“I 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 that’s 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 every bit 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 India’s 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; it’s about making sure that the poor aren’t poor any more,” says Ramakrishna. Having learned from the journey of Yunus’s 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 micro finance 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 women’s 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, to about 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 didn’t pay for about three or four months, but it usually doesn’t 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 their field partner and extending their reach to other parts of the country. This statement might sound radical, but if everybody has enough to live on decently, the world just might find itself a happier place.