MUMBAI: Ratan Tata, Tata Sons chairman emeritus, Nandan Nilekani, Infosys co-founder and Aadhaar architect, and Vijay Kelkar, noted economist and former finance secretary, have joined hands to start a microfinance venture. Named Avanti Finance, the company will lend to the poor.
It will apply for a license for the microfinance business, made famous by Nobel laureate Muhammad Yunus, to the Reserve Bank of India (RBI) in the coming days and hopes to launch operations before December 31.
Tata and Nilekani, in a joint statement said that they are bringing their investments from their respective philanthropic capital, and “any gains will be reinvested in philanthropic causes”.
Besides Tata, Nilekani and Kelkar, Tata Trusts managing trustee R Venkataraman will also be a part of the venture. The statement, without disclosing the founder-directors’ investments in Avanti, said a senior leadership team has been put in place. Avanti will be a technology-enabled financial inclusion vehicle
This is perhaps the first venture Tata is building from ground-up post his retirement as Tata Group chairman in December 2012. So far, the septuagenarian has been putting money in existing companies spread across e-commerce and social impact sectors. Nilekani, whose passion is technology, too has been backing transformative business ideas that would solve problems for the country. “My participation in Avanti is more driven by social motivation rather than anything else…technology is an important differentiator and allows us to make a difference in many ways than one,” Nilekani said. Currently Kelkar is on the board of Tata Consultancy Services, the most valued company in India.
“The aim is to leverage on the social sector presence of Tata Trusts and other like-minded partners and the rapidly evolving India Stack (Jan Dhan – Aadhar – mobile), UPI 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,” the statement said.
Of late, microfinanciers have started to disburse loans, the maximum ticket size being Rs 15,000, directly to low-income people using technology in a bid to cut lending rates. Currently, most micro lenders lend through NGOs and local self-help groups and charge rates up to 24% per annum.
The microfinance industry is growing at a breakneck speed after it nearly collapsed six years ago. In 2010, a number of borrowers committed suicide in Andhra Pradesh__which used to account for bulk of the industry’s loans, to escape coercive tactics employed by microfinancers, prompting the RBI to cap usurious interest rates and high-margin fees. Recent data from the industry trade body showed that during the January-March period, gross loan portfolio of the industry had grown by 84% on an annualised basis to Rs 53,233 crore.