Have you ever wondered what happens to money that’s sitting in your savings account, waiting to be withdrawn and used? I imagine it sitting in little stacks inside a steel vault or an ATM machine, waiting patiently for its day in the sun. But speak to Smita Ram, a young social entrepreneur, and you’ll see that there’s no need for money to laze around waiting to be withdrawn, when it can in the interim be used to bring colour into someone’s life.
How can really small sums of money effect such a transformation? Well, Smita ought to know. For she and her techie husband Ram have been running what is India’s first peer-to-peer microcredit lending service, Rang De. Operating through a well-designed website and a web of field partners ranging from microcredit institutions to NGOs, Rang De aims to introduce thousands of potential borrowers, all of whom require small amounts of money in multiples of Rs 100, to lenders (so far over 2,000) who register on their site.
Browse the site and you could meet Rehanabi from Pusad, Maharashtra. She’s been tailoring for five years on her own sewing machine. Now, she wants to grow her business by buying a picot machine. Or you could run into Kamla from Jhabua in Madhya Pradesh who wants to supplement her household income by growing vegetables. She needs capital to buy the seeds and fertilizers. A potential loan giver who supports them would earn the same 8.5 per cent annual interest that a bank would offer, as well as let his money bring their plans to fruition.
Rang De grew out of Smita’s experiences in the NGO sector. “I saw with growing disillusionment that donors to NGOs never really knew how their money had been used. Transparency, I realised, would not just be more honest, it could also spur people to invest more money into where it was needed the most,” says Smita. That is why she’s ensured that on the Rang De site, investors can read profiles and view pictures of borrowers, understand how they plan to use their loan amount, and choose whom to invest in. “Further, lenders receive regular evaluations of their loan and at the end of the term, get their principal amount back with interest,” says she. In fact, the system works seamlessly enough to spur over 60 per cent of Rang De’s social investors into reinvesting in other borrowers. As for the borrowers, the Rang De model makes capital available to them without compromising on their self respect, for what they receive is a loan not dole. “That is perhaps why our repayment rates are over 99 per cent,” says Smita, “last year, the floods in Andhra made it tough for some of our borrowers to repay their loans. We extended their loan term, and almost all of them eventually repaid their loan!”
“We were inspired by Nobel Prize winner Mohammad Yunus and his Grameen Bank. His social business model focuses on sustainability not profitability,” says Smita. In fact, the one trend they’ve noticed in the two years since Rang De began is that both investors and borrowers have developed a more compassionate attitude towards money. “When we wrote to our investors telling them that the Andhra floods had made loan repayments tough for some of our borrowers, many actually offered more money to aid relief work. Not one investor demanded his or her money back immediately…” says she.
The Rang De model shows us that compassion and profitability coexist quite comfortably. All it takes is a small leap of faith...