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MUMBAI : Non-bank financier IIFL Finance Ltd., and SME-focussed neo-banking platform Open Financial Technologies Pvt Ltd on Tuesday announced a joint venture (JV) to launch India’s first neobank that would cater to banking and credit requirements of micro and small enterprises (MSMEs).

Initial capital of the joint venture company will be 120 crore and the JV composition between IIFL Finance and Open is 51:49, a statement said. The name of the joint venture would be IIFL Open Fintech Pvt Ltd, subject to availability of the name.

The statement said there are 63.3 million MSMEs in India of which 99% are micro enterprises and their banking and business needs are a lot different than that of medium enterprises. To cater to this, IIFL Finance will leverage Open’s consumer neo-banking platform to offer additional services to its clients, it said.

Open has over 2.3 million small and medium business merchants on-boarded on its Open Money platform. It was founded in 2017 by Anish Achuthan, Mabel Chacko, Deena Jacob and Ajeesh Achuthan and has a strong technology stack, used by banks across India. IIFL Finance has over 8 million customers and presence in 3,000 locations.

The JV is expected to be a profitable fintech in the first year itself with 1 million customer mark reached within a year’s time and $2 billion lending book is likely to be created in two years, it said.

Nirmal Jain, founder, IIFL Group and managing director, IIFL Finance said, “We are excited to announce this joint venture which can genuinely transform banking and borrowing experience of millions of MSMEs."

Anish Achuthan, co-founder and chief executive, Open said, “We are excited to join hands with IIFL Finance in launching a neo-banking offering for the micro businesses and consumers combining the strengths of Open in the neo-banking space and IIFL Finance on the lending side with access to its 8 million customers.“

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