Sunday, September 21, 2008

Come on let's transform the society thru' micro-credit

Welcome! Your interest to read this post shows your interest in the social development. I would like to introduce you the concept of micro-lending and how easy it is to take part in that through the World Wide Web ( and thus facilitating economic growth and prosperity for rural-poor.

What is micro-credit?

The concept is very simple. The rural-poor typically needs small principal amount to start or expand their business. For instance, to start a vegetable shop under a hut, to start a tea shop on a hand-pulled cart, to buy raw materials for agarbathi making, to procure tender-coconut and sell it on a roadside, one would need anywhere between Rs.2000 to Rs.5000. If they were given this small amount they could stand on their own. But in the current system such a small amount of loans are not given by any public/private sector banks or by the government. So they end up taking such loans with a local person where the interest shots up even to 100% per annum. So instead of uplifting, the loan taken drives them to a deadlock situation and the poor could never come out of their poverty. The idea of micro credit is to reach out to those people give them loan of such small amount with a nominal interest.

How successful this concept is?

Well, this concept was extremely successful in Bangladesh. In 1976 Muhammad Yunus devised this concept and started giving micro-credit. The rest is history. He made revolution in rural economy of Bangladesh. To quickly let you know how successful the scheme was, read the following facts:
1. His micro-finance institution grown to become an independent bank by government legislation in 1983. The project initially called Grameen transformed to Grameen Bank.
2. The organization and its founder, Muhammad Yunus, were jointly awarded the Nobel Peace Prize in 2006 for their contribution to human kind.

If you would like to know more about Grameen please go through a.

How micro-credit is implemented?

Generally the people in need or grouped in to five member teams. And mostly the members are women even if their husbands' are in need of loan. The group is held responsible for the repayment of the entire loan. Thus the system makes sure that even if one person couldn't repay due to genuine reasons the other members of the team jump in to help him/her. If one is not repaying because of in-sincerity it creates peer pressure and it gets bad reputation. In a village setup a bad reputation is serious taken as a shame. Another strategy that makes sure of the repayment is making women of the family to be responsible for a loan. This is psychological approach that women are more sincere and sensitive. The repayment happens on every week or every month based on the nature of business they do.

Does micro-finance system exist in India?

Yes, there are several micro-finance institutions and NGOs' availing micro-credit across the county.

What is New?

The new thing in this is to get more individuals as investors of micro-credit or micro-lenders. is one such organization which allows you to take part in this scheme using simple mouse clicks on World Wide Web and online banking. The details of people who are in need of money are screened and posted on the website. People like you and me can look at their profile, the business their going to do and the amount of loan required. Once you pick the beneficiary you transfer funds in multiples of Rs.1000. You would get back your money with an interest of 3.5% at the end of the loan tenure. Please visit the site it has more information and inspiring stories of how a micro-loan transformed lives for few.

How Rangde operates?

Rangde is a non-profit organization that bridges the lender and borrower through their field partners. Field partners are NGO's are similar institutions who work on field to identify borrowers. They identify, analyze and post the borrowers to Rangde. Rangde again re-examines the person and his/her need and post the information on their website, You and me select borrowers on the site and transfer funds online. Field partners disperse the loan with and interest rate of 8.5 % which is lowest even compared to other micro-finance institutions.

Why micro-lending is called Social Investment?
It is called social investment because you get back 3.5 of interest. The remaining 5% goes to the field partners for their operation cost. Rangde is just a bridge in between.

Is the return of money assured?

We all know micro-credit is a non-secure loan given on trust. The rural-poor wouldn’t be able to give any security to get a loan and that's the reason the regular financial institutions don't have any schemes for them. But the system has preventive mechanism in place as explained above and historically the repayment rate is close to 100%.

Well, I believe that this inspires you and excites you to take part in the revolution which could drive away poverty from our country!