Rang De: Now anyone can support microfinance

By Naagesh, N.

Microfinance Focus, July 1, 2009: Small businesses are the ones which attract virtually no second look from the investors but microfinance with the help of websites is reaching micro enterpreneurs in every nook and corner and India is no exception. Taking cue from the American Kiva’s Web site (www.kiva.org) where anybody can provide  a loan of $25 to support an entrepreneur in a remote place, keep track of the loan and its progress, Rang De in India has unveiled similar web-based plan to bring together social investors and those at the bottom of the social ladder who have been ignored for long.

Rand De allows prospective lenders to search entrepreneur profiles from its website and select who will receive their loan. A loan of Rs 500 to 5,000 can be made at 3.5% annual interest through the website. The recipient, usually belonging to a self-help group or a voluntary group will have to pay 8.5% to avail the loan and the rest 5% would go in meeting the administrative cost of the voluntary organisation. The Rang De platform, with its low cost venture, wants to bring down the interest on micro credits down by at least 4% from what the traditional MFIs charge.

Microfinance institutions borrow capital from the banks at a fixed rate of interest, usually 5 to 8 percent and then add the cost of servicing the loan before disbursing it to the borrowers who are low-income individuals or small entrepreneurs. Through microfinance, capital reaches new businesses or individuals, and high loan repayment rates give lenders the comfort that their initial loan amount will be recovered. Through microfinance, now anyone can help stimulate the economy by loaning to new businesses.

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