How Rang De uses crowdsourcing to make microloans cheaper

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Various studies have come together to claim that money does not always bring happiness. The veracity of these claims can be disputed, but common sense attests to the idea that everyone at some point in their life may have aspired to rise above financial mediocrity.

Furthermore, it would not be an exaggeration to say that this scenario may be more prevalent in the rural pockets of the country where aspirations are often interrupted by domestic responsibilities. It is therefore not surprising that an initiative which seeks to remedy this situation has many takers.

“Our mission is to eradicate poverty in India by meeting the credit needs of underserved communities here,” says Smita Ramakrishna, who co-founded the P2P (peer-to-peer) online lending platform Rang De with her husband Ramakrishna NK in 2008. “We are striving to achieve this through a network of individual and social investors spread across the country,” she added.

The Bangalore-based non-profit organization (NGO) provides cheap microloans to low-income households at incredibly low interest rates. Depending on its model, lenders can choose a borrower – be it a farmer, tailor or student – and contribute to their needs – in part or in full – in multiples of Rs 100.

The borrower then reimburses the amount within a determined period at an interest rate of between 6% and 10%, of which 2% is returned to the investor after deduction of a lump sum for unforeseen events, the Rank of retaining until at 2% for internal expenses. . The rest goes to support rural partners – most of whom are nonprofits themselves – as they travel from village to village to organize literacy sessions and collect KYC data from borrowers.

“According to our financial statements last year, around 40% of the expenses were reimbursed out of that 2%,” Ramakrishna said. “The rest of the operational expenditure is financed by grants,” he added.

In fact, the main difference between Rang De and conventional microfinance units in India is the focus of the former on lowering interest rates to make loan products more affordable.

“We are able to cut costs by bringing in individuals rather than involving big banks,” he says. “In addition to this, we are also exploring institutional partnerships with other NGOs giving them credit so that they can broaden their reach,” he added.

Guardians of Dreams – a social sector startup in the childcare space – has been a Rang De field partner for over a year now. The NGO relies on the loan platform to finance its scholarship programs for children in foster homes.

“We raise money through our donor bases, but borrow from Rang De to make sure it happens on time,” says organization co-founder Gloria Benny. “This money is then repaid at a low interest rate and at more flexible terms,” ​​she added.

Guardians of Dreams works with children’s homes to improve the quality of child care. “In addition to improving the infrastructure in these homes and providing documents to these children, we also provide scholarships of Rs 25,000 for their college studies,” she added.

No conditions apply

The other appeal of this service is the level of transparency in which it operates, especially since microcredit finance programs in India are generally viewed with a great deal of skepticism. “The interest rates that a borrower pays for the loan product are published on the website,” says Smita. “We also provide regular updates to our social investors and hold regular offline meetings in different cities where all the players – from social investors to borrowers – come together,” she adds.

Rang De also enjoys a consistently high repayment rate of 93% since disbursing his first loan nine years ago. This is no small feat considering that most of the borrowers are high risk people without any financial backing.

“We have very few defaulters, perhaps because our loans are a huge relief for them, who are otherwise forced to approach conventional banking channels which lend notoriously even 30% per year,” explains Smita.

Approved by Raghu Dixit, Waheeda Rehman and Nagesh Kukunoor, at last count, Rang De had granted 57,096 loans, thanks to generous contributions from 12,443 social investors. During its nine years of activity, the organization has raised social investments worth more than Rs.55 crore, covering underserved pockets in 18 states across the country.

Swabhimaan

Interestingly, the majority of borrowers on the platform – 93.25% to be precise – are women, which inspired the organization to launch a pilot project exclusively for them with a focus on literacy training. same day financial and loan approvals.

Launched on International Women’s Day earlier this month, “Swabhimaan” launched a credit score-based system using technology with Aadhaar and UPI as the basis. It allows customizable loan requests and disbursements through digital channels using kiosks installed in villages.

“These self-service kiosks – or Bioscope – will help them familiarize themselves with the financial concepts essential to good money management,” explains Ramakrishna. “They will be assessed on the basis of this training, after which they will be able to apply for loans independently,” he adds.

Raziya from Yeshwanthpura village in Kolar district of Karnataka was the first to apply for a loan under this program. “The Bioscope was user-friendly and adapted to our mother tongue,” explains the 23-year-old, who runs a sewing studio. “We are also connected to a Rang De Mitra which helps to solve any problem we may encounter during the literacy session,” she added.

If successful, the organization will replicate this program in other villages across the country, ensuring that women are well informed about the different sources of credit available to them.

Today, Rang De works with 16 partners on the ground in states like Manipur, Orissa, Maharashtra and Madhya Pradesh, in addition to the 12,000 plus social investors in his circle. “Our long-term vision is to be able to shell out Rs.100 crore per year,” Ramakrishna said. “It could go a long way in eradicating poverty in India,” he concludes.


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