How a Bankless Loan Model Is Giving Indian Farmers Low-Cost Access to Climate-Smart Solutions

A hassle is how Mysuru-based Chiknanjaiah would describe a traditional banking experience. “It takes a lot of time and it isn’t easy,” he shares.

But Chiknanjaiah has never visited a bank. His opinions are coloured by the cautionary tales of his farmer friends. So, when he discovered a loan that he could secure within a matter of days to purchase his dream solar-powered hydroponic fodder unit, he was thrilled.

Today, the device — which enables him to grow fresh fodder — has proven to be an antidote to what was otherwise a cumbersome process.

“Since I started feeding my cows fresh fodder, there has also been an increase in the fat percentage of the milk,” he explains, adding that this boost in quality has also improved his earnings. But above all, Chiknanjaiah is grateful that he “did not have to stand for hours in a bank queue to make this happen”.

This relief is mirrored by Nagajyothi from Seegampatti village in Tamil Nadu. Like Chiknanjaiah, she too availed herself of an EMI option — she pays Rs 1,900/month for a year — for her solar-powered hydroponic fodder unit.

She praises the machine for its triple advantage: Nagajyothi no longer has to purchase fodder at hefty prices, the unit consumes less water, and it frees up her time to focus on household chores.

“There’s also been a 1.5-litre increase in the milk I obtain from the cows. This has increased my earnings,” she adds.

These stories highlight the power of loans as catalysts that help micro-entrepreneurs in rural India dream big.

As Smita Ram, co-founder of Rang De, a social investment platform based on a peer-to-peer (P2P) lending model — the same initiative that made these loans possible for Chiknanjaiah and Nagajyothi — explains, a large part of the population in remote India lacks access to credit. This observation was also what inspired Rang De in 2008.

“We came across reports of how borrowers of microfinance institutions had ended their lives because they were unable to repay the loans. We discovered that the cost of credit was extremely high,” recalls Smita, explaining how they envisioned peer-to-peer lending as a social investment model to support those excluded from traditional loans.

“One, it would lower the cost of credit, and two, the source of credit would be individuals — who aren't focused only on financial returns, but on creating tangible impact on the ground,” she adds.

Championing economic empowerment

What is a peer-to-peer (P2P) lending model?

“An individual can lend to another through a technology-based platform,” Smita explains, calling it a “game-changer” for rural communities.

“About 70 percent of the people we fund through the platform are first-time borrowers — think unbanked farmers, artisans and entrepreneurs,” she says. The model addresses the challenge of these communities often lacking a credit score — the biggest bottleneck when borrowing from financial institutions.

Smita notes, “Borrowing from Rang De helps them build their credit score, which in turn helps them unlock access to more lenders and larger pools of capital from financial institutions, because they’re now considered creditworthy.”

The Rang De model, which became RBI-regulated in 2019, is creating space for first-time borrowers in a system once skewed in favour of those with a good credit history.

Interestingly, there has been a surge in loans for DRE (decentralised renewable energy) livelihood technologies — such as hydroponic fodder systems and solar dryers. This is in line with an ISBR study highlighting the rise of green entrepreneurship. It also ties into a report that positions the adoption of cleaner technologies through the MSE-GIFT (Green and Inclusive Finance for Transformation) Scheme as the next big step.

The report states that from 2023 to 2026, a total of INR 478 crore has been allocated under MSE-GIFT to fund projects related to renewable energy, clean transportation, energy efficiency and waste management, as per the CII Climate Action Charter.

By easing financial barriers that prevent MSMEs from adopting green technologies, the government is creating opportunities for even the smallest enterprises to contribute to India’s sustainability agenda.

This, Smita explains, aligns with Rang De’s overarching goal of supporting livelihoods. The project is facilitated by the Powering Livelihoods Fund — a curated live lending platform that has accelerated loan approvals and simplified financing for rural users.

The initiative has been co-conceptualised by CEEW (Council on Energy, Environment and Water) and Villgro, a social enterprise incubator, to catalyse India’s rural economy through clean energy-based solutions.

Currently, over 17 small-scale farmers are benefiting from different DRE solutions. These include hydroponic systems to grow better-quality fodder, solar dryers and cold storage to cut post-harvest losses, LED lights to prevent human-animal conflict, and mechanical rakes to ease the hard work of cleaning poultry farms. These innovations not only solve everyday challenges but also make farming more sustainable and climate-friendly, giving farmers the confidence to dream bigger for their future.

Why is peer-to-peer lending beneficial?

For one, P2P removes layers of bureaucracy. Through direct lending, with fewer intermediaries and affordable interest rates, it creates a scalable, digital-first rural credit model for long-term use.

It’s avant-garde in nature: the Rang De model has supported 17,150 women investees and 12,831 first-time investees.

Reports also suggest that P2P is promising for driving holistic economic growth. Globally, P2P business lending volumes rose by 24 percent between 2017 and 2019, with SMEs being the primary beneficiaries.

To this end, P2P lending is gradually helping to fill the financing gap once bridged by traditional institutions.

Abhishek Jain, Fellow and Director, Green Economy and Impact Innovations, CEEW, highlights why the Rang De model has been successful.

“The two things that make Rang De very unique are: once they onboard a technology partner (impact partner), the listing of loans on the platform is very quick; sometimes, loans are fulfilled in just 20 hours. The pace at which loans are unlocked is very promising. The other is the affordable rates at which they are disbursed. A rural micro-entrepreneur or farmer can access credit much faster than knocking on a bank manager’s door.”

Abhishek stresses that while CEEW looks to invest in a way that they can scale promising enterprises, the broader focus is on the ripple effect of these collaborations.

“For us, what matters is how we make the ecosystem scale and succeed. The enterprises we support are a vehicle towards that success. We are not a typical incubator or investor; it’s more about strengthening the sector so that millions who can be impacted by distributed renewable energy in India are actually impacted. We’re always solving for the system," he notes.

Abhishek’s point is validated by Umesh, a farmer from Shidenur village in Karnataka.

Umesh’s solar-powered hydroponic fodder unit has created quite a stir in his community. Farmers visit, watch, and enquire about the device’s performance.

They ask Umesh how he afforded the unit. Never one to seek a mainstream loan — “they have very high interest, and it is tough to get one” — Umesh is delighted to explain about the EMI option and how Rang De approved his loan within days.

Umesh isn’t the only one happy with how the unit has improved his income — his investor is, too.

“The Rang De model enables every social investor to track their dashboard, where they can see a summary of their portfolio, financial metrics, and impact metrics on what their social investment has enabled. They can also track on-time repayments, delays, reasons for the delay, and success stories. They remain completely informed throughout the process,” Smita explains.

She summarises that the model reduces friction and cost for both lender and borrower.

As Umesh shares his success with fellow farmers keen to apply for a P2P loan, these conversations signal a new-age India — one where access to credit no longer prevents farmers from dreaming big.

All pictures courtesy Rang De

Sources 

'Green Entrepreneurship: An Emerging Idea for India’s Sustainable Development An Examination of Millennials', Published in ISBR Management Journal in June 2023.

'How India's MSMEs are Driving Towards a Sustainable Future' by Aditya Pran Mahanta, Published on 6 November 2024.

Climate change awareness and financing for MSMEs by PIB, Published on 22 July 2024.