I must disclose, I am just beginning to blog at citizenmatters and this is my first post. I will be posting about various types of Bangalore based businesses, right from startups to local businesses to bottom-of-pyramid ventures to single person owned firms or trades. The idea is to highlight what is unique in them, however small or trivial the case maybe.
With that said, the theme for this post is about social investment. I have been always intrigued with the new breed of social lending platforms, currently operating in and around Bangalore, the ones that most easily come to my mind are Dhanax and Rang De. Both of them resemble each other in their operating models with some small differences. The are trend setters in the micro-credit area in India.
Rang De is the next generation non-profit organization with the greater aim of providing micro-credit (small sized loans in the range of Rs 5000 to Rs 15000) for poorer sections of the society and thus reducing or alleviating poverty one step at a time. So also Dhanax. The setup has three components –
(1) the social investors
(2) the RangDe platform or Dhanax intermediary
(3) the borrowers
Anybody (NRIs included) can be an investor by lending small amounts of money, as low as Rs 1000 and be one of the circle of social investors. One can also choose and target particular borrowers.
Dhanax lets the investor divide credit amongst multiple borrowers to minimize any loss. The money thus collected is then disbursed at an interest rate of around 8.5% p.a (lower than normal) to borrowers, via a network of field workers. The system is setup in such a way that no payment gateways are involved; only consumer bank accounts. The denomination supported is Indian currency, the rupee. There is a 30 day loan disbursal guarantee.
Borrowers belong to low-income households and generally take money from the market to fulfill a business need like stitching clothes, selling food items, making furniture or pay for medicine etc. It is found that most of the borrowing population consists of women in general. The borrowed money is returned as per a pre-determined schedule either in parts or as whole. And the return payment of the loans is near 100% with very miniscule or almost zero defaulters. The rates of interest are much lower as compared to banks and other capital donating institutions.
Both Dhanax and Rang De partner with small time lenders and other selected or registered partners, who along with field workers form the network of micro-credit exchange. The onus of return payment lies with the intermediaries and field partners and the pressure of maintaining reputation along with recommendation maintains a healthy rate of return payment with interest.
What’s in it for the lenders and what’s in it for the RangDe and Dhanax as organizations?
Firstly, the lenders are not mere money makers, they are a part of greater network to alleviate poverty and thus contribute towards social welfare.
Secondly, social investors earn a good return in a small amount of time with returns in the range of 4% p.a. This is a good bet for medium income earners or household to invest money and get returns.
Coming to the other half of the question, Rang De wants to change the model of uplifting poorer sections, one by preventing exploitation, and two, by providing alternative to charities and unreliable investments. While Dhanax wants to a channel for the middle income group with some extra money to invest, at the same time be helpful to the community and earn some money back in the process.
As a side effect both these platforms would aim to drive down the interest rates and bring a larger number of people within the range of ready access to loan money. The thrust here is to provide an exclusive, safe and flexible community forum for small amount loans. The support system is geared to help the rural population, low income and slum dwelling urban populace.
Some of the players in the global micro-finance market are Kiva (provides inter-country micro-credit) and Grameen Foundation.
I feel micro-credit and peer-2-peer lending would be a path-breaking means of generating funds for the lower income group and helping alleviate poverty at the micro level, where banks or other financial institutions aren’t able to cater to low income customers.
These platforms want to succeed by being highly helpful and beneficial to all parties concerned and that’s the way to go! ⊕
It was nice to read your blog. I would like to emphasise on the fact that Rang De’s sole mission is to drive down interest rates that consumers of microcredit are being charged. In that sense RangDe.Org is very different from other p2p models. Any borrower getting a loan via RangDe.Org pays nothing more than 8.5% flat pa …I may not be wrong if I say, that, is by far the lowest in India…