PG Impact Investments, a global impact investment firm, has made an equity investment in NeoGrowth, India’s leading digital inclusive financial lender. In partnership with Leapfrog Investments and other co-investors, PG Impact Investments will support the company’s innovative growth strategy aimed at providing financing to more than 125’000 micro, small and medium sized businesses (“MSMEs”) by 2022, most of them currently being underserved and not able to receive financing through the traditional banking system.
India has over 36m small and medium sized businesses that contribute 30% of India’s GDP and provide employment to c. 80m people. The credit underwriting methods used by the traditional lending system exclude a large portion of these MSME’s, 80% of which are currently self-financed, resulting in an estimated annual financing need for urban retailer MSMEs of INR 2.8tn.
NeoGrowth’s innovative underwriting process uses digital payments data generated through electronic point of sale (“POS”) transactions. Thanks to its unique approach, the company is able to promote financial inclusion by providing financial services to underserved MSMEs while helping them to build and improve their credit history. The company provides a differentiated and innovative product with quick turnaround time, and flexible, automated repayment mechanisms that align with the merchant’s sales cycle.
The company’s business model benefits from a robust regulatory environment, managed by supportive yet rigorous regulatory bodies. The current government has placed particular emphasis on the growth of the financial inclusion sector and on digitalizing the economy by encouraging consumers and entrepreneurs to shift to non-cash transactions, catalyzing the digitization of financial services, penetration of credit cards and increase in POS transactions.
Urs Baumann, CEO and co-founder of PG Impact Investments, comments: “As the first and thus far only at scale provider of a POS-enabled, dynamic digital repayment, working capital solution to Indian merchants, NeoGrowth is well positioned to capitalize on a large underpenetrated and underserved market with government and regulatory tailwinds.”
About PG Impact Investments
PG Impact Investments was founded in 2015 with the vision that private investment, innovation and entrepreneurial talent can provide solutions to the challenges faced by our society, as well as create sustainable growth. PG Impact Investments is a private sector, mission-driven, global investment firm specializing in investment solutions aimed at delivering financial returns as well as creating a positive social and/or environmental impact. It manages investment strategies for an international clientele of professional investors who are seeking investment solutions that offer market-rate returns, while also helping to address pressing social or environmental challenges. All profits from the business activities of PG Impact Investments are transferred to PG Impact Investments Foundation. The Foundation supports social initiatives and social businesses ventures that otherwise would not receive funding through commercial investors or investment funds. Whilst being independent from Partners Group, PG Impact Investments entities are backed by Partners Group and its employees, and benefit from the global infrastructure, investment know-how and specialist resources of this leading global private markets investment manager. www.pg-impact.com
Founded in 2012 by experienced Indian entrepreneurs, NeoGrowth, an India based non-deposit taking financial company (“NBFC”), offers unsecured, working capital financing to small and mid-sized retail enterprises that accept credit/debit card or other digital payments from its customers. The company leverages digital payment data for the credit underwriting process enabling access to financial services for creditworthy customers that would otherwise be excluded by the traditional banking sector. NeoGrowth has launched commercial operations through 21 branches with a target to expand to 51 branches with a focus on Tier II and III cities in India, by 2022.
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