Future Growth and Recommendation
The alliance between technology and finance is heading towards a new paradigm with the emergence of peer-to peer (P2P) lending/crowd funding technology platforms. While in certain regulatory jurisdictions this space is being looked at as more favourable, some other regulators have raised concerns mainly relating to distress for lenders in the event of a sudden closure of such platforms. While these platforms are still new to India and the scale of transactions is insignificant, this is a gap which requires regulatory attention. The lack of clarity of rules and regulations has meant the industry is shooting in the dark. As the P2P market matures, and is better understood by consumers and regulators alike, we can hope that the grey area in which many platforms are still working becomes clearer and that the regulatory authorities will adopt policies conducive to the industries’ growth and transparency. This is all more important since many players are making an entry into this space amidst concerns over regulatory arbitrage
Landscape of financial services is changing very fast with new institutions like payments banks and models like mobile money. This innovation will certainly provide fillip to true peer to peer lending in India. Initiatives like public 26 service announcements planned by Milaap and celebrity endorsements (Kiva.org benefitted by celebrity endorsements like Clinton and Oprah Winfrey) can provide much needed push to web enabled social lending. .
Going forward, there is a need to undertake detailed research in this space covering the following aspects/questions: – Detailed analysis of operating costs and business projections of CFPs backed by financial statements of at least last 3 years. This analysis should allow drawing some conclusion of how current models are positioned against mainstream microfinance funds and its sustainability going forward. – Why do lenders really want to lend? How do members come online, how are they identified, and how are info/online security matters handled? – Detailed analysis of due diligence of field partners conducted by CFPs. – Since CFPs handle lenders money by so called escrow accounts, how are escrow accounts maintained and what is their legal status? Can a private limited company be an Escrow agent in India or is this limited to NGOs? – How do real Funds Transfers happen – between lenders and the MFI, and between the latter and its borrowers? How are funds returned to lenders if required or real time basis? – How can online models boost savings of the poor people and provide other financial services to the poor? How can cultural changes be initiated in the Indian environment? – What are privacy protection regulations for all the photographs of borrowers on the websites? Are borrowers aware that their MFI is forwarding their photograph and profile to CFPs? What permission is taken?
Today, Rang De works with 16 field partners across states like Manipur, Orissa, Maharashtra and Madhya Pradesh, in addition to the 12,000 plus social investors in its circle. The founders’ long-term vision is to be able to disburse Rs 100 crore annually. The transparency with publishing of interest rates, regular updates to social investors and the Rangdevous (offline meetings term coined from ‘Rendezvous’) in different cities make each stakeholder more involved and empathetic to the cause. The significance of the Rang De model is that it has successfully used technology to put a human face to poverty.