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Proparco signs its first credit line to a transport finance company in South Asia, Shriram Transport Finance Co Ltd
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By granting USD 70 million to Shriram Transport Finance Company (STFC) for the financing of Compressed Natural Gas (CNG) light commercial vehicles, Proparco seeks to contribute to the mitigation of particle emissions and the resulting air pollution in India, and also supports access to formal credit for business purchases in deprived areas.
Incorporated in 1979, STFC is an Indian Non-Banking Financial Company (NBFC), part of the Shriram Group which provides financial services in India. With over 2 million clients and a network of 1,545 branches including in deep rural areas, STFC is the leading institution in vehicle finance in India. It provides financing for commercial vehicles, tractors and passenger vehicles. In particular, STFC lends to small truck owners, an otherwise neglected segment of the transportation sector to buy new and used trucks.
Through this USD 70 million credit line, Proparco supports the diversification and greening of STFC’s activity. This project will allow STFC to finance the acquisition of used CNG vehicles, environment-friendly alternatives to diesel-fueled vehicles deemed to emit less harmful particles. This financing will also foster financial inclusion, since STFC’s clients are mainly self-employed professionals without the means to afford new vehicles, which are the only ones financed by the banking sector, and largely in rural areas that are underserved by the financial sector.
Proparco will also provide technical assistance to support STFC’s approach to assess its activity’s emissivity and define an action plan to reduce its carbon impact.
A project fully in line with Proparco’s “green and inclusive growth” mandate in India
The financing of CNG vehicles should have a positive impact on air quality – a major issue in India, and hence on the quality of life of the resident populations.
On the social level, this credit line will enable the financial inclusion of underserved Indian populations, by supporting the development of STFC’s network of rural agencies, with 150 new agencies planned to open in rural areas every year. Proparco’s financing could also support thousands of SMEs that could benefit from it, making this project fully aligned with Proparco’s “green and inclusive growth” mandate in India, and the Sustainable Development Goals 8 “Decent work and economic growth” and 10 “Reduced inequalities”.