Do you have a little extra cash that you want to spend for a good
cause? Have you always wanted to help a cause but didn’t know where to put your money? Or do you own a company that focuses on corporate social responsibility and wants to make sustainable
investments? One way of doing it is to donate the money, but there’s a small snag. The money you spend is gone for good – it can’t be used multiple times to help more people. But how about helping people as many times as you want, using the same capital you have spent in the beginning? And getting the entire amount back in monthly repayments? Call it sustainable giving or crowd lending, this kind of financial model enables you to do all these and one
start-up is leveraging it to enhance life at the
bottom of the pyramid.
Welcome to
Milaap Social Ventures, a social enterprise operating from Bangalore and
Singapore, which has developed an online crowd-funding platform to help the unbanked and the
underprivileged masses in
India. Simply put,
Milaap (it means ‘connecting together’ in Hindi) offers an RBI-approved micro-lending platform that allows the organisation to receive ‘loans’ from all over the world. Although
individual lenders don’t get ‘financial returns’ on their investments (after all, you are putting in your money for a ‘good cause’), they get the principal back after the stipulated period. They can then re-deploy the money to help another person/project or cash out their principal. This helps create a
continuous funding cycle, more effective and sustainable than one-time donations. Want to know more about how Milaap is connecting the haves and the have-nots in a bid to help implement life-enhancing projects? Here is a snapshot that captures the start-up’s vision and viability.
Who runs Milaap (milaap.org): A team of three co-founders –
Sourabh Sharma (
CEO),
Anoj Viswanathan and
Mayukh Choudary. Sourabh, a graduate from the
National University of Singapore, started his first company, a mobile app start-up, straight out of college and ran it for more than two years. Next, he had a stint with corporate houses but soon joined hands with the other two co-founders to start Milaap.
Anoj holds a degree in Engineering from the National University of Singapore and he is also a StartingBloc Fellow (2010). Prior to co-founding Milaap, he had worked with SKS
Microfinance and focused on the energy and water services space. Earlier, he had been at
ReEx Capital Asia, a cleantech investment boutique in Singapore, and served as a fellow at D.light Design. He is also a founder member of the
Microfinance Society in Singapore and leads the Milaap team in India.
Mayukh is an
electrical engineer from IIT Madras and holds a PGDM from IIM Lucknow. He specialises in building technology-enabled financing models and worked as a
financial risk consultant in Dubai before starting up Milaap.
What inspired the venture: A sabbatical that changed life. In 2008, Anoj took some time off to be with SKS Microfinance and worked on a project to provide solar lanterns on credit in a few tribal villages in
Odisha. There he met Mayukh who was then working with the solar lantern-maker D.lightdesign. While on this project, Anoj noticed how
small loans impacted life in a big way, especially at the bottom of the pyramid, and the idea of Milaap came to his mind. Developing a crowd-funding platform to connect India’s underprivileged with prosperous individuals and
institutional lenders across the globe seemed the right way to go about it. Anoj, who knew Sourabh from 2006 when he interned at his previous start-up Microappli, got him and Mayukh together to give shape to the idea of Milaap, which finally went live in June 2010.
What’s the pitch: Lend a little,
change a lot – that’s Milaap’s motto and it has started happening. “India has a large pool of people who don’t have access to traditional banking, but they do require
funds for self-employment and developmental initiatives. So we are leveraging the global reach of the
Internet and trying to ensure that people – either individually or through their
social networks – can raise and lend capital to the millions who are unbanked and underprivileged,” says Sourabh.
Milaap is currently targeting over 700 million Indians who are mostly living in the rural & semi-urban areas and unable to access formal sources of
funding. According to the social enterprise, less than 5% of them are able to procure reasonably priced, life-improving loans for their small businesses, vocational training or other essential household assets, and that’s where the ‘loans’ raised by Milaap come in .
How it works: At Milaap, the work is done in two stages. One part is
shortlisting borrowers and publishing their profiles/projects on Milaap.org for crowd funding. Second part is deployment of the loans, monitoring their usage and ensuring timely repayments. Understandably, the second part is more cumbersome and requires a lot of offline work. Milaap has already tied up with 20-plus carefully selected ‘field partners’ (chosen from a wide range of
microfinance institutions or
MFIs,
social businesses,
vocational training institutions, etc.,) to identify the most deserving candidates/projects for loans. Once they are selected, each
borrower’s profile is uploaded on the site, along with the fund raised till date and the amount still required for completing the loan.
Lending online is quite simple, though. Browse through the profiles to choose a borrower or select one from an impact area that you feel strongly about. You can also use various parameters such as cause,
location,
project urgency,
repayment period, women-centric projects to fine-tune your
borrower search. After the loan payment is made online, Milaap disburses the amount to the concerned
field partner and the end-borrower gets it from the field partner. When repayment is done (end-borrower – field partner – Milaap), ‘credits’ are accumulated in your Milaap account. When the loan is fully repaid, you can either withdraw the money or roll it into another project. As for diehard do-gooders, there are even more options to
start fundraising for the projects you prefer.
Claim to fame: The concept and the build-up. According to the co-founders, crowd-funding is still a niche concept in the country but it is gaining traction gradually. Till date, Milaap has raised and disbursed over Rs 8.4 crore in 8,633 loans, impacting more than 46,393 people across 11 states in India. These loans are essentially raised to fulfil a wide range of
developmental requirements including
basic education & vocational training,
seed capital for small businesses,
access to clean water &
sanitation, and
safe lighting. Moreover, Milaap boasts 100% repayment of loans till now, indeed a rare feat when banks and big
financial institutions (
FIs) are suffering from the rise in bad loans.
The organisation is also focusing on
pan-India expansion. “Earlier, we were mostly operating in states like
Tamil Nadu and
Maharashtra. But now we are scaling up our operations and growing in states like Odisha,
Mizoram and even Gujarat,” notes Sourabh.
Show me the money: While a borrower gets the entire sum offered by the lender, Milaap charges its field partners a 5% fee on the loans disbursed through them, to cover its operating costs. Its field partners, in turn, charge affordable interest from the end-borrower to meet their operating costs. Milaap also makes sure that all fees are disclosed upfront.
Unlike many other ventures in this space, this social enterprise is a for-profit concern, but has not reached break-even yet. However, it has found some solid backers and already raised $1.1 million in Series A venture funding in May 2013. The money raised is being utilised for developing the online platform further and scaling up operations. “We want the number of lenders to go up to 100,000 in the next 18 months. That is the tipping point from where we can gather momentum and look at break-even,” adds Sourabh.
The
Series A round was led by Singapore-based
Jungle Ventures, an early-stage investment firm and an approved
technology incubator under the
Singapore National Research Foundation’s Technology Incubation Scheme. Other investors included
Toivo Annus (
co-founder of
Skype),
Lionrock Capital (a Singapore-based
family investment office),
Jayesh Parekh (Co-Founder, Sony Entertainment Television) as well as existing investor,
Unitus Seed Fund. The company is looking to raise a Series B round worth $3-5 million in the second half of CY2014.
Earlier, between August 2010 and January 2012, Milaap raised $250,000 in seed investment from Unitus Seed Fund,
First Light Ventures,
Vijay Shekhar Sharma (Founder,
One97) and
Rajiv Madhok (Founder,
Oorja).
Interestingly, only 40% of the total lending amount comes from individual lenders (mostly from India, Singapore, the US and
Canada) while 60% funding comes from institutional lenders, social funding and even family offices. But unlike
small lenders, large institutional and
HNI lenders get 3-4% return on their loans.
Biggest challenge: There is competition from a few sites like
Kiva or Wishberry, but it is still a niche space and
discoverability is the main challenge now, feels Sourabh. “We need to do more marketing and promotion to let people know such a platform exists. That will help us get more lenders on board, more field partners and subsequently, help more and more people get life-changing access to capital,” he says.
A word for wannapreneurs: Take the plunge and do it. ‘Now’ is always a good time to do it – so don’t hesitate. I always feel that the risk part is overrated in entrepreneurship. You actually need the experience before you can succeed. So start early and make sure that you get the kind of experience you need for long-term success. Your first initiative may not be all that great but at least, you would have learnt from all your mistakes. Try fast and fail fast before you can succeed.
