Ratan Tata and Nandan Nilekani’s Avanti Finance wants to help 150 million households get rid of poverty

Ratan Tata and Nandan Nilekani’s Avanti Finance uses data and technology to combine with financial partners to lend to the poor and alleviate their lives with customised products.

Four years ago, Indian business icons Ratan Tata and Nandan Nilekani joined hands to launch Avanti Finance, a social fintech startup that hopes to serve 150 million unbanked households in India.

To achieve this, the duo brought in Lalitesh Katragadda as its Chief Product and Technology Officer, Manish Thakkar as the Chief Operating Officer, and Rahul Gupta as the CEO.

Avanti Finance

"Avanti Finance creates a more equitable economic system for financial services. In India, this journey of taking banking and other financial services to the masses has been paved with challenges despite its stated intent of ameliorating poverty," says Rahul Gupta, CEO tells YourStory Media.

Data suggests that only 80-90 million households in India are a part of the formal credit system. This means that the rest — over 150 million households — are dependent on non-institutional sources, such as local moneylenders or acquaintances.

These lenders, in the unorganised segment, levy exorbitant interest rates, creating a vicious cycle of poverty and asset loss. Avanti Finance wants to eliminate these lenders and help users avail products tailored to their economic needs without any hidden charges.

"We started with small ticket loans solely for livelihood enhancements and will offer fit-for-purpose insurance and savings products in the future," adds Rahul.

The opportunity and the product

Avanti Finance wants to help the financially excluded become a part of the mainstream financial system so that they are empowered to save, borrow, and receive benefits.

The company’s core product is the Avanti Platform, an open-access “digital financial spine", which helps its partners to create, curate, and deploy financial products in a touchless, presence-less, and cashless interface. In the form of an app, it is open for use to philanthropic funds, commercial sources, other NBFCs, MFIs, and banks.

"We believe that the interplay between the digital spine and our partnerships result in several outcomes. The outcomes are to bring organised financial services to the unbanked. Technology can reduce the cost of reaching these users and of administering financial services," says Rahul.

The business model

Avanti Finance has an assisted model. Its network of partners sources customers and provides input for customised products and also manage the credit operations.

Rahul Gupta, CEO, Avanti Finance

The startup’s partner agents onboard users onto the Avanti platform via its app on their handheld devices. This entire process takes less than fifteen minutes. The subsequent loan approval is digitised and the disbursement is made directly to the customers’ bank account, which takes only a few days.

The process is fast, frictionless, and unique for the bottom of the pyramid segment.

"We partnered with SEWA Bihar Credit and Thrift Cooperative, a cooperative institution and a part of the Self-Employed Women’s Association (SEWA) Network, for our first pilot in Bihar. SEWA Bihar has a history of working with women groups on their livelihoods, savings, and credit patterns since 1983 and enjoys the respect of the community. Through intensive needs assessment and insights, Avanti co-created a credit product, which was customised to the needs of the borrower offering between Rs 20,000 and Rs 50,000 for micro-enterprises," says Manish Thakkar, COO of Avanti Finance.

Avanti Finance has raised more than Rs 102 crore from the NRJN Family Trust, and Rs 15 crore in debt from the Michael and Susan Dell Foundation. It is yet to find profitability. For additional growth capital, it is evaluating opportunities with impact investors and marquee global foundations.

The startup claims to have disbursed a total of Rs 200 crore in loans to approximately 30,000 households, impacting around 150,000 people to date.

Business challenges

Avanti Finance is a bold experiment on multiple dimensions. The team passionately believes that a digital delivery model is the only way to build a scalable business. Executing this in rural locations has come with its set of challenges, such as going paperless, the KYC process requiring a wet signature, understanding the validity of digital agreements by the ecosystem, and stoppage of E-KYC for NBFCs.

Even going cashless continues to be a problem. The discontinuation of setting up of mandates using biometric has been a setback and so has the lack of interoperability in banking channels. 

"We have built key assets—an agile platform, a strong partner network, and a mission-aligned team. Our product-market fit is strong and we have a high demand. Now, we have to execute to take the business to the next level. We must bring on an array of relationships that have the capital and use our platform to reach geographies and segments to help our users access financial products that enhance their livelihoods," says Lalitesh K, Chief Product and Technology Officer, Avanti Finance.

The startup has a mix of partners — social organisations, Business Correspondents (BCs), agritech players, and FPOs (Farmer Producer Organisations) — that support its presence across nine states and 70 plus districts. These include ASSEFA (Association for Sarva Seva Farms - Association for Farms of All Service), SEEDS (Socio Economic and Educational Development Society), ASA (Action for Social Advancement) Jai Kisan, Mahismati, and Basix.

The market

According to PWC, although India is one of the world’s fastest-growing economies, access to credit remains one of the major impediments, resulting in low financial inclusion.

For Avanti, the task will be offering its platform as a service to other financial institutions so that multiple pools of organised capital can be connected to the neediest users in a frictionless manner.

According to Rahul, the startup does not compare or compete with NBFC-MFIs as it believes that these will become important partners in the future to serve their end customers.

“We also believe that our platform will result in the creation of a large number of small- and medium-sized financial organisations to serve local ecosystems. Poverty is our only competition and we aim to make every loan at Avanti an impact story,” he signs off.

Edited by Saheli Sen Gupta