MICROCAPITAL STORY: Microfinance Brokerage Sites Rangde.org and dhanaX.com Launch in India Following Kiva.org

Two new microlending sites, Rangde.org and dhanaX.com were launched this year to facilitate loans between social investors and low income borrowers in India. Initiated by U.S.-based kiva.org in 2005, micro-lending websites allow individual lenders to invest in individual borrowers via associated microfinance institutions (MFIs) that disperse the loans. These sites appear to be similar to “peer to peer” (p2p) lending sites such as US-based prosper.com, but in reality, are connecting individual borrowers and lenders through a third party (the MFI). Though Rangde and dhanaX also act as microfinance brokers, they are distinct from Kiva because they only allow investments by people with Indian bank accounts. MicroCapital has done extensive coverage on the development of kiva.org including coverage of Kiva’s launch, growth, and operations as a non-governmental organization (NGO).

Launched in January 2008, Rangde.org is a nonprofit microfinance facilitator organized by its founders and a group of volunteers. It provides a virtual connection between individual lenders, microfinance institutions (MFIs) and borrowers. Lenders can register on the site rangde.org and invest in microfinance operations via unsecured loans. Rangde.org aims to drive down interest rates by limiting the interest rate for the investor to 3.5 percent. The money goes to both rural and urban MFIs and assists entrepreneurs with initiatives such as shops, cattle rearing and agriculture.

The loans on Rangde.org are unsecured as Rangde.org is only a facilitator and does not guarantee the loans will be paid back. The minimum amount that can be invested is the equivalent of USD 23, and all loans must be given in the equivalent of USD 23 increments. Investments are made online, through Indian bank accounts only. While the investor will gain only 3.5 percent in interest, the borrower must pay 8.5 percent interest on their loan. The extra funds are used to cover the transaction fees incurred by the MFIs that give out the loans. The borrowers who apply for the loan are given a 30 day period for investors to contribute, which is the only time when an investor can give to that specific borrower.

When the borrower has attracted the full amount of the loan, Rangde’s field partners give the loans to the borrowers. All borrowers are associated with a Rangde partner MFI. After the investment is made, it usually takes about a month for a loan to begin to be disbursed. The MFI also orchestrates a repayment schedule. Rangde’s two current partner MFIs are the Center for Bharatiya Management Development (CBMD) and non-governmental organization ASSCOD. CBMD organizes entrepreneurship and management development programs, consultancy for small and medium-sized enterprises and policy advocacy for entrepreneurship. Its Micro Enterprise Development Program (MEDP) focuses on providing loans to women’s self help groups in rural areas. ASSCOD focuses on rural and economic development as well as women’s empowerment through the self help group model by providing microcredit and skills training.

Rangde.org currently has 15 borrowers listed, with the majority looking to raise the equivalent of USD 116, and 42 investors. Since its inception in January, it has raised loans for a total of 56 borrowers with funds totaling the equivalent of USD 6,984. Rangde’s future plans include reaching out to 1,000 borrowers in the next 6 to 8 months, increasing partnerships and organizing fundraising events, a “village vacations” program, micro-lending best practices workshops and a micro-enterprise “boot camp”. Further details on these future initiatives are not yet available.

The financial backing for Rangde was initially based on a commitment of USD 6,000 by the founders along with an informal loan of USD 33,000 from a group of engineers who had left the technology and business consulting services company InfoSys and were looking to “do something interesting”. Additionally, India’s ICICI Group’s Foundation for Inclusive Growth has agreed to pay for Rangde’s operations for the length of one year. As of April 2008, the largest total investments had been the equivalent of USD 1,251 from an acquaintance.

dhanaX was launched in February 2008 with the aim to provide credit for low income farmers and entrepreneurs as well as lucrative investment opportunities for lenders. In 2007, dhanaX had won the second prize award of the equivalent of USD 2,328 in the Srijan Microfinance Business Plan Competition as reported by MicroCapital here. With the money from that competition, an unidentified angel investor, family and friends, dhanaX was launched with USD 20,000 backing. Socially-conscious investment information portal xigi.net reports that current information on dhanaX’s revenues is not available but adds that its current investors are the unidentified angel investor and the founders Siva Prasad and Prashant Mishra.

dhanaX gives members the option of investing through Direct Lending, where the lender chooses only one borrower to lend to, or Diversified Lending, where the lender can try to mitigate risk by dispersing an investment to multiple borrowers. The lenders at dhanaX are required to pay a commission on the loan of 1.5 percent of the total repaid amount on the loan. The lender also pays the equivalent of USD 2.32 to join the dhanaX network. Lenders can invest amounts from between the equivalent of USD 23 and USD 23,284.

The loans on dhanaX are configured by each individual borrower, who lists his or her requested interest rate. The borrowers can ask for financing ranging from the equivalent of USD 232 to USD 465. Along with designating the interest rate on the loan, the borrower also chooses a repayment period of either 6, 12 or 18 months. Additionally, the borrower may choose to repay at the end of each month or at the end of the loan term. Additionally, dhanaX gives the borrowers a rating of poor, average or fair depending on credit and repayment history. Based on this information the lender can decide whether or not to lend to a specific borrower. Borrowers are given 45 days for lenders to fully fund the total loan amount. A list of current borrowers on dhanaX can be accessed by registering. Examples of borrowers are available on dhana’s beta site. The borrowers are also charged a standard 6.5 percent commission on every loan to be paid to dhanaX.

When lenders make loans through dhanaX, the dhanaX “agents” actually disperse the loans. The agent is responsible for choosing perspective borrowers and checking their background and eligibility. Currently, dhanaX’s only agent is the Janani Group, established in 2002. The Janani Group targets farmers and agricultural production through services such as warehouse facilities, finance, insurance and marketing. dhanaX is currently looking to have other agents from MFIs, rural technology centers, non-governmental organizations or credit societies.
By Sarah Knapp, Research Assistant

Additional Resources:

ASSCOD

Center for Bharatiya Management Development

dhanaX Articles: Report From India: A Web-Based Startup, Employee Head Count: 2

dhanaX.com FAQ Loans, Registration

Foundation for Inclusive Growth

The Janani Group

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