7/31/2019 Deccan Chronicle - Funding the poor: Not a bad idea at all

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Published onDeccan Chronicle (http://www.deccanchronicle.com )

Funding the poor: Not a bad idea at allI was teaching in one of the universities while the country was suffering from a severe famine. People

were dying of hunger and I felt very helpless. As an economist, I had no tool in my tool box to fix that kind

of situation. So, he went out and made one and thats why the world knows Muhammad Yunus today. He

did not lay the matter to rest with a philosophical statement he proposed micro credit instead. In the rough-

and-tumble world of capitalism, money is usually made only by those who have it already. The poor are

left to pick up the scraps after the feast has already been eaten. The micro credit revolution begun by Yunus

inspired Ramakrishna M. K., a software consultant living in the UK. He and his wife Smita were sure that

one day they would come home to India and take the plunge into the social space. The root cause of everybit of social work in the country is poverty, says Ramakrishna. We were very interested in child labour.

We wanted to create an online engagement platform where businesses of all kinds could certify that they

were completely child-friendly. Creating jobs was another option and social media to highlight Indias

issues was a third. Micro finance lay at the bottom of the list. Ram and Smita realised that at the heart of

every social cause in India and there are plenty lies the most daunting ogre of all: poverty. When

Muhammad Yunus won the Nobel Prize in 2007, the answer dawned: micro credit. Micro credit is not

about making money its about making sure that the poor arent poor any more, says Ramakrishna.

Having learned from the journey of Yunuss Grameen Bank, Rang De, their micro finance institution,

focused mainly on women and women self-help groups in particular. When they first sat down to do some

research, they stumbled across an article published in 2004 that talked about how borrowers from a microfinance institute were committing suicide. The interest rates were sky high, says Ramakrishna. Those

people had their loans waived, but they paid back anyway because they were so afraid of not getting loans

from other places. In Andhra Pradesh, which had enthusiastically embraced the micro credit revolution,

the mounting defaults, suicides and government intervention, made sure that micro financing in the state

came to a screeching halt. This did not deter the founders of Rang De. They went ahead with their plan to

lend money to the poor without collateral. To keep this system as risk free as possible, Rang De requires all

borrowers to be part of a group, like a womens self-help group. The leader of the group signs as

guarantor the only collateral we have is what the members of the group give each other, says Smita. They

boast of a 98.7% repayment rate and have disbursed loans to the tune of Rs 7.2 crore across 13 states, toabout 15,000 entrepreneurs. We have had defaults but they were always due to genuine reasons, explains

Smita. Floods, issues in the family those were the kinds of reasons, but the percentage of defaults has

remained very low. After the floods in Orissa, borrowers took a repayment holiday and didnt pay for

about three or four months, but it usually doesnt get much worse than that. We have a very thorough

screening process. Our field partner is an NGO who also puts the borrowers through levels of screening

before giving the loans, explains Smita. Rang De can take credit for providing funds for about 250

businesses, from tailoring units and livestock rearing, to vocations as out of the way as bird-cage making.

It has worked wonders in India, remarks Ramakrishna. They are looking at working more closely with

7/31/2019 Deccan Chronicle - Funding the poor: Not a bad idea at all

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