Tata Trusts Chairman Ratan Tata, former finance secretary Vijay Kelkar and Infosys cofounder Nandan Nilekani are teaming up to start a technology-enabled financial inclusion vehicle, Avanti Finance, which will provide tiny loans to poor ignored by other lenders. The aim is to knit together several related threads:
The social sector presence of Tata Trusts and other like-minded partners
The JAM trinity comprising the Pradhan Mantri Jan Dhan Yojana, the Aadhaar system and mobile phones
The Unified Payment Interface, or UPI, that's just debuted
Upcoming payments bank ecosystem Since stepping down as chairman of Tata Sons, Ratan Tata has invested in more than 25 firms. Ratan Tata has invested in several firms, including unicorns such as Ola, Paytm and Snapdeal. He has also set up a venture fund -RNT Capital Advisers.
“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,“ Tata said.
Infosys cofounder Nilekani, who led the team that established the Aadhaar unique identity system, recently invested in Mumbai-based Sedemac Mechatronics as well as Bengaluru-based 10i Commerce Services.
Avanti's promoters believe institutional inequalities and information asymmetries are depriving the poor of access to affordable credit, they said in a release. In the past few years, the poor have had low delinquency rates compared with any other segment but are charged the highest interest.
Financial inclusion is a key thrust area for the government and the Reserve Bank of India, aimed at opening up access to financial services for vast sections of the population.
To this end, they have initiated several programmes, including the Pradhan Mantri Jan Dhan Yojana and payments banks, which are in the process of being set up. India also has an ecosystem of microfinance institutions that offer tiny loans to the poor, although their presence is not uniform across the country.
The Pradhan Mantri Jan Dhan Yojana has so far covered over 99.7% households and offers formal banking services to them. Nearly 24 crore accounts have been opened by banks in the past one-and-a-half years, which now have a deposit base of over Rs. 41,789 crore.
Both Tata and Nilekani will invest from their philanthropic capital and any gains will be reinvested in such causes. Avanti will apply for registration to the Reserve Bank of India soon and will start operations before March 2017.
“My participation in Avanti is more driven by social motivation rather than anything else -with a view to serve the underserved and unserved and make the Tata Trusts and other like-minded partners' philanthropy more effective,“ Nilekani said. “Technology is an important differentiator and allows us to make a difference in many ways than one.“It is a very important step because the Indian mass still does not have access to financial institutions,“ said Sreedhar Prasad, partner, ecommerce and startups, KPMG India.
“Small finance banks take time to set up, the mass of people who need these loans is very large in India. Any lending product for masses is a huge opportunity. Seamless operationalisation and collection would be key, since demand will not be a problem,“ he adds.
The social sector presence of Tata Trusts and other like-minded partners
The JAM trinity comprising the Pradhan Mantri Jan Dhan Yojana, the Aadhaar system and mobile phones
The Unified Payment Interface, or UPI, that's just debuted
Upcoming payments bank ecosystem Since stepping down as chairman of Tata Sons, Ratan Tata has invested in more than 25 firms. Ratan Tata has invested in several firms, including unicorns such as Ola, Paytm and Snapdeal. He has also set up a venture fund -RNT Capital Advisers.
“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,“ Tata said.
Infosys cofounder Nilekani, who led the team that established the Aadhaar unique identity system, recently invested in Mumbai-based Sedemac Mechatronics as well as Bengaluru-based 10i Commerce Services.
Avanti's promoters believe institutional inequalities and information asymmetries are depriving the poor of access to affordable credit, they said in a release. In the past few years, the poor have had low delinquency rates compared with any other segment but are charged the highest interest.
Financial inclusion is a key thrust area for the government and the Reserve Bank of India, aimed at opening up access to financial services for vast sections of the population.
To this end, they have initiated several programmes, including the Pradhan Mantri Jan Dhan Yojana and payments banks, which are in the process of being set up. India also has an ecosystem of microfinance institutions that offer tiny loans to the poor, although their presence is not uniform across the country.
The Pradhan Mantri Jan Dhan Yojana has so far covered over 99.7% households and offers formal banking services to them. Nearly 24 crore accounts have been opened by banks in the past one-and-a-half years, which now have a deposit base of over Rs. 41,789 crore.
Both Tata and Nilekani will invest from their philanthropic capital and any gains will be reinvested in such causes. Avanti will apply for registration to the Reserve Bank of India soon and will start operations before March 2017.
“My participation in Avanti is more driven by social motivation rather than anything else -with a view to serve the underserved and unserved and make the Tata Trusts and other like-minded partners' philanthropy more effective,“ Nilekani said. “Technology is an important differentiator and allows us to make a difference in many ways than one.“It is a very important step because the Indian mass still does not have access to financial institutions,“ said Sreedhar Prasad, partner, ecommerce and startups, KPMG India.
“Small finance banks take time to set up, the mass of people who need these loans is very large in India. Any lending product for masses is a huge opportunity. Seamless operationalisation and collection would be key, since demand will not be a problem,“ he adds.
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