Pune, June 2021

Reaching the unbanked in India

Pinkes Ambvat, chief information officer and IT director of CRIF India, which launched India’s first microfinance database in 2011, believes that fintech companies are not only harnessing data, but also helping automate the underwriting process. “They use algorithms and AI to develop their own credit rating mechanisms, apart from psychometric tests and digital verification to evaluate potential customers’ creditworthiness and ability to repay. Technology is revolutionising how microfinance fintech services are delivered,” says Ambvat.
Avanti Finance, which saw the coming together of Ratan Tata, Nandan Nilekani and Vijay Kelkar to facilitate financial inclusion through technology, is an MFI that works with partners and connects with the end user through a process that is paperless, presence-less and cashless. Manish Thakkar, the company’s chief operating officer, believes that Avanti’s crowd-sourcing approach for collecting and using data will bring about a huge shift in the MFI sector.

Microfinance in India: Some key facts
Microfinance in India plays an important role in delivering credit to people at the bottom of the economic pyramid. Owing to its grass-roots level connect, it is able to support income-generating activities and impact livelihoods in both rural and urban geographies. Furthermore, microfinance acts as a potent tool for empowering women who constitute the largest part of its borrower base, according to the Reserve Bank of India’s September 2020 report, Microfinance: Reaching out to the Bottom of the Pyramid.
Microfinance loans are of small amounts, with short tenures, extended without collateral and the frequency of loan repayments is greater than that for traditional commercial loans. These loans are generally taken for income generating activities. The overall gross loan portfolio of MFIs — the outstanding amount of loans extended to microfinance borrowers — grew from Rs.1.79 trillion as on March 31, 2019 to Rs.2.32 trillion as on March 31,2020.
In terms of geographical spread, East, North-East and South India account for 67 per cent of MFIs’ loan portfolio, while the remainder is spread across West, North and Central India. Among the states, Tamil Nadu holds the largest share of microfinance loans, followed by West Bengal and Bihar.

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