Ananya Birla started Svatantra in 2012, when she was 17. Today, she has learnt invaluable lessons in how to target microfinance better than industry peers.
Svatantra Microfin Pvt Ltd, a microfinance company founded by Ananya Birla, is betting on Aadhaar, India’s controversial citizen ID project, to increase efficiency delivering financial services to a lucrative cohort of customers — women in villages.
Ananya Birla is the daughter of billionaire Kumar Mangalam Birla, chairman of the $41 billion Aditya Birla Group and one of India’s most powerful businessmen. She started Svatantra in February, 2012, when she was 17 years old. Today, at 23, she has learnt invaluable lessons in how to target microfinance better than industry peers.
About a year ago, Birla, as we will refer to Ananya in this story, realised that Svatantra had to go completely cashless in its own operations if it had to penetrate deeper in the hinterland. The problem, of course, was know your customer (KYC) norms and authentication of data for which Aadhaar was the most viable option.
“Our agents can take (the Aadhaar number) and all the information of the client is directly pulled out. It is more like an e-KYC… Once that is done, we get eligibility criteria in 15 seconds from credit bureaus” — chairperson of Svatantra
Birla believes Svatantra is just scratching the surface in villages. “All our clients are deeply rural. They are so rural that no other microfinance institution that have gone there. There is only one who has a much similar client base — that’s Bandhan (Bank). Others are very urban and semi-urban. That is a huge difference,” she says.
According to Parshvi Gupta, a business analyst at UK-based Dunnhumby Analytics, India’s microfinance outreach is very low — just 8% compared to 65% in Bangladesh. Of this, those MFIs focussing on the poor make for a tiny fraction. “Out of more than 800 microfinance institutions across India, only six are currently focusing their attention on the urban poor… Ensure the uniform distribution of micro financing in both rural and urban areas of each state of India,” she recommends in her note Microfinance in India.
Birla says that Svantantra’s focus on rural customers has helped it expand at a fast clip — in 2016-17, Svatantra grew at 324%. Since inception, the company has grown at a compound annual growth rate of 220%.
Svatantra’s cashless journey has been enabled by Saathi, an app that allows all microfinance processes to be done on a mobile or a tablet — from village surveys to loan origination to management to collections
Another reason for Svatantra’s growth is the shift in its focus on women. When Svatantra started, it lent to both men and women.
Not any more. Five years ago and even later, says Birla, about half of Svatantra’s clients were men. But giving loans to men in villages had its own challenges. Most of them migrated in search of work. Those who stayed back squandered the money on alcohol or just plain cash mismanagement.
“What I learnt was you cannot reinvent the wheel. Men migrate so much that it is nearly impossible to collect the money back from them. It was impossible to keep track,” she says. With women, it was different. “They put it in to boost household income, but men, at times, put it to purposes that are not very viable.”
This may work in the medium term, but MFIs will have to expand their loan footprint beyond women, according to analyst Gupta. “It has been observed that microfinance programmes focus a great deal of attention on women. Women may be better and more reliable clients, but in order to increase their outreach, microfinance companies cannot ignore men,” Gupta wrote in her report.
“You have to ensure that the loan that you give — 90% of that goes into business. It should not go into household consumption or beti ki shaadi (daughter’s wedding) or to consume alcohol” — Birla