Investing For A Cause
Microlending website Rang De gives you an opportunity to invest small amounts and become a ‘social investor’
How It Works
- Collaboration with field partners, who identify borrowers, discuss their business plans and inform Rang De
- The information is then put up on the website www.RangDe.org
- Investors search the website and choose borrowers to make an investment
- Field partners receive and disburse loans to borrowers, who have a waiting period of 30 days after applying for the loan
- Borrower repays loan according to the repayment schedule
- At the end of the investment tenure, which is one or two years starting from a month’s time after investment date, the investor earns an interest of 3.5 per cent on principal invested. The remaining 5 per cent helps to cover administrative costs incurred by the field partners
Mahadevammafrom Mysore needs Rs 10,000 for buying a sewing machine to set up a business.You can reach out to her.
RangDe.org, a website meant toprovide small loans to low-income households, allows you to invest as little asRs 500 a month and become a ‘social investor’.
Why it is different. SmitaRam, co-founder and CEO, RangDe.org, explains that traditional microfinanceinstitutions borrow from banks at a diminishing rate of 10-12 per cent per annumand, after adding operational expenses, lend to borrowers at a diminishing rateof about 24 per cent per annum (13.5-20 per cent fixed rate). Under this system,interest is calculated on the reducing balance, making for lower EMIs eachsuccessive month. However, moneylenders, who lend money at rates of 90-120 percent per year, still continue to thrive. Rang De aims to change this by offeringloans at a fixed rate of 8.5 per cent per annum.
Investing options. Thesite helps you search for profiles of those you want to lend to on two criteria:the state the borrower is from and his or her business activity. You can alsoinvest without choosing a profile, in which case your money is automaticallyallocated to a borrower at the top of the waiting list. Archana Ramakrishnan,30, a software professional who invested Rs 5,000 in Rang De six months ago,says that she had gone with Rang De on a field trip in Tamil Nadu and interactedwith the borrowers. "We encourage our investors to pay such visits so thatthey can see for themselves who they are lending their money to," says Ram.
One has the option of payingeither by credit card, debit card, cheque or online money transfer. Investors,if they wish, can forego the interest. However this is not passed on to theborrower. The investor can also reinvest the money or get it back.
The beauty parlour owner took a Rs5,000 loan through Rang De to buy cosmetics in bulk. With these, she now has ashop as well as a parlour, so her income has increased.
--Nita 35 Nagpur
Return on investment.RangDe.org ensures that each of the borrowers is a member of a self-help group (SHG)or a joint liability group. In such a system, the group acts as collateral andtakes the responsibility to pay back the loan in case an individual member isunable to do so. Though there have been no defaults in repayment till date, RangDe says that returns are not guaranteed because, in isolated cases when theborrower falls ill or passes away, the SHG might not be able to sustainrepayment for long.
What’s in it for RangDe?A not-for-profit organisation started by capital put in by the founders, Rang Dehas since also received grants from the ICICI Foundation. Education andinsurance. Rang De has forayed into the education loan segment as well. The rateof interest in this case is 5 per cent per annum, and the entire amount goes tothe field partners. Hence, investors get back their principal amount but do notearn any interest. "Education is something that is close to the heart andhelps a person break out from the cycle of poverty, so investors do not mind azero return," says Ram.
While direct loans will beprovided only from the next academic year, now loans are being given to thosewho have to pay back loans taken from moneylenders to finance their children’seducation. Rang De also plans to offer life and health insurance in the future.
Says Archana: "Here, I amnot just giving away money, but helping a person live with dignity." Themessage: together, we can make a difference.