The International Finance Corporation (IFC), a Washington, D.C.-based member of the World Bank Group that focuses on advancing private sector growth in developing nations, has provided $10 million in funding to group buying site Power2SME.
Based in India and founded in 2012, Power2SME provides small and medium-sized businesses (SMBs) with a B2B e-commerce platform and a working capital solution.
“In addition to the investment, IFC will also advise Power2SME to help it expand beyond its current 14 states [in India], improve its ability to provide working capital to small and medium enterprises by adding more banks as partners and increase the number of users on it platforms by up to 10 times in five years,” the IFC and Power2SME said in a joint announcement.
Micro, small and medium enterprises form a large part of the Indian economy, accounting for 45% of the country’s industrial output and 40% of its exports, the announcement said. There are 48.8 million MSMEs in India, which together employ 111 million people—and 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.
Indeed, India has the largest base of SMBs in the world after China. However, Indian SMEs contribute only 8% to 10% to India’s GDP, compared to 60% in China.
“IFC’s extensive experience in supporting the [SMB] sector through financing and deep networks with banks and financial institutions will help us in our vision to make [SMBs] bankable,” said Power2SME CEO R. Narayan. “Indian [SMBs] 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 aim to continue strengthening the [SMB] ecosystem by addressing key challenges that are roadblocks to [SMB] growth.”
Power2SME also is backed by venture capital firms—among them, Kalaari Capital, Accel Partners and Inventus Capital.