Social entrepreneurs are a unique breed. They try to blend the seemingly conflicting goals of making money while being socially conscious. Can this model really work? At Prayag, we are learning first hand the nuances of this model through Our client Micrograam. Founded by Rangan Varadan, an academician and a consultant in his earlier avatars, Micrograam’s business purpose is to link needy borrowers, typically from rural India, with compassionate lenders, typically from urban India, through the Internet. Micrograam’s model emulates that of Kiva’s; Kiva now disburses loans worth over $1 million every week to deserving borrowers across 62 emerging countries.
Ask Rangan why he opted to lend rather than donate money, and he gives a few reasons. For one, he strongly believes that for the causes Micrograam supports, which relate to livelihood, the receiver is willing to and capable of paying back, provided the terms are reasonable. So, the dignity of the receiver is intact. Not only that, in a loan based model, the same amount can be circulated to multiple borrowers, thus creating a multiplier effect. Third, the lender also can get reasonable returns, if he so desires. Thus, this model may attract a wider pool of investors. At the same time, interest rates are affordable and among the lowest in India, and Micrograam’s margin is also minimal. Now, all this sounds great, but does it really work? The initial metrics do substantiate Rangan’s belief. MicroGraam has disbursed close to Rs 2 crores of loans over the last two years and has an excellent repayment rate of 99%.
So, what does the success of the model hinge on? Two things. An inexpensive way to identify deserving borrowers and ensuring fulfillment and collections and two, creating a large pool of willing lenders. Rangan has accomplished the first part by building a network with NGOs across the country. The second part is more challenging. It requires evangelising of a new concept to a large number of people in urban areas. This is where Prayag is working with Micrograam. Over the last few months, we have put in place the building blocks of a cost effective branding and reach out program for Micrograam. In the next few months, you will be hopefully hearing and seeing more of Micrograam, it’s agenda and achievements.
It’s been a fascinating engagement for the team at Prayag. Not often do we get to work with a business that is socially relevant and at the same time economically sustainable.
If you are curious to know more about Micrograam and it’s business check out www.micrograam.org.