Micrograam P2P online micro credit portal
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Micrograam P2P online micro credit portal

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Micrograam P2P online micro credit portal

Micrograam P2P online micro credit portal

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Micrograam P2P online micro credit portal Micrograam P2P online micro credit portal Presentation Transcript

  • 1 A P2P marketplace for Microcredit http://www.micrograam.com
  • Microfinance Microfinance is not what you believe What is microfinance? What is not microfinance? A working economic model: Social business or “Philanthropy” A powerful tool of financial inclusion and economic development A new market, with new clients One of the fastest growing economic sector in the world Not charity nor philanthropy Not giving but lending Not a magical tool to eradicate poverty Not an exclusive financial investment for rich people Not as risky as it may appear (average repayment rate of 97%)
  • New Models For Microfinance
    • Traditional market model: one central organization (financial, governmental, non-profit institution or corporation) serving many individuals
      • - Large-scale impersonal markets
      • - Low resolution preference expression
    • New innovative market models: flexible dynamic capital allocation systems that provide democratic, more immediate, low-cost, affinity-directed capital
      • - Benefits to individuals: freedom, convenience,
      • preferences articulation
    • - Benefits to groups: virtual aggregation of group,
    • power to conduct transactions
  • Goal
    • Create a system that favors borrowers so that they get the lowest interest rate that a free market will bear
    • Investors are benefited as the principle is returned with nominal interest as well making it a social cause
    • Connect people / NGO's / MFI's, who are in need of capital, directly with people who are interested in lending
    • Participate in a solution that can help alleviate global poverty by helping people help themselves
  • How MicroGraam addresses the challenges?
    • MicroGraam’s success is aligned with the reduction in interest that the borrower pays; MicroGraam has also minimized the overhead in back-office work, payment transaction overhead, etc.
    • MicroGraam has built a demand-side technology platform for peer-to-peer microfinancing, and a blueprint to franchise this model out to other geographies over time.
    • MicroGraam has already established a network of partnerships with NGOs and SHGs representing millions of borrowers in India.
    Traditional monopolies MFIs MicroGraam Interest paid by borrowers 100+% 25-50 %* 5-15%
    • source: Kiva.org
    • (Kiva invests via MFIs)
    • Average MFI interest is 25%
    Need: Reduce overhead In ecosystem to minimize Interest paid by borrowers
  • MicroGraam Portfolio Overview Microfinance Infrastructure MicroGraam Platform NGOs & Borrowers Lifecycle Management Payment Projects Portfolios Auction Negotiation
    • Micro-Loans
    • Target: Individual investors
    • 1 year investment horizon
    • Peer2Peer investing
    • Launched Feb 2010
    • Auctions & negotiations to reduce interest rate
    • Micro-Portfolios
    • Target: Foundations, HNI, FI
    • Multi-year investment horizon
    • MicroGraam created portfolio based on geography, industry and reputation ranks
    • Launch scheduled in Q2CY10
    • Enable foreign investments
    • Micro-Ventures
    • Target: All
    • Short-term investment
    • Build-to-order model
    • Pre-fund artisans in NGOs
    • Investor is returned investment minus good sale price, and any interest
    • Launch scheduled in summer
  • Micro-Loans Borrower Profiles Borrower Profiles Investor invests on borrower(s) based on auction process Field Partners post borrower profiles and distribute investments Field Partners collect repayments and manage delinquency Borrowers are subject to Field Partner’s due diligence and credit processes
  • Micro-Portfolios Portfolio Profiles Portfolio Profiles Investor invests on Portfolio of Borrowers belonging to one or more NGO or Industry Field Partners post portfolio of borrowers and distribute investments Field Partners collect repayments and manage delinquency Borrowers are subject to Field Partner’s due diligence and credit processes
  • Micro-Ventures Venture Profiles Venture Profiles Investor invests / pre-pays artisan group Investor gets return & goods at end of term (in a few months) Field Partners post portfolio of borrowers and distribute investments Field Partners collect repayments and manage delinquency Field Partners also help organize and execute on deliverables Artisan Venture Unit -- 3 Artisan Venture Unit -- 2 Artisan Venture Unit -- !
  • Investor’s Investment Options
    • Individual– Up to Rs. 1 lakh
      • Person to Person Investing model
      • Auction or Negotiation Model
      • Expected Returns up to 6% for 4-Star and 7.5% for 3-Star Ranked NGOs
      • Period of investment 12-18 months
    • Individual or Group Investment – Rs 1 to Rs. 10 lakhs
      • Portfolio Investment
      • Auction or Negotiation Model or Portfolio Investment for Investment > Rs. 5 lakhs
      • Expected Returns up to 8% for 4-Star and 9% for 3-Star Ranked NGOs
      • Period of investment 12-24 months
    • Institution Investment – Rs. 10 lakhs and above
      • Portfolio Investment
      • Expected Returns up to 9% for 4-Star and 10% for 3-Star Ranked NGOs
      • Period of investment >36 months
  • Why Invest in Micro Credit as an Asset?
    • Superior quality : <3% credit loss, attributed to concept of social collateral, shorter maturity of products and continuous follow-up
    • Strong underlying business model : Group liability and social reputation
    • Diversification : Low correlation with other asset classes and within asset class - very high granularity of loans
    • High growth rate : Three of the largest MFIs in India – SKS, Share Microfinance and Spandana have shown near 100% YoY growth rates
    • Good Returns : These are double-bottom line assets—social and commercial returns. Commercial returns to the extent of 6-8% can be expected for individual social investors. Social returns depend on each investors’ preferences.
  • Risk Comparison Best In Class Thematic (eg. environmental) Micro Credit SME Investment Universe Large caps Multi-sectors Small & Mid caps Sector specific NGOs or financial institutions Small & Medium Enterprises Nature of Underlying Asset Listed Listed Almost entirely non listed Non listed (Private Equity) Categories of Investors Institutional & Retail Mainly retail High net worth individuals, institutional, potentially retail Sophisticated High Net Worth Individuals Profitability Similar to Benchmark Higher than Benchmark Small profitability High Profitability Volatility Limited by construction High Low (<1%) N/A Social & environmental contributions Medium High Very high High Risks Low Medium Low by experience High by perception and sector characteristic Very high
  • Investment Risk
    • All investments carry some risk
    • Micrograam platform is built around a network of local field partners screening the Businesses who would like to obtain a loan . All Businesses interested in obtaining a Loan undergo a thorough investigation process to make sure they provide healthy economic prospects for growth before they are classified as investment Businesses . The due diligence process include a background check to track record, reputation
    • Historically, 97% of poor people have actually paid back their loans through good and bad economic cycles. This means that the institutions that work with our borrowers can generally pay you back too. And, Micrograam thoroughly vets these institutions to make sure they meet certain business and regulatory requirements
  • Key Differentiation
    • Only organization in India that uses an online auction based investment bidding process
    • First organization in the world to provide negotiation based determination of terms of credit by all parties
    • Reduce interest rates by working with NGOs and SHGs
    • Social investors help determine the interest rate of the loan, not financial institutions
    • Reduces the loan origination cost
    • A platform for an open, competitive microfinance marketplace
    • Reputation rankings of NGOs and borrowers for transparency
    • Unique business model of pay-for-performance ensures that MicroGraam’s interests are aligned with that of a reputable borrower
  • MicroGraam EcoSystem Borrowers Groups (SHGs)
  • MicroGraam’s Partners – A Snapshot
  • MicroGraam’s Partners – A Snapshot (contd..)
  • About The Founding Team
    • Sekhar Sarukkai, PhD, voted recently as a top 25 CTO by Information Week, is a successful serial entrepreneur based in the silicon valley. The last company he founded (Securent) was acquired by Cisco systems. The previous company that he had co-founded is now part of Oracle. Previously he worked at HP labs and NASA research, and holds a PhD in computer science from Indiana university. He has a passion for application of technologies in ways to better humanity.
    • Rangan Varadan, PhD, brings in extensive experience in financial services domain. His current focus and interest are in the area financial inclusion in India. He is working towards taking branchless banking services to the villages in the most efficient manner using technology and through partnership with grass-root level organizations. Previously he was heading the Banking and Capital Markets Domain Group at Infosys Technologies Limited. His experience in the financial services domain encompasses the areas of securities trading, investment management, risk management, and economic modeling. Rangan holds a PhD in finance and economics from Lehigh University. He is also a fellow of the Institute of Chartered Accountants of India.