At a time when loan disbursal and repayment is in the eye of a political storm, a former corporate honcho is charting out pathways to disburse micro-loans worth Rs4.5-5 crore to villagers in the state.
City-based Rangan Varadan, through his venture MicroGraam, is looking at giving small loans worth anywhere between Rs5,000-30,000 to villagers near Haveri, Bagalkot, Belgaum, Rannebennur. His borrowers include farmers, small entrepreneurs and students, who are children of poor farmers.
“We want to reach 100 villages,” he says.
He explains that often the poor are in the need of small loans for either farming, starting their own little enterprises, or education, or even for health emergencies, or buying vehicles.
“The average ticket size of the loans we provide is Rs15,000. The loans could be as low as Rs5,000 or Rs30,000 on the higher side,” says Varadan, who started MicroGraam in 2010, after a 10-year stint with Infosys.
MicroGraam sees a repayment rate of “nearly 100%,” says Varadan, stressing that they give a grace period before the repayment starts. “Depending on the condition of the borrower, the period between payments is extended from weekly to fortnightly or even monthly.”
How does MicroGraam work?
MicroGraam works by tying up with local NGOs and identifying people in need of small loans who are credit worthy.
“Local NGOs have a strong bonding with people and this helps in building trust and confidence, making it easier to carry out our activities,” says Varadan, former head of banking and capital markets at Infosys.
Varadan explains that all borrowers are members of self-help groups (SHGs) that work closely with NGOs. The self-help model helps bring in moral responsibility which, in turn, ensures repayment. Moreover, borrowers are monitored to ensure they make timely repayments.
On the other hand, investors in MicroGraam can be anyone interested in lending any amount, from Rs500 to that running into lakhs through online transactions.
“We have a three-step strategy of garnering investments,” says Varadan, saying they look for retail investors who are willing to invest any amount, high net-worth individuals looking at investing Rs1 lakh or more, and foundations.
According to Varadan, investors can later choose to receive their money back, or reinvest the funds towards other borrowers.
Along with Karnataka, MicroGraam is looking at disbursing loans to villagers in states like Jharkhand, Assam, Tripura, and Tamil Nadu.