Rang De takes microlending online

Rang De takes microlending online

When co-founders Ramakrishna N.K. and Smita Ramakrishna established Rang De, a Chennai-based web-based microlending platform, little did they know of the impact it would have on society. Since its inception on January 26, 2008, the non-profit trust has reached out to over 2,500 micro-entrepreneurs across 10 states by lending over Rs. 1.4 crore, with a repayment rate as high as 98.9 per cent. The founders were ably supported by CSO Partners and ICICI Foundation in bringing their venture to light.

The social initiative has brought cost-effective microcredit to lower income households across the nation, giving them the opportunity to invest in an education or fulfill their business dreams. Through the platform, an individual could participate in the microlending process by contributing as little as Rs. 100. The Rang De team’s passion and commitment towards social change has seen them bring together over 1,300 social investors in a short span of time. This dedicated team currently comprises eight full-time and two part- time team members and active volunteer chapters support the team across seven cities in India.

In sync

Rang De partners with micro finance institutions (MFIs) and non-government organisations to identify borrowers and post their profile on the website. Investors can access these profiles online and pay either a part or the entire loan amount to the borrower. When the entire loan amount is raised, the Rang De partner receives the money and disburses it to the borrower. The borrower repays the money according to the scheduled repayment plan. Investors receive an interest of 2 per cent flat per annum (p.a.) on their investment.

Since the investors can lend part amounts, it brings down the cost of microcredit. “Through this, we hope to reach out and include people to whom even ‘traditional microcredit’ is unaffordable,” says Ramakrishna. Rang De interest rates to borrowers vary from 5 per cent flat p.a. (9 per cent annual percentage rate (APR)) to 10 per cent flat p.a. (18 per cent APR). These are significantly lower than the prevailing rates of at least 15 per cent flat p.a. (28 per cent APR).

Rang De has 17 field partners – including HOPE, Roshan Vikas, Karuna Trust, Pragati, Gram Utthan – in 10 geographic areas across the states of Andhra Pradesh, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Rajasthan, Uttar Pradesh and West Bengal. “We will continue to partner with credible non-government organisations and non profit microfinance institutions across India and support our existing field partners to scale up their operations,” adds Ramakrishna.

Sourcing funds

Currently, Rang De raises funds for working capital loans for micro-entrepreneurs from individuals (social investors) and corporates (corporate social investors). “We will continue to work towards extending our social investor base as well as reaching out to more corporates to tap into their corporate social responsiblity funds,” says Ramakrishna. The operational expenses of Rang De are met through grants, donations and income from operations, which includes a small fee of 1 per cent charged for processing the loans. “Going forward, we intend to raise funds through online sponsorships and subscriptions,” explains Ramakrishna. He adds, “We have not yet broken even in terms of operational revenues. However, we have received funding sufficient to cover our operational costs for next two years.” He also adds that Rang De plans on breaking even in the next 18 months.

There is a critical need to balance between the requirement for credit and the social investments they raise. For this to happen, they feel a great need for awareness about microcredit among potential social investors. “Once people understand the concept, they do not hesitate to make a social investment,” explains Ramakrishna. The second challenge for them is reaching out to unserved and underserved population.

Education- the way forward

Ramakrishna believes that to make a social impact, it is not money that matters, but, the value that you add. And, Rang De believes that it is through education that one adds this value. “Education alone will give people the escape velocity to come out of poverty,” he says.

Rang De, along with the Reach for India initiative of PanIIT, is offering job-guaranteed vocational training, funded by microcredit. Recognising high unemployment rates in rural areas to be one of the biggest problems today, Rang De started two pilots in Bahraich and Karnool for unemployed youth in the 18-35 age bracket, giving them training in vocational skills such as construction and welding. Reach for India provides the schools and placement assistance.

To make this a success, Rang De does not give grants/loans to the students, but, to the parents, forming a joint liability group of parents to ensure social collateral and the pressure they need to ensure they complete the course. In addition to providing one month’s training, they are also given work for six months at a pay of Rs. 6,000 per month. At the end of it, they get a certificate equivalent to the one from Industrial Training Institutes, recognising them as skilled labour.

Another focus area is the primary and secondary education. “Just like the middle class aspired for good education for their children in the 80s and the 90s, today, the lower income group households are willing to even borrow to give their children good education,” says Ramakrishna. They did a pilot in Hyderabad last year, and this year, are doing one in Chennai. Rang De has worked out a model with the schools whereby in return for assured payment, they get 10 per cent discount as well as one month of credit. Rang De plans to launch it in a big way next year and believes that meaningful access to good education will have a positive impact. Even bigger than the impact they have already made.

When co-founders Ramakrishna N.K. and Smita Ramakrishna established Rang De, a Chennai-based web-based microlending platform, little did they know of the impact it would have on society. Since its inception on January 26, 2008, the non-profit trust has reached out to over 2,500 micro-entrepreneurs across 10 states by lending over Rs. 1.4 crore, with a repayment rate as high as 98.9 per cent. The founders were ably supported by CSO Partners and ICICI Foundation in bringing their venture to light.

The social initiative has brought cost-effective microcredit to lower income households across the nation, giving them the opportunity to invest in an education or fulfill their business dreams. Through the platform, an individual could participate in the microlending process by contributing as little as Rs. 100. The Rang De team’s passion and commitment towards social change has seen them bring together over 1,300 social investors in a short span of time. This dedicated team currently comprises eight full-time and two part- time team members and active volunteer chapters support the team across seven cities in India.

In sync

Rang De partners with micro finance institutions (MFIs) and non-government organisations to identify borrowers and post their profile on the website. Investors can access these profiles online and pay either a part or the entire loan amount to the borrower. When the entire loan amount is raised, the Rang De partner receives the money and disburses it to the borrower. The borrower repays the money according to the scheduled repayment plan. Investors receive an interest of 2 per cent flat per annum (p.a.) on their investment.

Since the investors can lend part amounts, it brings down the cost of microcredit. “Through this, we hope to reach out and include people to whom even ‘traditional microcredit’ is unaffordable,” says Ramakrishna. Rang De interest rates to borrowers vary from 5 per cent flat p.a. (9 per cent annual percentage rate (APR)) to 10 per cent flat p.a. (18 per cent APR). These are significantly lower than the prevailing rates of at least 15 per cent flat p.a. (28 per cent APR).

Rang De has 17 field partners – including HOPE, Roshan Vikas, Karuna Trust, Pragati, Gram Utthan – in 10 geographic areas across the states of Andhra Pradesh, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Rajasthan, Uttar Pradesh and West Bengal. “We will continue to partner with credible non-government organisations and non profit microfinance institutions across India and support our existing field partners to scale up their operations,” adds Ramakrishna.

Sourcing funds

Currently, Rang De raises funds for working capital loans for micro-entrepreneurs from individuals (social investors) and corporates (corporate social investors). “We will continue to work towards extending our social investor base as well as reaching out to more corporates to tap into their corporate social responsiblity funds,” says Ramakrishna. The operational expenses of Rang De are met through grants, donations and income from operations, which includes a small fee of 1 per cent charged for processing the loans. “Going forward, we intend to raise funds through online sponsorships and subscriptions,” explains Ramakrishna. He adds, “We have not yet broken even in terms of operational revenues. However, we have received funding sufficient to cover our operational costs for next two years.” He also adds that Rang De plans on breaking even in the next 18 months.

There is a critical need to balance between the requirement for credit and the social investments they raise. For this to happen, they feel a great need for awareness about microcredit among potential social investors. “Once people understand the concept, they do not hesitate to make a social investment,” explains Ramakrishna. The second challenge for them is reaching out to unserved and underserved population.

Education- the way forward

Ramakrishna believes that to make a social impact, it is not money that matters, but, the value that you add. And, Rang De believes that it is through education that one adds this value. “Education alone will give people the escape velocity to come out of poverty,” he says.

Rang De, along with the Reach for India initiative of PanIIT, is offering job-guaranteed vocational training, funded by microcredit. Recognising high unemployment rates in rural areas to be one of the biggest problems today, Rang De started two pilots in Bahraich and Karnool for unemployed youth in the 18-35 age bracket, giving them training in vocational skills such as construction and welding. Reach for India provides the schools and placement assistance.

To make this a success, Rang De does not give grants/loans to the students, but, to the parents, forming a joint liability group of parents to ensure social collateral and the pressure they need to ensure they complete the course. In addition to providing one month’s training, they are also given work for six months at a pay of Rs. 6,000 per month. At the end of it, they get a certificate equivalent to the one from Industrial Training Institutes, recognising them as skilled labour.

Another focus area is the primary and secondary education. “Just like the middle class aspired for good education for their children in the 80s and the 90s, today, the lower income group households are willing to even borrow to give their children good education,” says Ramakrishna. They did a pilot in Hyderabad last year, and this year, are doing one in Chennai. Rang De has worked out a model with the schools whereby in return for assured payment, they get 10 per cent discount as well as one month of credit. Rang De plans to launch it in a big way next year and believes that meaningful access to good education will have a positive impact. Even bigger than the impact they have already made.

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