“Access to Finance is a commonly cited problem for social enterprises in India and refers to the financial barriers related to the lack of equity, debt, and working capital for start-up enterprises, in addition to non-financial barriers, such as a lack of financial literacy.” – IFC, 2011
Access to finance, especially so by the underprivileged sections of the economy, is an important deciding factor for the growth of the economy, as highlighted in the above quotes. In fact, currently, the sector’s total demand is currently met only to the extent of 10%.
Microfinance’s in India exist in a variety of forms, such as: trusts registered under the Indian Trust Act, 1882/ Public Trust Act, 1920; societies registered under the Societies Registration Act, 1860; cooperatives registered under the Mutually Aided Cooperative Societies Acts of the States; and non-banking financial companies – MFIs which are registered under Section 25 of the Companies Act, 1956 or with the Reserve Bank.
Here we explore the various notable micro-finance social sector enterprises:
Set up in the year 2004 as a not-for-profit enterprise, Grameen Koota Financial Services Pvt. Ltd. actually got registered as a Non-Banking Finance Company under the RBI in 2007. Operating out of South Bangalore, Grameen was originally set out to replicate Mohammad Younus’ Grameen Bank model of Bangladesh. The founder, Mrs. Vinatha M. Reddy, essentially focused on provision of timely and affordable credit to rural and low-income households, targeting women in particular. Grameen Koota believes that the power of running the household lies with the women of the house, and hence focuses on improving their participation in the house and teaching them how to manage their finances. Their products offered include- micro-finance loans, micro-insurance services and pension. Grameen Koota now boasts of lending to atleast 400,000 women in the country.
Aavishkaar, literally meaning “Invention”, was founded in the year 2001 by Vineet Rai. Vineet’s organisation essentially helps social entrepreneurs, in getting capital and gain funding for their enterprises. Having its humble beginnings in the year 2007 with a fund estimate of US $ 14.5 million, in 2013, it has moved on to a fund size of almost US $ 155 million. Their ultimate goal for the next ten years is- “to invest in 300 start-up companies across emerging economies with significant low income populations, nurture latent local entrepreneurial talent, and promote enterprise based development in these countries, thus helping them achieve sustainable and equitable economic growth. To achieve these goals, Aavishkaar aims to raise US$1.0 billion over the next ten years.”
Vikram Akula founded SKS Microfinance in the year 1998 as a catalyst to poverty reduction in the country by provision of easily available loans and financial services to the majority of the poor. Initially started as an NGO by the Fullbright scholar Vikram Ahula, it is now named as BFIL, a Non-Banking Finance Company under the RBI, in the micro-finance industry. BFIL follows a credible model of scalable micro-finance by using the group-lending model in which women guarantee each other’s loans. They are also required to undergo financial literacy training along with mandatorily passing a literacy test before they are allowed to take loans. BFIL went for an IPO in the year 2010, showing a record high amount of US$ 347 million. It has claimed to directly impact 45.97 lakh women in 1 lakh villages. It is touted to be one of the largest and fastest growing micro-finance organisations in the world.
BASIX was founded in the year 1996 by Vijay Mahajan as the first micro-finance project in its days to lend to the poor. It seeked to promote a new generation of livelihoods in the country, by offering consulting services in micro-finance and livelihood promotion, as well as information technology (IT) applications for microfinance and livelihoods. As on May 31st, 2014, BASIX disbursed around 3,512,480 loans in around 122 districts of the country spread over sixteen states. BASIX is also a member of the prestigious Microfinance Institutions Network (MFIN).
Artoo was started in the year 2010 by Sameer Segal, who had the vision of having the world’s most intuitive technology delivered to those people who need it the most. The focus is on empowering all borrowers and field agents learning to operate in a paperless way, i.e through using the latest technology. Artoo’s model combines mobility with analytics and cloud computing, to digitalize the field processes – to improve productivity, reduce risk, and improve the customer experience and further adds a strong social element to the process. Artoo focuses more on the small and medium enteprises’ micro-financing needs, as it believes that is where the maximum potential lies. Artoo claims to have influenced 4000 users and 400 branches all over India.
To read Impactpreneur’s previous article on Artoo, click here.
Ramesh Ramanathan, a well-known champion for the advocacy of poverty-related issues, founded Janalakshmi Financial Services in the year 2000, within the Sanghamitra Urban Project. They started giving group loans in the same year, and within 18 months reached the mark of giving out loans of Rs. 1 crore. It was soon incorporated as an urban micro-finance institution, seeking to serve the underserved of the country’s urban populace. Janalakshmi currently has 5,00,000 customers in almost 11 states of India. Janalakshmi is also part of the financial inclusion group working with the World Economic Forum.
Kinara Capital, more formally known as Visage Holdings and Finance Private Ltd, was set up to fulfil the mission of creating a financially inclusive community to provide capital to small and micro businesses. Founder CEO of Kinara Capital, Hardika Shah, started the enterprise in the year 2011. Essentially based out of Bangalore, Kinara seeks to provide loans in the range of Rs. 1 lakh to Rs. 10 lakh, thereby focusing on the needs of small and medium social enterprises. Their mission was fuelled by the fact that traditional banks are barely able to cater to the needs of these MSME’s, and therefore only about 5% of these enterprises have access to the capital they require.
Micrograam is an enterprise which aims to encourage peer-to-peer lending. Set up in the year 2010 by Rangan Vardan, it empowers rural Indian entrepreneurs by providing them affordable microloans at pre-determined rates of interest. By partnering with small not-for-profit organisations and leveraging technology, Micrograam manage to keep their costs low as well as provide business solutions to all their customers. Micrograam has also set up a Principal Guarantee Fund, which will guarantee repayment to the investor, in case the borrower fails to do so. There are different kinds of loans available as well, with a maximum capping of the rate of interest an investor can charge. Such as, educational loans have a capping of 11%, whereas for microfinance it is 17%.
9. Rang de
Started in the year 2006 by Smita Ramakrishna and Ramakrishna K, Rang de seeks inspiration for its name from India’s struggle for freedom. Their business model is similar to Micrograam, as they too emphasize on peer to peer lending. Registered as a not-for-profit organisation, their vision is to make poverty history in India by reaching out to underserved communities through microcredit. They are striving to do this through a network of committed field partners and social investors.
Milaap is an online fund-raising platform, for personal as well as social causes all across the country. Initially founded in 2010 by Sourabh Sharma as a not-for-profit micro-lending platform for the poor, it has now become the preferred platform for all people to raise money for causes that they care about. It aims to provide a new class of crowd-sourced, low-cost and risk-tolerant capital at around 50% lower interest rates than the ongoing micro-finance industry rates. Milaap claims to have disburses around Rs. 63.91 crores of loans as of 30th October, 2016.
Do also read- 10 Notable Energy Focused Social Enterprises