Posted on December 22, 2015
Existing Investor Aavishkaar Goodwell II also participates in the round
Swarna Pragati Housing Microfinance Private Ltd., India’s first housing microfinance institution, has raised Series B funding from the Bangalore based private equity fund Zephyr Peacock and Pierre Omidyar’s Omidyar Network. The transaction also involved a follow-on investment by Aavishkaar Goodwell II, an existing investor in the Company and participation from I3N (Intellecap Impact Investment Network) and select high-profile HNIs. Intellecap was the exclusive advisor to Swarna Pragati on this transaction.
Set up and promoted by a team of senior bankers led by A Ramesh Kumar, former CGM, State Bank of India and chairman of NABARD’s National Committee on Rural Habitat, the Company provides housing finance specifically to rural households and innovatively addresses the pain points of operating in the rural India. The Company’s products include Housing Loans of INR 50,000 – 200,000, Housing Plus Loans of INR 200,000 – 700,000, and Water, Sanitation and Hygiene Loans (WASH Loans) of INR 15,000 – 25,000. The housing loans are provided both for fresh construction and for renovation/ repairs/ up-gradation of existing houses. With established presence in the states of Maharashtra, Odisha, Karnataka and Tamil Nadu, the Company will be using the funds to strengthen its position in existing geographies as well as to expand into the states of Madhya Pradesh, Bihar, Uttar Pradesh, Chattisgarh and Gujarat.
“We are glad to welcome Zephyr Peacock and Omidyar Network on board and hope to replicate the successful business model of operating in rural India across the length and breadth of the country. Our aim is to provide easy access to finance to address rural people’s basic need of housing and hygiene thus enabling them to lead a life of dignity and security from nature’s onslaughts. Our products and processes are uniquely adapted to mitigate constraints of rural borrowers in taking a housing loan, which is reflected in our rapid growth.” said Ramesh.
As at November 30, 2015, the Company has a portfolio of approximately INR 850 Mn and has built a customer base of nearly 8,700 borrowers since it became operational in 2011. The Company is targeting a portfolio of approx. INR 24 Bn by 2020-21 and a customer base of one hundred and sixty thousand customers by then.
“Zephyr Peacock is excited about being associated with Swarna Pragati. The Company has a highly innovative model for serving the needs of rural customers. With the use of robust technology and smart data analytics, the model can be scaled up rapidly and the Company can cover a broad range of product offerings for the rural customers. This will have a multiplier impact on the local economies,” says Mukul Gulati, Managing Partner, Zephyr Peacock.
“Swarna Pragati is addressing deeply entrenched socio-economic issues that remain largely unresolved and ignored - the need for clear title to land and secure property rights in rural India in order to unlock access to formal financial systems,” says Anuradha Ramachandran, Director – Investments at Omidyar Network. “By providing housing loans to rural low income households, Swarna Pragati is aiding the creation of a credit history and a long-term asset, and also providing recognition to women’s rights to the property.”
Adds Vineet Rai, Founder, Aavishkaar, “We invested in Swarna Pragati at a very early stage, when the Company had just piloted its unique model and was looking to scale up. Since then, the Company’s loan book has grown from approx. INR 150 Mn when we invested to INR 850 Mn today, nearly six fold in two and a half years. We have full confidence in the Swarna Pragati team and remain a committed stakeholder in their vision for rural housing finance.”
“The housing shortage in rural India is currently estimated at approx. 40 Mn units which will increase by another 23-25 Mn units by 2022 to meet Government’s initiative of Housing for All by 2022. Housing finance is emerging as the next frontier for investors in the financial services spectrum. While the established HFCs and banks continue their urban focus, unique models like Swarna Pragati are emerging who are successfully servicing the hitherto untapped rural customer who actually has good repayment records and low delinquency rates”, says Meenal Dutia, Vice President, Investment Banking at Intellecap. Other recent deals concluded by Intellecap include SIDBI’s investment in RCI Cash Management Services, Responsibility and Infuse Venture’s investment in Green India Building Systems and Services (GIBSS), Tano Capital’s investment in Arohan Financial Services and Developing World Market’s investment in Suryoday Micro Finance.