A Look At Independent India’s Growing P2P Lending Sector — Smita Ram

August 13, 2016
By Rang De Team

Borrowers in Manipur that took loans to carry out applique work in villages near Imphal

This Independence Day, the buzz word is all about growth and startups across India. We love such days as it brings the country together on a joyous, patriotic note and we can talk about the steps we need to take to get to a better place for all.

In a similar vein, Rang De began on Republic Day, 2008, as an initiative to provide low cost loans to underserved communities. At the time, there were other peer-to-peer lending platforms overseas but none existed in India.

Since our inception, over 30 online P2P lending start-ups have sprung up in India. On India’s 70th Independence Day, let’s take a stock at what this sector can do for the country and how Rang De plays a role in it.

Borrowers from Tamil Nadu that carry out cashew nut deshelling in Cuddalore

There is a clear distinction between the work that we do and what can be seen elsewhere in this sector. We are India’s first peer-to-peer micro-lending platform to crowd fund affordable, collateral-free and ethically administered micro-loans that are an alternative to expensive, exploitative credit.

We exist in order to lower the cost of borrowing to the end borrower.

Usually, this is an individual below a certain income threshold identified by a valued Impact partner known for its developmental efforts in the region.

Our interest rates range from 9% APR to 18% APR (5% flat p.a. to 10% flat p.a.). For every loan program that we launch, we share both the flat and APR rates so that there is no ambiguity.

There are no hidden costs.

Our interest rates are among the lowest in the world. Our efforts are constantly driven towards lowering this further. We will be happy to be challenged by anyone who feels that their interest rates are lower than what we provide as ultimately it is the borrower that stands to benefit from such competition.

We regulate our interest rates.

Our Impact partners are not allowed to charge beyond 5% flat to cover their operational costs. Interest rates on the field are always regulated and our loans remain affordable. We audit regularly to make sure it stays this way.

Our stats are real numbers that communicate our progress.

For example, our lives impacted is the number of individuals who are beneficiaries of our low cost loans. Even though we may have impacted an entire family and, at times, even the community, we do not claim credit for the impact.

Our Social Investor numbers refer to the active Social Investors and not ‘registered users’. It is easy to get an email address but to recruit people who actively want to contribute and make a difference is a different matter altogether.

Borrowers from Orissa that we most recently visited in July

As a Social Investor on Rang De or any other peer-to-peer platform, individuals have the right to ask many questions.

Here are important aspects of the platforms that should definitely be considered when evaluating an organisation in the micro-lending space.

Is the initiative a non-profit or for-profit?

This is important because it sets the tone and drives the operations of the organisation. If it is a non-profit, it is important to ask questions on sustainability. For-profit institutions need to be queried on what they plan to do with the profits. It is also important to know who the investors are and the team that is driving the organisation, their expectations and return.

What is the interest rate that the end-borrower pays in both APR and flat terms?

This will give you a clear idea of the interest rates and how the initiative seeks to benefit the community.

Can individuals probe deeper into the stats?

If numbers look misleading, can individuals ask questions on what the stated impact means? Can lenders or donors get an answer and continue to get it over time?

With eight years of experience in this field, we are excited about the growth of technology in the social sector.

We do, however, hope that the best interest of the community is kept firmly at the forefront as new entrants enter the stage and India begins a new year as an independent nation.

Rang De disburses affordable crowdsourced microcredit in 15 states with the help of 36 partners across India. If you haven’t done so, do join our Dependence Day campaign and support the farmers of India.

Smita can be reached at communications@rangde.org for any media or related enquiries.