By Smita Ram, Rang De Team
In the last couple of weeks, we have heard of more than a couple of suicides by borrowers of microfinance institutions in Andhra Pradesh. While the media is known to exaggerate and take a lop sided view of stories, let us not deny the fact that there is a serious issue that needs to be addressed by the industry. Since the inception of Rang De was prompted by such instances, we take this opportunity to share with you the underlying values and principles that govern our work at Rang De:
Lowering Interest Rates: The peer to peer lending model is great but we believe it is of no use if we do not deliver value to the end users-our borrowers. We expect social investors to ignore the ROI factor while investing on RangDe.Org and we ensure they have a good reason to do so. Rang De borrowers pay nothing more than 8.5% flat p.a. which amounts to 15.3% A.P.R. We would like to see happy entrepreneurs who are able to see the benefit of the Rang De loan.
Repayment Rate & Mechanism: With the help of our field partners, we ensure that the screening of borrowers is done before their application for a loan reaches Rang De. Once the repayment begins, the communication channels with the field partner remains open. We do accept delays in repayments as long as we are notified of the reasons. Defaults for genuine reasons is accepted and the reasons for default is communicated to the social investor. We are not paranoid about 100% repayment rate but we are paranoid when it comes to transparency.
Scalability: Rang De scales along with the field partner and the social investors. Our field partners support us by reaching out to communities — in many cases these are communities that did not have access to microcredit at all. That is the target group and the communities that we would like to see Rang De loans in. Hence, the choice of field partners are smaller NGOs and NGO-MFIs that are doing fantastic work before and during their partnership with us.
Transparency: Interest rates that the borrower pays for every loan product is published on the website. Rang De’s field partners are not allowed to charge documentation charges or loan processing fees.If these come to light, depending on the severity, the partnership is either terminated or suspended. And yes, we do believe that just like there can be good stories, there are distress stories as well — both of which are shared with social investors.
Our beliefs and practices are included in what we call the Mandate for field partners and we are currently working on strengthening our audit and evaluation mechanisms. This is just the beginning of financial democracy and we are glad that you are part of this movement!