Dvara’s Journey Comes Full Circle As It Seeks A Small Bank Licence

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When Dvara Trust started out, the idea was to approach rural finance differently.

The team of former ICICI bankers who came together to set up the venture had lived through the initial years of private rural finance. They had seen the potential. They had also seen the problems. And so, when they set up the Dvara Trust, in 2008, backed by Rs 150 crore in seed funding from ICICI Bank, the plan was to help move rural finance away from a bank-centric model.

“The problem with our financial system is that it is too bank-centric and the regulation is also very bank-oriented,” says Bindu Ananth, co-founder and chair of the Dvara Trust. The job, Ananth says, is “too big and complex” for a bank in Mumbai to tackle.

Dvara set out with a plan to establish a “bunch” of customer-facing, last-mile institutions. Almost like a network of hundreds of small non-lenders rolling up into a larger one.

The bank-led model of rural finance had also meant an excessive focus on credit as a product. Dvara went in wanting to fix that by offering products ranging from savings and investments to credit and insurance. “The idea was that can we experiment and deliver on the next version that does multiple products, not just credit,” says Ananth.

Twelve years later, some ideas have worked, others have not. Along the way, lessons were learnt. Some of these lessons, driven home by the pandemic year, have now prompted the group’s flagship non-bank lender Dvara KGFS, with over Rs 1,200 crore in managed assets, to apply for a small finance bank licence.

“What we learned over time is that the kind of customisation of products that we would ideally love, is nowhere near what we have been able to get…The second big missing link and unaddressed issue is the access to a bank account,” Ananth said, explaining the decision to seek a small finance bank licence. In addition, the access to longer-term liabilities and a lower cost of funds remains the time-tested draw of the banking model.

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