International Finance Corporation (IFC), a member of the World Bank Group has invested $10 million in Gurgaon-based B2B marketplacePower2SME that helps SME’s buy raw materials at bulk prices and get working capital without collateral.
In addition to the investment, IFC will also advise Power2SME to help it 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 was founded by R Narayan in January 2012 with a seed capital of Rs 2 crore, and it started operations in July that year. So far, it has raised around $35 million in four earlier rounds from Kalaari Capital, Accel Partners, and Inventus Capital, as well as Nandan Nilekani, who is also their strategic advisor.
“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.
Micro, small and medium enterprises form a large part of the Indian economy, accounting for 45 per cent of the country’s industrial output and 40 per cent 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 $320 billion against a total of demand of $500 billion. India has the largest base of SMEs in the world after China. However, Indian SMEs contribute only 8-10 percent to the GDP, compared to 60 percent in China, according to company’s release.
“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. “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,” she further added.