Thursday, April 01, 2010

Use RangDe to distribute your microfinancing investments

I tried RangDe, an online micro-credit intermediary a while back. The idea is simple: You chose a borrower to whom you provide an investment of anywhere between Rs. 3000 - Rs. 5000 (USD66-USD110 for the rupee-challenged) for some very poor, but entrepreneurial borrowers in rural India who repay the amount with interest to you over a period of about a year or more. RangDe keeps a share of the interest (I presume that it is to cover the expense of running the operation) and passes on the rest of the interest to you, which you can chose to keep, invest back or waive off completely.

The purpose of the site for people like me, is not to make interest (it is quite low anyway), but to help the poorest of the poor, who shall otherwise be devoid of a source of capital. We all know that micro-credit actually works, in spite of being no guarantees to hold the borrower to and it enables some of the poorest people in making their lives better ("livable" would be a better word).

I wanted to invest, but the catch was that there is a 3% failure rate, which means if your borrower happens to be in that 3%, your money goes kaput. And that was precisely the reason that I didn't venture into it.

When I visited the same site recently, I found a nice feature. Every borrower's requirement can be split into multiples of Rs. 100 (USD 2.2) each and sourced from multiple investors and you in turn can chose to break you intended investments into many borrowers. You spread your risk and the borrower still gets the money.

As soon as I saw that feature, I made my first investment (tiny amount) to test the waters and have now pledged my second round of a slightly higher number. My first investment will be in the borrower's hands in 2 weeks time, but I am eagerly waiting for the repayments to start coming in, which obviously is a good source to make further investments from.

This is not a comparative review and I am led to believe that there are other such sites like Dhanax, United Prosperity (which has a guarantee based model) and Kiva (Global micro financing), but rather a post on how you can spread your micro finance investments and feel safe in sponsoring some budding entrepreneurs. I might test the others in coming days to see how they compare to RangDe.

[As much as it happens to be posted on April 1st, no fooling is involved in this post. :)]

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