India’s microlending sector has got a significant nudge with the central bank giving its first nod to a crowdsourcing company to attract small loans from abroad for the country’s poor. Following the Reserve Bank of India’s (RBI) approval, individuals or institutions from anywhere in the world can use Milaap’s online platform to identify whom they want to lend to, widely expanding the capital source for the company. They can extend as little as Rs.1,000 to fund someone’s education or solar stove business and Milaap will give the pooled money to the borrowers at interest rates of 8-15%. India has only a handful of these so-called crowdsourcing, or peer-to-peer (P2P), businesses—smaller cousins of microfinance institutions, or MFIs, which extend small loans at interest rates of 18-24%. The poor in India have to pay high interest when they borrow from MFIs as these, in turn, borrow from banks at commercial rates, said Milaap chief executive Sourabh Sharma. “This will open the doors to the entire world to be able to make loans to help India’s working poor. This exponentially increases the potential social capital which can be raised.”
Mint
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