Unitus Ventures (formerly Unitus Seed Fund) is thrilled to announce that we’ve made a seed investment in Milaap Social Ventures based in Bangalore!
Milaap is an online platform to make microloans to India’s working poor. Everyone (in India or other countries) can view personalized microloan requests along with information about how the loan will be used and when it will be paid back. And with a few clicks, you can contribute as little as $20 towards a loan or fund the whole small loan. Other lenders then provide the remaining loan amount and the loan is made through one of Milaap’s trusted microfinance field partners. Milaap is covering a much wider range of loan types than traditional microcredit including vocational training loans, home toilet loans, solar lamp loans and small business expansion loans. They have made a lot of progress in 2011 and they now want to expand to the next level of impact.
I met the founders, Sourabh and Anoj about a year ago through an introduction from my friend and colleague Shalaka Joshi at Unitus Impact. I was really impressed with what they were doing but at that time we hadn’t yet launched Unitus Ventures (formerly Unitus Seed Fund). Shortly after this meeting, Milaap won the peer-selected business investment competition at the Dasra Social-Impact program and that resulted in them earning an investment from our friends at First Light Ventures.
Another break-through for Milaap is that they figured out a legal and viable way to bring foreign debt capital into India to support microloans. As you might know, India has very strict regulations which make it very difficult to get approval for this. This enables Milaap to tap into foreign sources of debt capital which will allow them to greatly expand their microlending capacity.
Why we’re excited about what Milaap is doing
One of the exciting things that Milaap is doing is educating the India middle-class about how they can start to use their resources to have an impact beyond their immediate relationships. It is quite common in India for people to be generous with people in need right around them or their extended family network. By providing a transparent, personalized, trusted platform for impact lending, Milaap is giving many people the opportunity to reach out and help people they don’t know. And it is in the form of a loan which gets repaid (but with no interest). To date, Milaap has 100% repayment on its loans! So far, Milaap has had a very high percent of lenders re-lend once their repaid demonstrating that they’ve had a very good experience!
Milaap is providing capital to MFIs at about 7% interest rate which is about half the rate that MFIs must pay for on-lending capital from banks. This allows MFIs to experiment with new, riskier types of loans and, in many cases, to pass along some of the benefit in lower interest rates to the borrowers. This enables MFIs to offer new, value-add products at lower risk and once they’ve validated the product design and repayment history they are in a much better position to fundraise from banks and other more conservative capital sources.
Milaap already has some great field partners including:
- Grameen Koota — vocational training microloans
- Industree Crafts Foundation — artisans and agricultural worker microloans
- Sakhi Retail — education, water and sanitation microloans
- Guardian — water and sanitation microloans
- DCBS — solar lighting microloans
Unitus Capital acted as a financial advisor to Unitus Ventures (formerly Unitus Seed Fund) on this investment.