My Microfinance Motivation

In 2008, I decided to leave corporate finance at Infosys to pursue a social initiative. I was inspired by the microfinance movement and Mohammad Yunus to start a business in the microfinance space. Through my network, I came across an offer to be the CEO of a business correspondence company, which was given a mandate from commercial banks to set up village banking centers across India. I was intrigued because it leveraged technology to improve financial inclusion in rural areas.

In a little more than a year, I set up more than 1,200 business correspondence branches. This year taught me two things, first that the business correspondence model adopted by the banks to open zero balance savings account had absolutely no benefit to the people. Second, that if I want to impact under severed populations, I needed to make credit more accessible. This motivated me to develop a micro-lending organization with credit as the first product offered.

Soon after I left the business correspondence company, I had a conversation with a cousin, Sekhar Sarukkai that inspired me to start MicroGraam. Sekhar told me that our younger cousin, who was a very talented cricket player, wanted to become a professional player. To do so, he needed funding to move to an urban area and train with a team, however his family lacked the funds to help their son do so. Although the family was willing to take a loan for their son to pursue his dreams, not one bank would offer them credit.

As our conversation continued, I told Sekhar of my experience in rural villages. I knew there were millions of people across India with the potential to be successful who were hindered by their lack of resources and capital. Similarly to our cousin, if an entrepreneur misses out on receiving funding at a crucial time, the opportunity could be lost forever.

Sekhar and I set out to build a model that was win-win for both lenders and borrowers. At the time, in rural borrowers paid more than 30% interest while urban borrowers could get an interest around 18%. This made us wonder, “Why is there a gap between urban and rural in an age with such advanced technology?”

As Sekhar and I began to research how to start MicroGraam, we gave some loans from our own savings. In one village we gave 20 loans to women to buy dairy cows. After three months we visited and I asked one woman if she was able to provide for her two small children through the cow. She nodded and said that she earn about Rs. 2,000 a month was enough but more than the money, now she was able to give her children milk so they are growing much bigger than they did before. She paused for a moment and said, “Also, now I can offer a guest coffee when they come to my house. I have respect in my village.” Although I expected that the loan would provide her family with food and income, I did not anticipate the respect she described from her peers. Furthermore, she attributed the improvement in her life to the additional respect! This singular experience showed me that MicroGraam was worth pursuing and the multifold impact that a loan can have on a person’s life.

Rangan Varadan is the CEO and Co-founder of MicroGraam Marketplace. Previously he headed the Banking and Capital Markets technology research group at Infosys Technologies. Rangan holds a Ph.D. in finance and economics from Lehigh University, and is also a fellow of the Institute of Chartered Accountants of India. Rangan brings extensive experience in financial services domain. His current focus is on taking branchless banking services to villages in the most efficient manner through technology and field partnerships.

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