Milaap, a micro-lending platform, believes that a little help goes a long way, Shukti Sarma reports
After working in Singapore, Anoj Viswanathan joined SKS Microfinance, working on energy and water services in rural India. The impact of a $10 solar lantern, sold on credit to poor tribal villagers, triggered the idea of starting a micro-lending platform. His friends Sourabh Sharma and Mayukh Choudhury were also working on similar projects. Together, they founded Milaap in June 2010 and registered it as a society.
“Anoj realised that the impact of products like solar lamps remained limited because loans were not available at low interest. Donations lead to dependence; when you give someone a loan, you’re encouraging them to stand on their feet,” says Tanvi Mehta, the chief evangelist for Milaap.
Through Milaap, anyone can make small loans to registered borrowers. The amount can be as little as Rs1,000. When the loan is repaid with interest, the lender can choose to re-lend the same amount to another borrower. “Loans usually fund two causes: providing essential needs for families like clean water and sanitation; and for income-generation opportunities—like giving vocational training to youngsters, or enabling farmers and artisans to invest in equipment and raw materials and providing them with a guaranteed buyer,” says
On Milaap’s website, one can select a borrower and make a loan through PayPal. Repayment occurs over an extended period. Milaap collaborates with other organisations and field partners who are in touch with the borrowers. “Borrowers approach field partners who appraise and verify the authenticity of their credit needs and recommend borrowers to us,” Ms Mehta says.
The biggest challenge for the founders was getting Reserve Bank of India’s approval for foreign funding of loans. After much persuasion, permission was finally granted in August 2011. As of November 2011, Milaap has raised $160,000 for 600 borrowers in Karnataka, Tamil Nadu, West Bengal and Maharashtra with 100% repayment rate. It has helped many; like Vasim, who had benefited through an educational loan. Last year, he was unemployed, untrained and directionless. In April 2011, he decided to join a vocational training programme. Through Milaap, he could organise the entire amount required. Today, he has a stable and secure job at the retail chain More.
Milaap disburses loans bearing in mind borrowers’ repayment capacity and the regularity of their cash-flows. For example, students availing of education loans are given time to find a job before the repayment cycle begins. Generally, they are allowed four months to find employment. Loans are disbursed using vouchers for buying products or hiring services from assured vendors. Vendors receive payments from field partners on presentation of vouchers. Borrowers are encouraged to save and focus on improving their living conditions. Several households across the country now have solar lighting or toilets installed through Milaap’s loans.
The microfinance crisis in India has not affected Milaap’s work as yet. But micro-lending is a comparatively new concept that requires awareness creation. One can help Milaap by providing technical support, or advocacy through social media and raise funds, or any other means. “We had a couple who asked their friends to lend money through Milaap instead of bringing them gifts for their wedding. That is amazing,” Ms Mehta says.
Milaap’s funding has so far come from some private investors, apart from the small commissions they charge their field partners. Milaap plans to raise at least $1 million in the next 12 months. “We’re hoping to scale up to 10 field partners and fund at least 1,000 loans,” Ms Mehta said. They are planning to have an Indian payment portal on their website too. While loans to borrowers are not tax-exempt, donations to Milaap are exempt under Section 80 (G) of Income Tax Act.
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