Microfinance company MicroGraam, headed by former Infosys CFO V Balakrishnan, plans to fund rural businesses worth ₹500 crore by 2020 and expand into the North-East.

MicroGraam officials see a lot of opportunities in funding sustainable businesses in rural India.

“India needs a systemic approach towards funding farmers, such as enabling them to diversify their income generation,” said Balakrishnan. The microfinance institution currently funds farmers in southern and western India.

India, which currently generates 60 per cent of its annual income through agriculture, has seen a number of its farmers commit suicide due to factors such as inability to repay loans which come at almost 35 per cent interest rate.

“We charge an average of 14.5 per cent and the loan amount tends to be not more than ₹1 lakh,” said Balakrishnan.

The payback period ranges anywhere between 12 and 18 months, and since the last five years 98.3 per cent of the loans have been repaid, company officials said.

Further, the new scheme, which involves funding women in rural households, will bear an interest rate of 12 per cent. The microfinance company is taking these services to Jharkhand, West Bengal, Assam, Chhattisgarh, Bihar and Madhya Pradesh.

The institution, which partners with NGOs such as Deshpande Foundation, has the backing of several tech entrepreneurs including Kris Gopalakrishnan, SD Shibulal, and Ranjan Pai of Manipal Group. It crowd sources funding from various people and for a capped return of 8 per cent funds rural businesses in the areas of renewable energy, solar lighting and water sanitation.

MicroGraam is also talking to corporates to provide funds, but believes that its model of using technology and crowd funding would continue to be the way forward rather than rely on a large investor. Company officials pointed out that 96 per cent of its borrowers are rural women who have better credit records than men.

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