Rang De

Owned by Ashu Sikri (Unlicensed)
Last updated: Jun 14, 2022
5 min read

Notes from June 10 call with Ram (founder) and partnerships team (Sunder, Shraddha, Shivang)

  • Bc RangDe is RBI licensed (as a P2P NBFC), borrowers have same "status" as if borrowing from a bank. RD shares repayment info w all credit bureaus which builds borrower credit history

  • Some rules specific to P2P NBFC:

    • Max a borrower can take on is 10 lakh (whether individual or biz like an FPO)

    • Max a lender can give out is 50k per borrower and 50 lakh total (eg, up to 100 investments)

    • Max tenure is 3 years

  • Social investors are looking for 6-8% annual return and “radical transparency and impact”. Geography of borrower is really important (some investors want to visit their borrowers).

  • Suggested structure for DG

    • Position debt as "micro equity" to social investors w variable return and flexible repayment terms

    • Lend to individual farmer within an FPO, borrower authorizes FPO to receive the money 

    • Impact partner (eg, DG) puts up FLDG for 10-20% of loan book to offset delays / defaults

    • DG will pay RangDe an “access fee” to reach borrowers via the platform; RD’s economics not impacted by interest rate or repayment rates. One time platform fee (2.4 lakh) and annual maintenance fee (1.2 lakh); there is also a 2% processing fee for each loan 

    • Need to figure out if proceeds from govt subsidy programs like Agri-Infra Fund can be used to repay P2P loan through RangDe

 

 

Intro deck received June 1

 

  • I spoke with Darshan (Feb 16 2022) who used to be at TRIF working on a project where TRIF was developing a strategy/project for NRLM on livelihoods promotion. He has been at at RangDe for a couple months. 

  • RangDe ran as a non-profit from 08 to 17 supported by Tata Trusts and ICICI Foundation and as of Sep 2019 relaunched as for-profit RBI regulated NBFC doing P2P lending

  • Since then, have facilitated loans of 30cr to 11k households

  • P2P model and the retail investors who lend money are called "social investors." They can expect a return of 6-8% which is not great from a risk adjusted return perspective but not bad vs an FD and given the impact angle. 

  • I was curious if investors care about impact metrics; right now, RD asks partners to collect income enhanced for borrower and "# of livelihood days" but wants to get better impact metrics and also track carbon emissions going forward

  • Areas of interest for social investors are education, livelihood and increasingly climate (eg, buying clean cookstoves)

  • RD has no field staff and relies on "impact partners" to bring borrowers onto the platform. 

  • Impact partners are usually NGOs for whom getting their beneficiaries access to credit is an important programmatic KPI so they are motivated to bring borrowers to RD  

  • Impact partners pay RD a one time platform fee (2.4 lakh) and annual maintenance fee (1.2 lakh); there is also a 2% processing fee for each loan 

  • Some examples of Impact Partners who work with farmers incl PRADAN, WASSAN, Gram Vikas, AEGF (Synegnta Agri-Entrepreneurs)  

  • Everything goes through impact partners; they identify potential borrowers, fill in the loan application. Login credentials for RD are issued to the impact partner not individual borrower. Borrowers deposit money directly to RD's bank account but impact partners have a dashboard to track repayments and followup with borrowers who are late

  • There as been some experimentation with impact partners providing loan guarantee; 10-20% of loan is kept as FLDG.  

  • RD works with the impact partner to set the interest rate (usually 6 to 8%); rate is based on whats feasible for the borrower and what other options the borrower has locally (with a goal to be cheaper)

  • Some examples: 

    • PRADAN: Promoted SHG federations, got funding from NRLM which was lent to SHG members (10 to 15k check size). SHG members now have further credit needs; 50k to 1 lakh loans for their specific businesses. Banks are not viable bc the loans are too small and borrowers don't have enough of a paper trail, MFIs at 20-25% interest are too expensive as are local informal lenders. 

    • Tata Cini: Farmer group wants to do solar powered micro irrigation, needs a needs 1.5 loan after subsidy, came to RD

    • Interestingly, seems like they have setup an Agtech "fund" with Sanjay Vidyarthi where social investors can lend to a portfolio of borrowers who are using proceeds to deploy tech for their farms (3.5 lakhs for tube wells, diesel engine pumps and pipes). See here for more detail   

  • One idea I floated to Darshan is DG playing the role of an impact partner that could put together a climate adaption and resilience "fund" where social investors could help farmer groups put in place equipment that delivers productivity + climate resilience and maybe even mitigation benefits. Something we could explore further based on where we land with prioritization 

  • Could also list individual farmers or FPOs that have a specific need (eg, cashew processing for Velugu promoted FPO)

  • RD open to input and generic working capital loans to FPOs as well

  • Loans for climate smart tech is an growing theme on RD; Sustain plus (which works on distributed rural energy, DRE for farms) is apparently on-board as an impact partner

  • Loan size is capped at 10lakh but typically smaller (~1 lakh)

  • Duration is upto 3 years, typically 1 year with quarterly (or perhaps even more frequent) repayments

  • Usually the borrower is an individual but have also done loans to groups (eg, an artisan society in Kutch)

  • One thing to note is that due to RBI rules, the most a social investor can put towards a single borrower (whether its an individual or a group) is 50k 

  • Bc RD is RBI registered, loan repayment records are shared w credit bureaus