We Want To Be The Banker of Every MSME In India: Arth

The small businesses sector is not just one of the biggest in India with footprints across the length and breadth of the country, it is also largely unorganised with little or no access to formal finance. Arth, which started with the aim of delivering low-cost credit and financial services to small businesses, has over the years managed to reach out to a large number of small business owners, with its business model designed to cater to new-to-credit (NTC) micro businesses in the country with a special focus on women-led businesses.

Arth’s business model is uniquely developed to identify and support micro-business owners' credit and capital requirements either directly or through partnerships with network operators at national, regional and hyper-local levels to offer working capital loans and other financial products such as insurance, payments, etc.  

How Arth Works 
Arth’s two-pronged approach of partnering with national players via MSME networks using the digital platform, and directly digitising select-occupation micro MSMEs using hyper local partners has established unique digital and phygital channels to cater to the vast MSME population in the country. The company differs from other solutions in terms of product design as well as distribution channels.

Innovation is built into Arth’s product technology, process integration and credit engine. The company captures data of potential customers across social, economic, health and business parameters to assess credit worthiness. It uses its proprietary credit engine and digital lending platform to generate and digitally offer the best flexible line of credit to its customers.

Since technology adoption is still limited amongst its target group, the team at Arth helps new-to-credit customers understand the details of the credit and payment mechanism to ensure that there are no surprises for the customer at a later stage. For Arth, this exercise gives them a chance to understand the needs of a customer better and design products suitable for them. For instance, during the Covid lockdown, many customers needed capital to restart their business. Arth offered Covid Rahat loans – interest-free financial loans to help customers who were severely impacted by loss of income generating activities during lockdowns. Rahat loans were targeted at women nano entrepreneurs with earnings less than Rs 3 lakh per annum.

Approach Towards Customers 
Founder Shweta Aparmeya says Arth, in a good way, lacks homogeneity. This works for the company as the MSME sector in India is quite heterogeneous. Arth tries to understand the behavioural patterns of small businesses as well as their needs as far as access to responsible finance is concerned. Because small businesses need that catalytic capital, the firm will have to break down this complex ecosystem into something which becomes a serviceable, slightly more understandable ecosystem.

Arth also never penalises its customers. Until April, Arth had never levied delay charges. Despite it being a revenue option, Arth prefers to understand the reason for the delay than just penalising the customer for it.

The Milestones
Arth currently has a credit reach in more than 18,400 pin codes, supports over 70,000 women-led micro businesses, and has touched the lives of more than 3,70,000 micro MSMEs till date. It aims to impact 1 million MSMEs in the next one year through digitisation.

The company has helped over 40,000 women nano-enterprises avail credit. The impact measured under livelihood enhancement relates to the Sustainable Development Goals laid out by the United Nations. Fiftyfour per cent of women micro-entrepreneurs have reached an average monthly income range of Rs 25,000 to Rs 40,000 after utilising credit support from Arth. Also, 67 per cent of the micro-entrepreneurs who started record keeping of their businesses say that they were able to save money from their daily operational expenses. In less than six months, Arth has established 350-plus channel partners in remote parts of India, giving it cumulative access to 4,000 micro-shopowners.  Majority of these shops are first-to-credit, enabled by the hyper-local approach adopted by Arth.   

The Way Forward 
Arth aims to be a full-stack service provider, a transformative partner, somebody who's proactively out there and seeking information to be able to deliver the right financial products. Credit is their starting point. And then they have insurance, payments, and the firm wants to digitise small businesses by giving them the right business tools, including capacity building. Aparmeya feels that if they are able to touch about a billion customers that they are seeing in sort of two years, that's a goalpost where Arth has happy 1 million micro MSMEs small and narrow businesses operating with it and growing their business and growing their life. That is a sort of mission for Arth.