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Arthan Finance Connects Nano Entrepreneurs with Tech-Based Credit

Project Overview

There are more than 11 million nano enterprises in India today, and they represent a significant portion of India’s economy. These street vendors, neighborhood kirana stores, micro-wholesalers, and other extremely small businesses have an annual turnover of between $13,000 and $130,000 (INR 10 lakh to INR 1 crore) and typically provide jobs for one to five workers.

Yet their informal nature and perceived high risk for loans mean that only 10 percent have access to formal credit. This leaves 90 percent of nano enterprises vulnerable to external shocks and expensive loans to protect their businesses. They often resort to credit from money lenders who charge interest rates of 60 percent or higher, which creates a cycle of ongoing debt and pushes these nano business owners closer to poverty.

Arthan Finance is creating AI technology-informed lending models to help nano entrepreneurs access affordable loans and expand their impact on families and livelihoods.

Ambika Patra sitting in her kirana shop with her son, smiling to camera and surrounded by their goods.
Ambika Patra and her husband operate a small temple goods store on the outskirts of Bhubaneswar. With plans to expand their business to offer catering equipment rentals, the couple needed a $5,000 (INR 4 lakh) loan. Arthan Finance was the first institution to offer them a formal loan over a four-year term.

How It Helps

Nano enterprises could have a significant impact on the Indian economy if they were able to grow. They represent a credit market as large as $26 billion (INR 2 lakh crore) with the potential to employ at least 20 million people.

To support this sector, Arthan Finance uses artificial intelligence and machine learning (AI/ML) to create alternative credit models that ascertain the creditworthiness of nano entrepreneurs and qualify them for loans. Arthan’s lending model is based on two pillars: using the power of technology and networks, and providing purpose-based credit to enable growth.

The model builds on nano entrepreneurs’ digital footprints. Almost all nano entrepreneurs have bank accounts, and more than 75 percent have smartphones or feature phones. In urban areas, more than 50 percent have made digital transactions in some form. Their digital actions leave data trails that Arthan uses to create alternative credit models through its proprietary AI/ML algorithms. These models provide the credit history nano entrepreneurs need to become eligible for loans.

Partnering to Expand Access

Arthan Finance partners with MSME-focused platforms such as Khatabook, Finbox, and Minkpay which run smartphone apps for digital recordkeeping, inventory management, and payment solutions. In addition to serving as a source for business data and insights, these partnerships also allow Arthan Finance to reach more nano entrepreneurs with customized, purpose-based credit solutions to help them grow their businesses.

Through its model, Arthan has disbursed loans to over 16,000 businesses in the last year. With access to formal credit, these nano enterprises can expand their impact and support more families and communities in India.

Foundation Project Lead