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5 Sept – International Finance Corporation (IFC), a member of the World Bank Group on Tuesday has invested USD 10 million as equity in Power2SME, an e-commerce platform that helps small and medium companies to buy raw materials at bulk prices and get working capital without collateral.
In addition to the investment, IFC will also advise Power2SME to help expand beyond its current 14 states, improve its ability to provide working capital to SMEs by adding more banks as partners, and increase the number of users on its platforms by up to 10 times in five years.
Power2SME is backed by venture capital firms such as Kalaari Capital, Accel Partners, and Inventus Capital. Started in 2011, the company has raised about USD 33 million so far, excluding this round. The company also counts former UIDAI Chairman Nandan Nilekani as its angel investor.
“IFC’s extensive experience in supporting the SME sector through financing and deep networks with banks and financial institutions will help us in our vision to make SMEs bankable,” said R Narayan, founder and CEO, Power2SME.
He added that Indian SMEs are critical to making India a manufacturing hub and we must foster the sector if we are to meet the national imperative of inclusive growth.
“We have aggressive plans to boost our revenues and continue on our path of profitability,” he added.
Micro, small and medium enterprises form a large part of the Indian economy, accounting for 45 percent of the country’s industrial output and 40 percent of its exports.
There are 48.8 million MSMEs in India, which employ 111 million people.
There is a critical shortage of long-term funding for the sector. Some estimates put the gap at USD 320 billion against a total of demand of USD 500 billion. India has the largest base of SMEs in the world after China, contributing only 8 to 9 percent to the GDP, compared to 60 percent in China.
“Our investment in Power2SME will spur greater VC interest in the SME sector in the country and support India’s vision to become a global manufacturing hub,” said Ruchira Shukla, Venture Capital and Private Equity Lead, IFC South Asia.
She added that by working with SME-focused companies and partner financial institutions, we aim to improve access to finance for over one million SMEs in the next five years.
Following the recent slowing of start-up funding in India, IFC has made a strategic decision to increase its venture capital investing.
The company makes direct equity investments in start-ups and as a limited partner in venture capital funds.
The article Power2SME raises USD 10 mn from International Finance Corporation (IFC) was taken from MoneyControl News.