MICROCAPITAL BRIEF: Northern Arc Capital to Provide Research, Modeling, Reporting Services to Nasira, FMO Program that Guarantees MSME Lending to Youth, Women, Migrants

Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (FMO), a Dutch public-private partnership, recently finalized an agreement with Northern Arc Capital, an Indian financial firm, to support Nasira, a risk-sharing program through which FMO encourages retail financial institutions to lend to entrepreneurs in Africa and parts of Asia. In particular, Nasira guarantees lending to micro-, small and medium-sized enterprises whose owners fall into one or more of the following categories: youth, women, migrants and those highly affected by the COVID-19 pandemic. Northern Arc’s role will be to perform “research on macro trends, assessment of financial landscape[s], transaction monitoring, performance reporting and modelling support for securitisation transactions…”.

FMO’s Director of Financial Institutions, Marnix Monsfort, said, “Reporting and modelling is an essential part of the Nasira guarantee program… [and] shows financial institutions the real risks of lending to underserved parts of the populations, allowing them to continue serving these groups, also after the guarantee program has ended.”

Founded in 2008, Northern Arc is a non-banking finance company with a debt portfolio spanning 29 states in India. Formerly known as IFMR Capital Finance Limited, its mission is “to enable access to finance for the underbanked in an efficient, scalable and reliable manner.” It does this by arranging funding for financial institutions active in agriculture, housing and the provision of gold loans through mechanisms such as direct loans, structured finance, fund management and capital market instruments. Northern Arc also consults in areas such as securitisation transactions and external commercial borrowings. As of March 2020, the firm reports total assets of INR 44.8 billion (USD 597 million).

Established in 1970, FMO is 51-percent held by the Dutch government and 49-percent by private investors. The institution works toward the UN’s Sustainable Development Goals by funding capacity development and placing debt and equity investments in sectors such as agribusiness, financial institutions and energy. For the first half of 2021, FMO reported a net profit of EUR 198 million (USD 224 million) on a portfolio valued at EUR 12 billion (USD 14 billion).

By Adhya Singh, Research Associate

Sources and Additional Resources

FMO press release
https://www.fmo.nl/news-detail/4a708559-f610-402b-aa9e-3d12ce9d2b02/fmo-partners-with-northern-arc-capital-on-the-flagship-nasira-program-to-support-young-female-migrant-and-covid19-affected-entrepreneurs

Nasira homepage
http://www.nasira.info/

Northern Arc homepage
https://www.northernarc.com/

Northern Arc annual report, 2019-2020
https://www.northernarc.com/assets/uploads/pdf/Annual-Report-2019-20-1605599349.pdf

FMO homepage
https://www.fmo.nl/

FMO 2021 interim report
https://annualreport.fmo.nl/2020/interim-report-2021/at-a-glance/

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