Rang De, an Indian peer to peer online lending platform providing micro-credit to low income entrepreneurs through social investments is extending its platform to foreign investors from January 26,2012, Ramakrishna, the CEO & Founder of Rang De, told MediaNama.
Rang De receives two kinds of capital – debt and donated capital, and so far, only Indians were allowed to invest. Rang De allowed Indians to provide debt to small businesses via its platform, starting at Rs. 100, for a return of 2% on their investment.
Foreigners Can Invest Money, But Cant Repatriate Returns
Rang De has received approval from the Ministry of Home Affairs, to allow foreigners to make investments, under the Foreign Contribution Regulation Act, but it still doesn’t allow people to take money back.
FCRA Act allows foreigners to contribute to non-profit organisations without receiving any financial benefit from such a contribution. Once the nature of the transaction changes to investment for returns, the transaction becomes an external commercial borrowing, governed by several other regulations. The regulations for these transactions require a lock-in period of three years.
When asked about the reason for the decision to take only foreign investments without returns, Ramakrishna said that the compliance with the external commercial borrowings for small amounts that they receive doesn’t make economic sense.
Technology aided accounting
Owing to the need for technology to support the foreign investments in the backend of their system, Rang De did not open its platform to foreigners. The new technology supports the separate accounting of these foreign funds that will come in as investments that will not be returned. The newly introduced features will enable foreigners to invest in an entrepreneur of their choice, track their investment and reinvest the money once repaid by an entrepreneur. Though the interest of 2% will be credited to the principal invested, foreigners will only be able to reinvest it and not withdraw the sum. Similar to Indian CSR initiates, foreign organisations can also donate to Rang De. However, foreigners will not receive any tax exemptions in their country.
Other overseas plans
Rang De has its chapters in U.K and U.S.A and are in the process of opening another chapter in Singapore to spread the word about their work. Rang De is also in the last stages of registering themselves as a non-profit even in the United States. Americans donating to the entity in the U.S will be eligible for tax exemptions in the U.S. Although, Rang De is making its presence felt in other parts of the world, they don’t plan to scale this model to meet the micro-credit needs in other parts of the world. They have limited their work to India with the belief that there is enough to be done at home.