MICROCAPITAL BRIEF: Microfinance Institutions (MFIs) in India Attempt to Raise Funds Using “Crowd Sourcing”

Microfinance institutions (MFIs) in India have increasingly been exploring “crowd sourcing” to raise funds since traditional sources of funding such as banks and private equity houses have significantly decreased their investments following the “microfinance crisis” that began in 2010 in the state of Andhra Pradesh. Crowd sourcing in the microfinance sector is the “mobilization of capital from individuals by a collecting platform and passing it through a partner or channel to the end borrower” [1]. Rang De and Milaap are among the Indian companies that are using crowd sourcing to attract funds online and then disburse the loans through nongovernmental organizations (NGOs) or for-profit MFIs. Milaap is reportedly the first company in the country to get approval from the Reserve Bank of India (RBI), India’s central banking authority, to source funds from the international market.

Mr Alok Prasad, CEO of Microfinance Institutions Network (MFIN), a trade association of Indian MFIs, says crowd sourcing “does have the potential of emerging as an important retail funding structure. Focused marketing coupled with the industry regaining its image as a stable and responsible provider of financial services to the poor are necessary conditions for crowd sourcing form of funding becoming significant.’’

By Nisha Koul, Research Associate

Sources and Additional Resources:

[1] The Financial Express, “In search of funds, MFIs take to crowd sourcing,” http://www.financialexpress.com/news/in-search-of-funds-mfis-take-to-crowd-sourcing/837260/0

MicroCapital.org story, May 5, 2011, “MICROCAPITAL BRIEF: 17 Websites Now Allow Individuals to Commit as Little as USD 20 as Microfinance Loans,” https://www.microcapital.org/microcapital-brief-17-websites-now-allow-individuals-to-commit-as-little-as-usd-20-as-microfinance-loans/

MicroCapital.org, June 27, 2008, “MICROCAPITAL STORY: Microfinance Brokerage Sites Rangde.org and dhanaX.com Launch in India Following Kiva.org,” https://www.microcapital.org/microcapital-story-microfinance-brokerage-sites-rangdeorg-and-dhanaxcom-launch-in-india-following-kivaorg/

MicroCapital Universe profile: Milaap, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=milaap

MicroCapital Universe profile: Rang De, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Rang+De

MicroCapital Universe profile: Microfinance Institutions Network (MFIN), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Institutions+Network+%28MFIN%29

Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/

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