Aye Finance Bags $37.18 M in a Funding round Led by BII.

In a move reflecting growing investor confidence in Indian fintech, Aye Finance, a startup specializing in micro-enterprise lending, has secured $37.18 million Series F funding led by British International Investment (BII), emphasizing the continued success of its unique approach to unsecured business loans and digital lending.

Aye Finance, founded in 2014, has demonstrated remarkable growth, with its loan book expanding by 56 percent in the fiscal year 2022-23, reaching INR 2,700 crores as of March 31. “We have 395 branches, and we plan to expand this rapidly. We will be using the fund towards that, and we will also be expanding our team,” said Sanjay Sharma, co-founder and managing director of Aye.

The Indian fintech company’s unique focus on providing unsecured small-ticket business loans towards micro-enterprise lending has garnered attention, contributing to its revenue of INR 630 crores and a net profit of INR 60 crores for the fiscal year 2022-23.

Sanjay Sharma said, “After the difficult Covid impacted years, FY23 was an opportunity to return to high-performance levels. The credit quality has returned to pre-Covid levels, and profitability has never improved. We are poised for another promising phase and will expand our client base with profitability and positive social impact in FY24 in the digital lending space.”

Strategic Funding Partnerships

The Series F funding round, led by BII, also saw participation from The Waterfield Fund of Funds and existing shareholder A91 Partners. Indian fintech startup Aye Finance has successfully secured nearly $200 million in various funding rounds, with support from notable investors such as CapitalG, Elevation Capital, and Alpha Wave Global.

Aye Finance has become a key player in digital lending, catering to the underserved micro-enterprises that face challenges obtaining working capital from traditional lenders. The company, backed by accomplished investors, has adopted a unique cluster-based credit appraisal approach and a digitized phygital model, leading to its rapid rise in the micro-enterprise digital lending sector.

“We feel there is enough market to capture for Indian fintech startups within the MSME space. We will not be diversifying now but will continue penetrating the MSME lending space. We have 330,000 active customers and 700,000 total customers lent to so far, and it is still a small part of the market,” added Sharma.

Meeting the Credit Gap

Startups like Aye Finance address a critical gap in the Indian market, where over 63 million micro, small, and medium-sized businesses struggle to access credit. These businesses contribute significantly to India’s GDP, exports, and employment, but many face difficulties securing funds due to mismatches with government schemes and complex eligibility requirements.

“At Aye Finance, we have decreased our operational costs by increasing productivity. We are increasing between 50 and 55 percent annually, and in the upcoming year, we plan to consider branching out into additional states and cities. We grew to include Odisha, West Bengal, and Jammu last year, and we plan to add more Northeastern states,” Sharma said.

Aye Finance’s Impact

Aye Finance has disbursed over $959 million in credit to more than 700,000 unorganized businesses, playing a pivotal role in supporting the growth of micro-enterprises and enabling their inclusion into the formal economy.

With the recent funding injection, Aye Finance is well-positioned for further expansion and has expressed interest in potentially entering the public markets in the fiscal year 2026. “We will have enough funding for the next two years. We have an AUM of Rs 3,600 crore which will grow to Rs 7,000 crore in two years and then we may think of an IPO, which is in FY26,” Sharma said.

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