Meet the social impact startup that has funded over 15k women micro-entrepreneurs in rural India

From small shop owners to traders and agriculturists, Delhi-based social impact startup Arth has provided Rs 25 crore worth of loans to micro-entrepreneurs, primarily women.

13th Feb 2020
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The risks and aspirations of micro-entrepreneurs run the rural economy, the politics of the land, and the stuff that success stories are made of. But the crucial ingredient of credit is missing, hindering their growth greatly. 


Micro- entrepreneurs don't get to access credit on time and are often ignored by the banking network, simply because they have not been able to reach this market. And a majority of these entrepreneurs are women. 


Taking stock of the situation, Shweta Apremeya launched Arth, a social impact startup, in 2015.  The Delhi-based venture delivers credit for small and micro-entrepreneurs, and provides livelihood welfare services with a focus on financing rural women micro- entrepreneurs and micro-merchants. 


Arth

Arth Founder Shweta Apremeya


"The impact sector is constantly challenged with fund flow – limitations in both, access to commercial capital and expectation of commercial returns, make it a challenging space to crack," says Shweta Apremya, Founder of Arth


Shweta is a graduate of MIT Sloan School of Management. She has worked in the payments and lending space for 15 years.  Before Arth, she co-founded Happy, a lending fintech for SMEs, which continues to fund small businesses with working capital. 


The team has worked in the similar space of digital financial services, financial inclusion, fintech, and mobile payments. It has 10 branches across the country.




Wealth creation for women entrepreneurs

Arth follows a neo rural-finance model to go after micro-entrepreneurs, especially women, in rural areas—small towns, blocks, and villages.


"The model is a combination of deep branch network supported by end-to-end digital processes that are user-friendly, and allow for a scalable way to identify customers and offer services to them," says Shweta, adding that the startup uses advanced technology in a meaningful manner for customer selection, credit decisioning, disbursement, and collections


The Founder says Arth has developed a first-of-its kind credit underwriting tool, which is built on large, existing micro-enterprises’ data, including socio-economic, geographical, and demographics parameters.


This, when combined with certain physically verifiable parameters, helps assess the repayment capability and intent of the micro-entrepreneurs, and ascertains the optimal loan limit. 


One has to remember that this segment of the population does not have a credit score. Building good credit scores means that these entrepreneurs can raise loans to expand their business


Arth has also been able to layer social benefits on top of credit delivery for the women and their households, helping them to understand where their money can be saved. 


“The first outreach happened in a small town near Lucknow Bachnawarn, where we held a forum for women, introducing them to our service model, and launched our first branch,” Shweta explains.


The startup has expanded rapidly across the northern regions of India where Arth employees use mobiles to originate loans in villages. It is present in 500 locations, covering close to 600 villages.   

 

Arth has so far delivered Rs 25 crore worth of micro credit to micro women entrepreneurs in rural areas. The startup has raised funding lines from impact lenders of around Rs 20 crore and a small angel round for growth.


"Being an impact venture, there is a constant need to balance our social and financial viability to stay aligned with our purpose," Shweta says


She adds that the key principle of the model is driven by wealth creation for their women clients whose social and economic growth are the real measure of the model’s success. 


In the next 18 months, the startup plans to enter new geographies across India with its branch model and take its social welfare services deeper.


"The model is built for scale, and the economics is dependent on the volume of the outreach to rural women. The more number of women that take micro credit and financial services products from us, the more it helps us make revenue and reach financial viability," Shweta says.


Empowering women 

The startup’s model of developing powerful women-led occupations can support the rural hyperlocal economy. Most women micro-entrepreneurs are into trading, agriculture, and handicrafts. The process is completely assisted and paperless.


The women apply through an offline model where the loan originates digitally and is then disbursed to their accounts. The average loan size is Rs 17,000 and for a duration of less than six months. 


When Santoshi, a woman micro-entrepreneur running a handicrafts shop in Lucknow, started her family business, she faced lot of difficulties in getting finance at an affordable rate of interest.


“Arth has helped a lot in improving my financial situation, and now I can afford to pay workers at my shop and expand my family business," she says. 


The startup has been growing slowly by catering to micro -enterprises, and over 15,000 rural women micro-entrepreneurs are now credit- linked via its services . “Many of the women are single parents or widows who need lot of encouragement to support their families,” Shweta adds. 


The startup makes its revenue on the interest.


Fintech is a $31 billion market in India according to Niti Aayog. 


According to the Census of India there are nearly 6.5 lakh villages in India. This presents Arth a big opportunity to expand. It competes with banks and companies like Capital Float and SnapMint in the micro credit business.


(Edited by Evelyn Ratnakumar)

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