Caspian Advisors to set up $40-mn debt fund in India

Fund to invest in MFI, small business, farm sectors

Hyderabad-based Caspian Advisors has said it would set up a $40-million fund to provide debt capital to a wide range of institutions serving low-income or financially excluded communities.

The investment advisory firm has launched the fund with $10 million of committed investments from the Dutch development financial institution FMO, Triodos Doen and Hivos-Triodos Fund, Gray Ghost Microfinance Fund, Caspian promoters, and local Indian investors. This will be the third fund launched by Caspian, with prior funds totalling $120 million in assets at the funds’ respective closings.

Paul DiLeo, fund manager of Gray Ghost Microfinance Fund, said, “As investors in both Caspian’s previous funds, we are very familiar with the lead role that the team has played in developing the microfinance and impact investing space in India.”

The new fund, Caspian Impact Investments, will initially focus on investing in businesses in the microfinance, small business financing, affordable housing, food, and agriculture sectors. It will collaborate with Dutch NGO Hivos through the ProCif programme, aimed at improving the ability of producer organisations in the food and agriculture sector to access debt capital. In addition, FMO will provide technical assistance to the fund for research and development of the food and agriculture portfolio.

“While there are several funds that are either already investing or looking to invest in impact enterprises in India, most funds today are offshore and focused on equity due to the significant challenges facing non-resident investors providing debt. Caspian Impact Investments offers impact investors and opportunity to reach these social enterprises and extend their impact,” said S Viswanatha Prasad, founder and managing director of Caspian Advisors.

According to Caspian, the current supply of debt to social impact enterprises is scarce in India. The fund will invest in specialised intermediaries that support these impact enterprises and aid social entrepreneurs to scale their businesses without depending entirely on equity capital or debt funding from banks.

“For smaller institutions that are providing microfinance, small business finance, housing finance and agriculture access to debt financing is still limited. By providing these entities with debt, Caspian Impact Investments adds value and creates impact,” said Anneloes Mullink, investment officer at FMO.