Rangan Varadan, Founder, MicroGraam

MicroGraam -Micro Finance Marketplace

The use of technology can create many opportunities where none existed before; MicroGraam is testament to this fact… Its faith in open marketplaces has enabled investors and borrowers to gain the advantages of low interest bypassing more expensive routes. Mobile and Internet technologies have brought about this happy marriage of equal Microfinance needs. This innovative business idea that has created MicroGraam came from Young Entrepreneur Rangan Varadan’s mind which comes as no surprise considering that he is a PhD in Finance.

Yourstory spoke to Rangan and gleaned a few answers on why he took up social entrepreneurship and the finer points of Microfinance at MicroGraam.

Tell us more about MicroGraam and the business idea that propels it-

MicroGraam is an online, competitive, microfinance marketplace (http://www.micrograam.com) that enables people to invest in other people at the lowest interest rate that the free market will bear. MicroGraam uses mobile and Internet technologies, and the belief in 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 mainstream MFIs.

What makes your business idea and model one of a kind in India?

First and only auction and negotiation based marketplace for micro-credit, in India that includes peer2peer and institutional investors. With its auction- and negotiation- based bidding system, MicroGraam eliminates the need for intermediaries to fix interest rates. Instead, lenders, borrowers, and facilitators are accommodated on the same table, in equal footing, for online bargaining. This approach of bringing together lenders and borrowers as equals is a first for the Indian market.

Broadest portfolio of micro-investment options ranging from traditional micro-lending to profit-sharing based micro-ventures.

A unique and scalable NGO-nodal model enabling Micrograam to reach millions of borrowers leveraging the strength and network of community based organizations (that includes > 60,000 NGOs catering to >60M borrowers). Investors invest in people of their choice based on reputation ranks derived from audit of dozens of field partners. MicroGraam’s business model emphasis is towards an open marketplace with a balanced representation from all parties involved in the microfinancing ecosystem.

At MicroGraam we pride ourselves at being completely transparent and providing the widest choices for investment in a manner where investors, borrowers and field partners come on an equal footing to the table to negotiate and bargain for the appropriate rates.

What kind of growth do you have in mind and what does it depend upon?

MicroGraam’s model on the demand and distribution side is based on a unique and scalable nodal NGO model that leverages the federated social network of NGOs and borrowers to enable sustainable scaling of operations.

On the supply side, our model includes partnering with individuals, foundations and financial institutions. In the initial stages, our focus will be to partner with foundations and financial institutions that share similar objectives as MicroGraam and then scale up using P2P network.What has been the biggest test for MicroGraam so far?

The biggest test was building confidence among the social investors community on the viability of micro-credit for micro-entrepreneurs.

We have put together a robust evaluation framework of our partner organizations as well as partnering with credible third-party accreditation agencies for an unbiased external viewpoint.

We have also established a guarantee fund to the tune of 3x the historical default rate of the NGO partners. In layman’s terms, this provides a significant cushion in the unlikely event that borrowers default at much higher rates than historically demonstrated rates for the individual NGOs. For the record we have had 100% repayment rates to date!

What progress has MicroGraam made since its launch?

It has been a year since we started this organization and six months since we launched our online presence and with active social investor community and partner organizations, we have made tremendous progress to date.

We have been fortunate to witness >300% growth in funding over the last quarter from:

Local socially conscious investors

NRI community

Foundations and banks

What has been the biggest achievement for MicroGraam in its work?

The biggest achievement for us has been our partnership model with social investors, foundations, and financial institutions at the same time and still being able to keep the cost to borrower much lower than the traditional micro finance institutions.

We are getting continued support from social investors and more importantly foundations and financial institutions that believe in our model. This we feel is recognition of our good work. Further, we have started getting good press and media coverage highlighting the good work we have been doing so far.

What makes social entrepreneurship at MicroGraam worth it?

The satisfaction that people (especially the people who are getting impacted) appreciate your efforts to make a difference and build something that will have a long-run impact on the society.

What is your vision for MicroGraam in the coming year?

To create a strong foundation of microcredit model for increasing financial access at an affordable price to a diverse base of micro and small entrepreneurs’.

Technology used in delivery of services

MicroGraam is built on strong and state of the art internet and mobile technology. We strongly believe that technology will be critical enabler for us to achieve our objective of creating financial access at an affordable price. In this regard, we have created an internet based marketplace that,

• Is Transparent
• Is Engaging
• Provides choice
• Has ability to convert data in to information for value creation

The operations are supported mobile technology to provide real-time and cost-effective transaction and communication solution.

What aspects of social entrepreneurship should a budding entrepreneur prepare for?

I still consider myself as budding entrepreneur but if I have to share something based on my short experience then at would be,

• Aim for something simple but that has relative big impact
• Take time to crystallize one’s ideas
• Build a model that is scalable and sustainable

Yourstory wishes Rangan Varadan and MicroGraam a lasting successful presence in the world of Microfinance. We commend them on their exemplary and innovative work in social entrepreneurship. For a more comprehensive look at their offerings have a look at their site http://www.micrograam.com