Bangalore-based MicroGraam has launched Indiaâ€™s first auction- and reputation- based microfinance online marketplace that enables people to invest at the lowest interest rate that the free market will bear.
Funded by entrepreneurs – Sekhar Sarukkai and Rangan Varadan-, MicroGraam uses mobile and internet technologies, and uses open marketplaces, to bring down interest rates paid by low-income borrowers to levels that are traditionally reserved for the more affluent populations, and as much as half of what they may pay with main stream MFIs.
Based on auction model, MicroGraam is a marketplace where investors bid for the project to lend and the one bidding the lowest interest rate gets to lend for the loan.
The interest rate depends on the bid rate.Essentially, it eliminates the need for intermediaries to fix interest rates. Instead, lenders, borrowers, and facilitators are accommodated on the same table, on equal footing, for online bargaining This approach of bringing together lenders and borrowers as equals is a first for the Indian market.
The repayment to the investors are made on a quarterly basis that includes principal and interest. The investment disbursement process ensures that the money reaches the Field Partner. In most cases, we recommend the investors to transfer investment amount directly to the Field Partnerâ€™s Bank account.
The disbursement of the amount to the borrower is the responsibility of the Field Partner.
â€œWe plan to ensure that the money reaches the borrower by way of audit at periodic intervals. In the future, when the borrowers have Bank accounts the money can be transferred directly to Borrowerâ€™s Bank account,â€ explained Sneha Kini of MicroGram.
Dr. Sarukkai adds â€œThink of MicroGraam as â€˜eBayâ€™ of microfinance. It shifts the power away from investors who could traditionally demand any interest, and towards an open marketplace with a balanced representation from all parties involved in the microfinancing ecosystemâ€.
In addition to the launch of the marketplace, Diraviyaraj, Founder and Secretary of YNEEW-Youthâ€™s Network to Educate and Empower the Weak â€” a decade old grassroots NGO says â€œSince these transactions in MicroGraam involve tri-parties (lender, borrower and facilitators like us), we believe this will be very successful and will become the default platform of choiceâ€.
He added â€œWe have mobilized crores and crores of rupees for microfinance needs for our communities from banks but have never been acknowledged with due returns with what we serve upon. The partnership with MicroGraam is a breath of fresh air that brings new life into our grass roots communitiesâ€.
Dr. Varadan says â€œInvestors can confidently invest in people of their choice based on reputation ranks derived from audit of dozens of field partners. We have more than four crores of demand today even with our hand-picked set of field partners â€” we expect this to increase ten fold within a year or twoâ€.
MicroGraam plans to roll out new mobile and Internet solutions that will unleash additional value in these financial transactions.