Two of the most celebrated industrialists India has ever seen — Ratan Tata and Nandan Nilekani have decided to come together to offer financial aid to underserved and unserved segments of India. Both persons are investing from their personal philanthropic capital to start a microfinancing institution (MFI) called Avanti Finance.
Many people from the lower strata of the society often fail to get capital from traditional lending sources. This is the prime motive of both personalities coming together to start Avanti Finance. Explaining about the same, Tata Trusts said in a statement,
“The promoters strongly believe that the institutional inequalities and information asymmetries are depriving the target customer segment of access to affordable credit. The target customer segment over the last few years has displayed very low delinquency rates compared to any other customer segment, but still is charged the highest rate of interest.”
Avanti Finance aims to deal with this issue and offer credit at affordable costs to this segment.
“Avanti will be a platform to impact the poor through credit at individual and community levels to create an improvement in their livelihoods and standard of living, ushering prosperity, “
The major focus of Avanti Finance will be to leverage technology to speed up the microfinancing process and lower the cost of operations to offer credit at low rates.
It will also integrate various services of financial inclusion currently going on in the country with means of technology. In fact, as per Nandan Nilekani, the key differentiator of Avanti will be the use of technology.
Notably, the Indian government is also working extensively to bring financial inclusion to all population segments in the country. There are microfinancing institutions present which offer credits to the underserved segment.
However, they are small in number whereas people who need such loans are very high in number and do not have access to these institutions. And Avanti Finance will solve this problem by use of technology.
According to a press release, they want to leverage the social sector presence of Tata and schemes Jan Dhan-Aadhar-Mobile, UPI (unified payments interface) and payments bank ecosystem.
“Avanti would use this ecosystem and will innovate on product design in consonance with the indigenous needs, to deliver seamlessly for the end consumer,”
said the statement.
Tata and Nilekani will invest in the project from their personal funds of philanthropic capital. They will reinvest any profits back into these causes.
The company has applied to Reserve Bank of India to seek permission to start its operations as an MFI. It is expected to start its operations by the end of this financial year.