Commonwealth Development Corporation (CDC), the development finance institution owned by United Kingdom (UK) government, with venture capital firm Lok Capital has announced a Series D investment of $21 million in Utkarsh Micro Finance Private Ltd.
The Series D funding will be used to help the company diversify its portfolio of services and products as well as grow in existing geographies while expanding in others. Existing investors IFC, Norwegian Microfinance Initiative (NMI) and Aavishkaar also participated in this round of funding, the company and its key investors said in a press statement.
Founded in 2009 by Govind Singh, Varanasi-based Utkarsh offers microfinance products to the underserved population in the Northern and Central parts of India where access to formal source of finance has been historically underpenetrated as compared to the states in the East and the South India.
Utkarsh has tapped into this large opportunity through credit and pension products and by launching micro enterprises loans and micro pension. The company’s customer base is predominantly women focused; the joint liability group loans are specifically designed for the lower-income women. Utkarsh claims to have impacted four lakhs financially-excluded women in the states it operates in.
The company is present in 56 districts of UP, Bihar, Uttarakhand, Delhi, Haryana, Madhya Pradesh, Maharashtra and Himachal Pradesh. It currently has 213 branches with an active customer base of over 4.8 lakhs and a loan portfolio of Rs 552 crore as of November 2014.
Govind Singh, Managing Director & CEO, Utkarsh, said “We are delighted to have CDC and Lok Capital on board as investors. We are also encouraged to see our existing investors participating in this round, reflecting their continued confidence in team Utkarsh. Through this infusion of funding, we plan to impact more districts, diversify products and services and enhance our responsible finance initiatives, social interventions and client engagement initiatives.”
Announcing the funding, Vishal Mehta, Co-founder and Managing Director, Lok Advisory Services, said, "These are progressive times for the financial inclusion space and with the kind of regulatory support MFIs currently have, they have the option to transform into more robust Institutional structures. With this in mind, it becomes important for us to fund institutions that have the vision and capacity to be able to leverage the current environment and we believe Utkarsh is one of them. Govind and team has built a strong institution in a difficult geography with focus on processes and funding relationships.”
CDC is one of the investors in Lok Capital LLC and Lok Capital II LLC and is co-investing with Lok for the first time. Talking about the investment in Utkarsh, Maria Largey, Investment Director, CDC Group plc, said, "CDC is committed to investing direct equity and debt into the South Asia continent in social ventures, including microfinance and broader financial inclusion. We have been impressed by Utkarsh’s sustained growth and hope this fund infusion will enable the company to grow further. Our stable investment approach complements Utkarsh’s strong management team.”
"Having closely worked with Lok for over eight years, Lok’s knowledge of the microfinance sector in India combined with its on-the-ground presence makes them an excellent partner to co-invest with,” added Mari.
Utkarsh has a strong focus on the concept of ‘responsible finance’, which emphasises certain key aspects such as appropriate product design, fair assessment of a household’s repayment capability, higher focus on underserved geographies and no top up loans.
The company also has a social performance management system in place which is integrated with the overall responsible finance approach. The company’s strong focus on processes, coupled with responsible finance principles, ensures robust risk management.
Prior to this investment, Utkarsh raised three rounds of funding from Aavishkaar Goodwell India Microfinance Development Co. Ltd, International Finance Corporation (IFC) and Norwegian Microfinance Initiative (NMI). The funds were deployed for product diversification and to strengthen presence in Uttar Pradesh, Bihar, Uttarakhand and Madhya Pradesh.
Speaking of the latest round of funding, Vineet Rai, Founder & CEO, Aavishkaar said, "The promoter team at Utkarsh led by the indomitable Govind Singh has built an exceptional institution in the heart of Eastern UP that has built a reputation of high quality responsible finance for people from low income and poor families. The commitment and passion shown by the leadership team at Utkarsh in creating stakeholder value and benefitting all the shareholders at the same time makes this institution special. With the new investment we believe that Utkarsh is poised to leapfrog its competitors and move into a different growth orbit.''
Apart from providing a suite of financial products, Utkarsh has also established a non-for profit arm, Samutkarsh Welfare Society, to provide vocational and financial awareness training, market linkages, and build health and green energy (solar) initiatives.
Utkarsh Micro Finance Private Limited is registered with Reserve Bank of India as a Non Banking Finance Company-MFI (NBFC-MFI). Its registered office and corporate office is in Varanasi (Uttar Pradesh).
It provides financial and non financial services in its area of operations to the unbanked population who has the skill but is in need of capital. Initially it had started with credit under joint liability structure and insurance, but subsequently added micro enterprises loan and micro pension.
It also works with Samutkarsh Welfare Society -- a section 25 company -- to provide vocational training and market linkages, green energy (solar) initiatives, health initiatives and financial awareness training. It is committed to provide more products & services to bring transformation in the lives of the underprivileged.