India has the second highest unbanked population in the world - approximately six hundred and seventy five million people. More than sixty five percent of the people do not have access to a formal banking system. Only fifteen percent of the demand for credit worth ninety billion dollar is met through formal channels.
Microfinance is addressing this problem. The basic idea is simple: give a very small loan to a person who would not get it from a regular bank. We spoke about Grameen Bank and its contribution to Bangladesh here. Companies like Bandhan, Microcredit Foundation of India and SKS Microfinance are doing some amazing work in this domain in India. What got me wondering was: how can a person like me contribute to microfinance? After all, if the loan amount is small, someone with a small amount of money should be able to lend. And then I stumbled upon DhanaX.
What is DhanaX?
DhanaX is a person-to-person lending platform. DhanaX facilitates the lending and borrowing of money between Indians. They aim to provide easy access to low cost credit for the unbanked Indian population, and provide a credible and lucrative investment opportunity for the social investor.
How does one borrow through DhanaX?
People who need a small loan form a Self Help Group (SHG), and approach DhanaX for microcredit. DhanaX performs several checks to establish the credibility of the SHG such as verification of their passbooks and books of accounts. Using a 40-point parameter that they have developed internally, DhanaX also performs checks on individual members of the SHG. Some of the parameters are their residence history, their financial position and their purpose of taking the loan. Upon successful verification, the profile of the SHG is listed on the DhanaX website, where lenders choose the SHG they lend to. The loan is given to the SHG on a joint guarantee.
How does one lend through DhanaX?
Any Indian (including NRI) who is at least eighteen years old, has an Indian bank account and is not in the business of money lending can lend on DhanaX. One must register on their website to start lending. Once registered, the lender can choose the borrower depending on the SHG profile and the terms of the loan. The loan is given through DhanaX either by an online transaction or by a cheque/DD.
What is the rate of interest on the loan?
The borrowers are charged 24% interest on the loan. Though this is a high rate of interest, as per DhanaX, people who borrow from money lenders and other small financiers pay about 50% interest. Also, people who borrow through Dhanax increase their annual income by 11% compared to the people who borrow from money lenders.
The lender is payed 14% interest on the loan, calculated using a reducing EMI method. Payment is done every month. For every Rs 10,000.00 lent for a year, the lender gets Rs 898.00 per month.
The rest is kept by DhanaX as a service fee.
Is it safe to lend money through DhanaX?
DhanaX does a thorough verification before listing a SHG on their site. As money is lent to a SHG under a join guarantee, the rest of the group has to pay up in case of a default by one person. This is a well established model for lending money and has a high repayment rate of ninety eight percent. In additon, DhanaX stands as a guarantor for the principal amount of the loan.
Thus far, economic development in India has been non-uniform. Though a section of the population is moving ahead steadily, the other is at the risk of being left behind. Person-to-person lending plartforms, like DhanaX, provide a way for the people who have a little more to invest in the people who have a little less. They provide a way for us to move together as we move ahead.
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