dhanaX – online lending platform for micro loans

February 27, 2008

By sinha

dhanaX, Bangalore based startup has launched an online lending platform which enables individual to directly lend to low income borrowers via dhanaX’s partner channels.

Here is how it works:

dhanaX identifies and partners with recognized microfinance organizations, NGOs and credit societies that look into the economic needs of the poor.
As a lender, you can extend credit at a mutually agreed rate of interest to a suitable enterprise or individual through dhanaX.
At the end of the stipulated loan period, dhanaX will facilitate the repayment of principal amount with interest with the help of partner organizations.

dhanaX’s core USP lies in it’s attempt to eliminate the intermediaries and be the platform to bring lenders and borrowers together.

A quick look at Microfinance scene in India:

Of the estimated annual requirement of Rs 1,35,000 crore of credit for the underbanked, the microfinance sector in India meets little over 5% of the annual demand.
There are more than 200 MFIs in the country, of which the top 20 account for 80% of the total MFI portfolio.

MFI segment has witnessed one of the major PE investments in India (private equity group Legatum and Aavishkaar Goodwell have partnered to invest $25 million capital in a micro-finance group, Share. California-based venture capital group Sequoia and Unitus, the Seattle-based company that lends to and invests in MFIs, have ploughed $11.5 million into SKS Microfinance – source)

Infact, the most significant issue with microlending in India is bad recovery rate/NPAs; and the inefficiencies created by intermediaries in delivering/recovering loans.

dhanaX is a gutsy initiative and is a startup to watch out for – after all, social entrepreneurship is not an easy ball game in India.
What do you think?

Aside, I have done consulting assignment for Sam Pitroda’s c-sam , i.e. mobile wallet that can be used to disburse microloans via SHG (self-help groups) route and will share the final report/recommendations here.

dhanax

Tags: dhanax, Indian Startups

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Siva on February 27, 2008 at 9:04 am

Hi Ashish,
Thanks so much for writing about dhanaX.

We’ll send the beta for the site soon and I am looking forward to read your inputs on mobile wallet consulting assignment.

Cheers
Siva
http://www.dhanax.com

Satish K on February 27, 2008 at 1:50 pm

http://www.rangde.org is another new player which shows a lot of potential. Maybe you should be doing a review about them too!

Raseel on February 27, 2008 at 2:14 pm

DhanX seems like an interesting startup. But are there any Tax benefits involved ? As is in the case of Kiva.org Only, with Kiva, the Tax benefits are for US not India

amitkumar on February 27, 2008 at 2:34 pm

Again it’s cheap copy of kiva.org. Given the indian mindset it would be very difficult to pull the venture off the ground. Indian entrepreneurs should think of social economic factors before copying western models.I think ashish you can put it in deadpool watch list straightway.

Raseel on February 27, 2008 at 3:13 pm

Hey !!! That’s not a very nice thing to say. I think we need to encourage social entrepreneurship. Besides, having a Kiva clone for the Indian context is not such a bad thing. Instead of catering to the world’s entrepreneurs, we can start with Indian small business entrepreneurs.

Also, in my earlier post I mentioned Kiva had tax benefits. My Bad. Tax benefits are only for donations to the institution.

I think RangDe and DhanX should keep it up and not falter in the face of initial teething issues.

Siva on February 27, 2008 at 3:24 pm

Thanks for the comments..

Unlike the NGOs mentioned above, lenders get good returns on dhanaX (benchmarked with debt funds/bank deposits) .. we are taking the investment approach which requires a lot of compliance with local financial regulations..

Rassel>> You have raised an important point regarding tax benefits.. We are pitching to the government agencies to consider this as a tax benefit..hope something happens..

Amit>> everyday we are working hard not to get into dead pool startups..wish us luck:-)

Prashant on February 27, 2008 at 5:32 pm

@amitkumar: usually i don’t find it advisable to respond to remarks like the one you made here but i am making an exception here for two reason

1) you simply discouraged and dismissed a startup by measuring against a western benchmark when you don’t understand a heck about either Kiva or DhanaX or Micro financing. spend some time researching before opening your mouth on a public forum .you will save yourself from embarrassment.

2) Siva was excessively polite to you which might make you (and readers of this blog ) think that your points are valid

now lets talk about value of your feedback

>>cheap copy of kiva.org

Kiva is a different ballgame altogether . motivation at Kiva is to do charity , micro financing angle is at fund distribution end . from a Lenders point of view the driving motivation is not of profit .

“Given the indian mindset it would be very difficult to pull the venture off the ground. Indian entrepreneurs should think of social economic factors before copying western models.”

What you know about Scio Economic condition here in idnai which we don’t ? World know about MF because of Countries like India and Bangladesh .

Grameen Bank is from Bangladesh ,

“Shri Mahila Grah Udhyog Lijjat Papad ” is essentially a MFI thing and its hugely successful .

Vinod Khosla wrote Bicycle Commute Economy White paper [http://tinyurl.com/2ou249] from Indian view point .

ICICI is working on there Rural banking initiative

HLL is having Project for using Micro financing as a way to enhance and expand their distribution network

Indian Govt is seriously thinking of giving a tax break on all money invested in Registered Rural MFI or exempting MFI investment from Capital gain tax . to ensure money reached right hands and not lost in transition like what happen in Govt Machinery .

All this action is there because Indian in rural area have a reputation to protect and they don’t default on payment . NPA is lowest in rural loan .
so i advise that please don’t discourage folks like that .

“you can put it in deadpool watch list straightway”
Ahh thats a good one . you can see Ahead ?? which company you work for ? where will your company be if Rs keep appreciating ? BTW did you defaulted your credit card payment ? than you have good reason to think like that .

I don’t say that Dhanax will be Hit or something but their attempt is sincere and decent . Prosper.com ,www.zopa.com are doing somewhat same stuff (with reverse bidding and other twist ) .

a decent attempt , Good Luck Siva

Raseel on February 27, 2008 at 5:47 pm

Good one Prashant.
@amitkumar : This is a webiste FOR startups. Not to discourage them. Maybe 10 years down the line, if you find that for every feature one of the “western model” applies, DhanX also applies and don’t turn out to be popular or successful, it would make sense to criticise their policies (again, not their intent), but as of today, it’s a good initiative.

amitkumar on February 28, 2008 at 11:01 am

Wow! good to see how many people want to see dhanax succeed. You don’t want to listen to critcism, upto you.

@Raseel and Prashant: I will write what i feel is correct. you don’t want to listen-skip my comment.

India has been a breeding ground for startups on micro finance. I agree!

but lending money on internet, in a country where people don’t even want to use credit card online, no way!

And chill, i am not god. i might be wrong!

Satish K on February 28, 2008 at 11:12 am

Well Amit, the same applies for you too. If you don’t want to listen to Raseel’s and Prashan’t comments – skip it and return back to work.

Taking microfinance to the internet is one of the smartest move possible. You are talking only about the poor farmers who may not get online, but don’t forget the lender who has the internet for depositing money through the net and tracking the progress in real time.

Criticism is always good, but try to justify it with facts.

Raseel on February 28, 2008 at 11:44 am

@amitkumar : Dude, criticism is good. But you did not crticize. You predicted. If tomorrow, DhanX doesn’t perform, I’ll be the first one to criticize it. But it has JUST started. And if you are pointing a finger at it being a clone of a western startup, I think these kinds of clone India can do with.
We do not want to stop you from commenting. In fact, I for one, am eager to read to your next comment. The point we were trying to make is, this is not a Social Networking hangout clone like others. This involves money transactions and hence, serious business (of course with a touch of social entrepreneurship)
I’m glad your not a God. I’m an athiest anyways.

prashant on February 28, 2008 at 12:06 pm

amit,
people don’t use credit card I agree. But that’s not a reason to say that microfinancing is dead . Think of mobile and you have a goldmine at hand
http://www.eko.in is doing something on these lines(i guess as they are in stealth. )

Unmesh on February 28, 2008 at 12:39 pm

Hi Siva – appreciate the work you are putting to bring this concept to India. One suggestion I have on the repayment side is to provide an opportunity to other lenders to pick up a loan at the end of the term. So instead of the receiver paying back at the end of the term – they have an option to publish their financials – allowing some other lender to assume the loan and extend the repayment period. Theoretically, if the receiver is running a good business, new/existing lenders will continue to participate and the receiver will get to extend the loan forever.

Siva on February 28, 2008 at 4:08 pm

@Raseel and Prashant: Thanks for the informative comments..

@Unmesh: Thanks for the process suggestion.

@Amit: As per your argument, the existence of ICICI or SBI is irrelevant because “bank of north america” was started in 1781..all of us should be depositing our money and taking loans from them:-)

The logic of linking credit card usage to people not lending to other people is baseless..we are not linked to credit card usage and it is not even one of the payment options on our site.. Have you heard about chit funds?

Online trading companies have grown by 400% in 2007 and online transactions from retail investors account for 11% of total NSE transactions..People are increasingly investing online and there is a revolution going around you..do keep your eyes open..

We are working towards making investing through dhanaX both profitable and personally gratifying.. For any investor, dhanaX should be a one of their investment options like shares, mutual funds, fixed deposits etc.. that is the goal we want to reach..

Feedback is always important but it should not be baseless.. I hope to see you as a lender on dhanaX soon:)

Siva
http://www.dhanax.com

amitkumar on February 28, 2008 at 8:56 pm

Ok Ok, dhanaX will succeed.

Gr8, thankx for the in depth explanation. I did not know i will get such strong reaction.

Siva on February 29, 2008 at 7:03 am

@amit: I’m like any other entrepreneur, more passionate about dhanaX:-)

Please keep providing your feedback/suggestions on dhanaX

P.R on March 4, 2008 at 7:56 pm

any one interested in small deposits which attracts interest more than bank deposits backed by bank deposits , welcome, offer open for limited period -22 days

SriniwasKulkarni on April 27, 2008 at 7:05 am

DhanaX,
We SEEDA ngo are young MFI, We began to operate in 2005-6 , with small individual contributions.
We have small team of expereience in MFI/ community development. AT present 1000 – active clients.
We are interested to collobarate with you.
The everge size of loan INR.5000pa
I request U , kindly inform your procedural system to become a collaborator. E.mail yes2seeda@gmail.co.in / Mobile:9880226745, Land: 91-0836-2773259
Thanking in Anticipation
SriniwasK
CEO

Morpheus Venture’s new batch of startups |Technology and Business Startups in India on September 11, 2008 at 12:07 am

[...] Dhanax (www.dhanax.com) [...]

Shashi Kanth on November 8, 2008 at 10:57 am

hi
i read your online loans system in news papers. i am a state govt job holder. i need loan how to contact to you, what is your requirements and what the elgible to take loan kindly replay.
thanking you

Banumathi on March 16, 2009 at 7:22 pm

hi,
This type of local lending agencies are dime a dozen in India.80% of the population are not having net access and ways to have such sophisticated procedure for getting loans.Further in the loaning process impersonal methods don’t work except in the case of credit cards with gurantees.Recovery will be tough after volumes are dispersed.The lowering interest regime will go against such portals and actions.

Sriniwas Kulkarni on April 28, 2009 at 8:21 pm

Hi Siva,
This is sriniwas. from SEEDA microfin.-ngo , a startup MFI. I had contacted to Dhanax, unfortunately I could not get any response,
we are interested to be part of your efforts. We are already supported more than 500 poor women, in slum in Dharwad, either to initiate or to improve their business. we use to conduct Business development sessions every week to the potential micro-entrepreneurs. We wanted to scale up the microentrepreneur support activities this year. If Option is still open with Dhanax , we are very please to communicate further. We look forward to positive reply.
E.mail. yes2seeda@gmail.com / Cell: 9880226745