor throughout the financing process.
As a strategic shareholder and board member, managing nearly $ 1.2 trillion in investments worldwide, Nuveen’s goal is to steer the company toward acquisitions to grow and scale up climate initiatives.
This is the second investment made by the Global Investment Manager under the Global Impact Strategy after investing in advanced battery concepts in Michigan in October 2020. The strategy focuses on two areas: inclusive growth and efficient use of resources, with a goal of 40. – 60% allocated to each topic via investments direct private equity.
“AMPL sets the industry apart by focusing on product diversification, digital innovation, and geographic expansion, ensuring that rural entrepreneurs in India have the financial tools they need to manage and grow their business. It has done so,” said Nuveen.
Founded ten years ago in western Orissa, the company continues to expand its portfolio during the COVID-19 pandemic. “We opened new branches, launched professional education and training activities, and supported our customers’ steadfastness throughout the crisis,” Radhika Shroff, MD of private Impact investing at Nuveen, said.
For many years, microfinance was supported by crowdfunding lenders such as the nonprofit Kiva in San Francisco. This allows people to use their online platform to loan out low-income entrepreneurs with units of $ 25.
Nuveen Global estimates that around 640 million people are still economically excluded in India, but by 2025 54 million will join the ranks of the new consumers, with spending $ 600 billion and $ 1,200. It creates $ 100 million in demand for debt.
In February, when Narendra Modi announced his intention to privatize two of the twelve state-owned banks, India’s adaptation and launch of market reforms was a success. The policy change represents decades of the government-owned loan facility, which has been plagued by loan amortization and now seen as inadequate to take advantage of India’s next phase of growth. Even before the pandemic, India had one of the highest non-performing loan ratios in the world.
“AMPL is well-positioned to capitalize on [debt demand], and Nuveen’s investment will help the company implement future growth plans,” said Shroff. A Chicago asset manager began investing in Impact in the 1980s and currently manages approximately $ 6 billion in impact funds in the public and private markets.