In the article, we explain how Rang De attempts to bridge the inequality gap by bringing the underserved under the ambit of formal financial institutions.
“We are scared. We are careful with the money we take as loan from the moneylender,” a Rang De borrower.
This story is true for many in rural India who have to depend on moneylenders having little or no access to formal financial institutions.
Financial Inclusion in India
As per the World Bank statistics, in India, less than 10 percent of Indians have access to formal credit. While the Government of India has prioritised rural financial inclusion and building of a digital India, the rural India largely remains outside the formal banking system having little or no financial prowess. As per the Sustainable Development Goals 2030, women’s economic empowerment and financial inclusion have been recognised as the key to achieving the 2030 agenda for Sustainable Development.
“Women’s economic empowerment and financial inclusion remain an unfinished business”— Åsa Regnér, UN Assistant Secretary – General and Deputy Executive Director of UN Women
Financial Inclusion and Rang De’s borrower community
Rang De attempts to change this reality enabling them to receive low-cost credit through a formal digital system and thereby creating opportunities that economically empower them. Receiving a loan straight into their bank accounts, nudges our borrowers to utilise banking services and get accustomed to the digital financial world.
Currently, Rang De is amidst a significant transition to comply with the recent Reserve Bank of India regulations for peer-to-peer lending platforms. A key feature of this regulation is that all transactions have to be digital and funds are transferred directly from the lender’s bank account to the borrower’s bank account.
While this stipulation has been challenging, as it requires our borrowers to have operational bank accounts, it is also pushing us to enable a massive step forward in financial inclusion – by supporting our borrowers integrate into the banking system.
Our new P2P platform RangDe.in will comply with this condition, and all funds will flow directly from the lender to the borrower and back through Escrow accounts.
Credit Score and Rang De borrower
Since all transactions through our new platform will be digital, every loan taken and every consequent successful repayment will be recorded and will contribute to our borrower’s credit history.
A positive repayment behaviour increases borrower’s credit score, eventually enabling them to receive credit from other formal financial institutions and be a part of the mainstream financial system. This will drastically reduce their vulnerability and dependency on moneylenders and other risk-prone sources of credit.
Over the last 11 years, our borrowers have maintained a stellar repayment rate of over 90 percent. We are thrilled that this positive financial behavior will finally be recorded. We intend to create an India where Rang De is redundant, where every individual is truly financially included. This is a big step in that direction.
Impact of financial inclusion
“…We don’t need to depend or ask for money from our husbands. We don’t need to depend on them for our personal or childcare expenses.” – Sushma Das, a Rang De borrower
The impact of financial inclusion is reflected in the way Rang De’s borrowers, especially women, having economically empowered themselves, are able to take charge of their lives, and write their own destinies with dignity and freedom.