This Indian Start-Up Is Sachetizing Financial Products For the Blue Collar Segment Bengaluru-based Avail Finance, which is backed by the likes of Bhavish Aggarwal and Binny Bansal, partners with non-banking financial companies to help disburse easy loans ranging upto INR 50,000.

Ankush Aggarwal was working as an intern with cab-hailing company Ola, helping launch its auto rickshaw offering, when he had the realization that the blue collar segment in India was largely underserved in a variety of ways. While he went back to the US to complete his graduation studies, the idea of doing something for that strata stayed with the 27-year-old.

One of the many granular insights during his time working with the auto rickshaw drivers was that in a lot of the vehicles, the seat at the back would often be coming off. He says one would assume that it is because of some things stored beneath, but there's a separate opening at the back for that.

"The reason is they actually take that seat at night from the auto to their rooms and they do that either because the auto is parked outside in the open and the seat has a high resale value and the first thing to get stolen or because the kid needs a bed to sleep."

When he came back a couple of years later, in 2016, the itch to serve this grossly deprived part of the population had not subsided. He realized that financial services is one such large space where those people faced the most amount of problems. And that's how Avail Finance was born.

Co-founded with Tushar Mehndiratta, an IIT-Roorkee graduate with experience of working with Adobe, Avail partners with non-banking financial companies (NBFCs) to help disburse loans ranging upto INR 50,000 for the urban blue collar segment.

"This person doesn't need capital, what this person actually needs is financial protection. Currently, the financial protection for this person is a moneylender who charges extremely high interest rates and is extremely unorganized. We want to bring this segment under the financial umbrella," says Ankush. A 2017 report by the International Monetary Fund found that only 13 per cent of the Indian adults borrow through formal channels as many lacked collateral.

Ankush believes the only industry to have fundamentally cracked this segment is fast-moving consumer goods because it has sachetized everything. "What we are doing is sachetizing financial services for the blue collar sector."

He says lending and credit is a core part of what they do, but they don't want to limit themselves to doing just that. According to him, the idea is to build a financial wellness platform which would result in multiple interactions with the customer and potentially other types of transactions as well.

Then to Now

Avail has raised funds from day zero, with some of their early angels investing in just the idea and the team. High networth individuals such as Bhavish Aggarwal (Ola), Binny Bansal (Flipkart) and Kunal Shah (FreeCharge, CRED) have placed their bets on the Bengaluru-based company.

When Ankush and Tushar started operating in 2017, the company had an INR 20,000 product. Last year, it launched an interest-free product—a loan of INR 5,000 or less for a duration of one month. According to Ankush, that has proved to be a game changer for the company.

"The INR 20,000 loan is more of a need-based loan; you have certain expenditure, you want to buy something, there is a medical expense, it is an expense shock but people in this segment also have income fluctuations," he explains.

He says people in that income group traditionally turn to friends and family for this problem but sitting on the other side of the table, they realized that there was a need for such capital quite frequently. "But how do you build a product for this customer when his current solution is already free of cost? So we said obviously there is value in this proposition. You can take a small loan today and you can graduate with a bigger loan tomorrow."

There's a feature to this product, which allows the customer to leave a tip, however small, if they want to.

He says they were happily surprised that more than 60 per cent of those taking that loan left a tip. "People who themselves don't receive tips from people like us, waiters, drivers, they are tipping a corporate entity like Avail, because fundamentally, what we're standing for is their friend in need."

Currently, the company works with about ten NBFCs and is in talks with several others, says Ankush. While the NBFC charges an interest rate of anywhere between 1.2 and 2 per cent per month from the customer, Avail earns is by charging the NBFC a certain amount for each loan processed through the platform.

Beneath everything that Avail does is technology, says Ankush.

"The lending platforms of the world are built on monthly collections. That's because banking models are built for people like you and me and we earn monthly. But that system breaks for a blue collar person because this person earns on a daily, weekly, fortnightly or whatever frequency. So, rethinking their entire infrastructure in terms of what needs to be built for this customer, with the help of tech, that is something fundamental to our business."

Apart from this aspect, tech also helps the company be accurate and fast with the underwriting process. Ankush says it takes a maximum of 24 hours for a loan to be disbursed from the time an application is submitted.

Expanding Horizons

Over time, the start-up has grown beyond business to consumer to venture into partnerships with companies such as Swiggy, Dunzo and Quess to help the blue collars working for them.

Last year in June, the company raised $9 million in a Series A round led by venture capital firm Matrix Partners. In terms of numbers, the company has so far helped disburse INR 200 crore to a total of about 200,000 customers.

Over a million customers use the Avail Finance platform and Ankush says he expects that number to reach 15 million by March next year.

Going forward, he says the company is also exploring some kind of insurance offerings as well as instruments for savings.