Rang De: Credit Where It’s Due

Matheran, in Maharashtra, is Asia’s only automobile-free hill station. For years, the only way to get around was by hand-pulled rickshaws. Based on a PIL in 2021, the Supreme Court allowed the use of eco-friendly, e-rickshaws.

The rickshaw pullers of Matheran had no credit history, could offer no collateral and therefore had no way of funding the e-rickshaws. 

That is when Rang De, a peer-to-peer lending platform stepped in. In partnership with Tisser India and Caring Friends, Rang De launched a Matheran e- Auto Rickshaw Fund.  They have raised Rs.53 lakh from 462 investors, which has been disbursed to 18 people. 

The investors in the Matheran e-Rickshaw fund make 6% annually and Rs. 3,53, 744 has already been returned to them. So far, there have been no defaults. 

When we speak of entrepreneurs in India, rarely do we include the millions of micro-entrepreneurs like Matheran’s rickshaw pullers. Yet, they are the ones most in need of credit – and most deprived of it. 

The Pivot: Platform as Service

Founded in 2008 by the husband-and-wife team of Ramakrishna NK (Ram) and Smita Ram, Rang De began as a pioneering, non-profit, P2P credit platform. However, regulatory changes in 2017 forced the company to pivot to a for-profit, regulated model, requiring the founders to completely reimagine their approach.

Drawing inspiration from the software-as-a-service industry, Rang De transformed into a ‘platform-as-service’ model. The company now provides a regulated credit infrastructure to partner organisations and allows them to tap into crowd-sourced capital at reasonable rates. “This unique approach,” points out Ram, “decouples the twin challenges of regulatory compliance and capital costs, making it feasible for our partner organisations to offer lower interest rates to the final investee.”

It also allows first-time borrowers to start creating credit history, so that accessing credit in the future becomes less onerous.

How it Works

So far, Rang De has built a community of over 10,000 social investors and disbursed nearly Rs.80 crore rupees in loans, with a non-performing asset rate of 9.34%.

Rang De works closely with its partner organisations to design bespoke loan products, with interest rates ranging from 6% to 8%, tailored to the specific needs of different communities. For example, a loan for farmers would be designed for repayment after harvest, while a product for a street vendor could have more frequent repayments built in.

Another unique aspect about Rang De, is that interest is calculated on a simple interest model, unlike traditional lenders who use a reducing balance model.

Non-profit partner organisations pay Rang De about Rs. 2.4 lakh as a one-time setup fee and an annual recurring fee of Rs. 1.2 lakh. For-profit enterprises pay double. Depending on the borrowing community, Rang De may also take a percentage of the interest charged.

The platform is accessible and transparent and investors can participate with as little as Rs. 500, choosing from a variety of causes and borrowers. It took this writer under 10 minutes to sign up, complete KYC via Digilocker, and make a small investment to help a female entrepreneur set up a beauty salon.

The Launch

Rang De’s new platform was launched in 2019, just before the pandemic. “We started with a Rs.10 lakh loan to farmers in Yavatmal, Maharashtra, who were desperately in need of credit at the time,” says Smita, “and worked on getting the word out through various WhatsApp groups.” A funding telethon on NDTV followed, raising awareness and funds of Rs. 10+ crores. One of the investors who saw the telecast and reached out, was former Indian President, Pratibha Patil.

Social Investors: Building a Community

Dinesh Goel has been a long-time supporter of and investor with Rang De. An experienced strategy consultant and investor, he understands the importance of affordable credit for the unbanked sector. He tells us that his experience with the Rang De team, the platform and his investments, have all been stellar. 

Prashant Singh, Head of Product at fintech app, Jar, stumbled upon Rang De because he was studying products in the financial space. He ended up making three investments, and is also happy with his experience. “I could resonate with the situations that the borrowers spoke about,” he says. “I am from a small town and I know these challenges are real.”

“More than demographics, there is a certain mindset that we see amongst all our investors,” says Ram. “They don’t believe that charity is the answer, and they understand the catalytic impact of capital.”

The Growth Path

Both Smita and Ram are clear that they want to grow faster to reach their stated goal of a million investors and a billion dollars of loans. 

It seems like a no-brainer – your money has real impact, and you get your principal back with a return. Then why are more people not investing with Rang De, we ask.

Ram says that the company’s unique model defies easy categorisation, and awareness remains low among potential investors. “There is just massive information asymmetry,” he adds. “If you speak to urban, educated people, they do not think that credit is a big problem for India.”

To address these hurdles, Rang De is pursuing a three-pronged strategy focused on content, community and product. “We have ramped up our publishing efforts significantly,” says Smita.

Rang De has chapters in five cities and efforts are on to make community ties stronger. Says Sukhada Chaudhary, Vice President, Content & Communications at Rang De, “We host both online and offline events for our community of social investors. We also organise field trips to give social investors an opportunity to interact with farmers, rural entrepreneurs and artisans.” 

Recent partnerships, such as one with education company Physics Wallah to fund meritorious students-in-need, suggest new potential for expanding Rang De’s borrower and lender base.

Rang De’s impact goes beyond providing credit, to creating opportunities that could lift families out of poverty and transform destinies for borrowers. They could also serve a blueprint for other organisations seeking to make a lasting impact amongst underserved communities. As Goel points out, “In a country like India, we need more Rang Des and that is why it is so important that their model succeeds and scales, with many more investors joining the mission.”