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Allahabad MFI Sonata Finance raises $6.35M from Creation Investments, others

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Chicago-based Creation Investments made its first investment in India in 2010 by picking up stake in Eko India Financial Services.

September, 13, 2012: SONATA Finance Pvt. Ltd., an Allahabad based NBFC Microfinance Institution, announced that it has closed its Series D equity raise of Rs.35 crore. The leading investor in this series was Creation Investments, an alternative investment management company in Chicago. Other investors in this round include The Michael and Susan Dell Foundation and Swaminathan Aiyar, a renowned economist.

SONATA currently operates in four states in India: Uttar Pradesh, Madhya Pradesh, Haryana and Uttaranchal. Despite operating in one of the most underserved and poorest regions in India, SONATA enjoys client confidence and profitable operations with a portfolio of approximately Rs.110 crore.

Anup Kumar Singh, Promoter and Managing Director of SONATA, said, “We welcome the support of like-minded stakeholders like Creation Investments which has endorsed our efforts to ensure quality services to the BoP population.”

This is Creation Investments’ first MFI investment in India. Ken Vander Weele, Chief Investment Officer at Creation Investments said, “We are excited to partner with SONATA for it’s growth. We are long-term partners who will provide them with all the necessary support to achieve their mission.”

With offices in Austin, TX and New Delhi, as well as Cape Town, South Africa, The Michael and Susan Dell Foundation funds programs such as SONATA that improve the economic stability of families living in poverty. SONATA impressed investors at the Dell Family Foundation with their performance during the Indian microfinance crisis.

Representatives at both Creation Investments and the Dell Foundation voiced their support of Indian microfinance. Geeta Goel, Director of Microfinance at The Michael and Susan Dell Foundation said, “Despite the crisis, we have remained committed to the sector and continue to support investees that have retained their focus on being client centric, transparent and financially viable.”

“This transaction validates the fact that there is strong interest in [the] Indian microfinance sector,” said Abhijit Ray, Co-founder and Director of Unitus Capital, the sole financial advisor and arranger to SONATA and its shareholders for the transaction.



Microfinance as a Tool to Alleviate Poverty – Forbes

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For millions of people without access to traditional banking, the internet is a lot more than a place to share the latest family photos. It’s an opportunity to tell their stories and gain access to small loans that can change their lives.

Just 10 percent of the global population has access to traditional banking, according the Gates Foundation. To bridge the gap, microfinance institutions step in. Microfinance entails loans of as little as $25 to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services, providing low-income people with opportunities to become self-sufficient.

Back in 1974, a Bengali man named Muhammad Yunus created the concept of microfinance with Grameen Bank, winning him the Nobel Peace Prize in 2006 for the dramatic global impact of his idea. The World Bank estimates that more than 500 million people have benefitted from microfinance to date.

Different than charity, these loans are repaid to the individual lenders. Since 2005, Kiva, a person-to-person microlending organization, has provided more than $329 million from 786,000 lenders in 62 countries, with the astonishing repayment rate of 98.97 percent. Borrowers are able to tell their stories online, along with details of their business idea – say, opening a shop or buying materials to make goods by hand.

Kate Cochran, COO of education microlender Vittana, notes the ripple effect these small loans can have across entire families and even generations. “In India, an education can increase earning power by 200 to 300 percent. In many cases, siblings are able to pay for younger brothers and sisters to complete their education with that extra income, and the upward cycle repeats.”

The Dell Foundation also supports and funds microfinance, with a focus on promoting family economic stability by working to increase the number of high-caliber Microfinance Institutions (MFI) in urban communities through Ujjivan. Other microfinance organizations include ACCIONMicroplace, and Grameen America. Many MFI’s also offer microloans in the U.S. for entrepreneurs with solid business plans but who don’t qualify for traditional bank loans.

Global Philanthropy Group partner Maggie Nielson, who helped develop and implement the United Nation’s Year of Microcredit  program in 2005, sums it up nicely: “People just want access to the same financial tools we have so that they can help themselves. They don’t want someone else to build them a big project or give them a handout. They are perfectly capable of creating their own success even though they weren’t born into the same circumstances. That is the kind of assistance anyone can give. You can literally change someone’s life.”