By Kate Secrest
Most financial institutions today focus only on serving “prime” borrowers, those with verifiable incomes or sufficient collateral to back them. However, there are many people in society without the means to provide such securities. Unfortunately, these individuals are often the ones for whom a loan may prove to be the most beneficial. Rukula works to address this issue by offering credit to financially excluded individuals in Sri Lanka in an easy, safe and transparent way.
Rukula works by selling basic consumer items on credit without the need to provide collateral or pay interest. Instead, the company evaluates potential clients based on their familial stability as opposed to their financial stability.
With more than 250 merchant stores in Sri Lanka, the customer simply needs to choose their product and payment option and provide a national identity card and proof of residence. From that point the team at Rukula takes over, verifying the customer’s interest in the product and asking several demographic questions. When a customer’s request is approved, they are guided through the payment process. The entire process takes approximately 30 minutes.
The process of repaying loans is flexible and works to accommodate the challenges of low income earners. The company charges a fixed interest amount of 40% no matter how long they take to repay the loan. No late payment or penalty fees are ever charged. Even though the population is not backed by traditional securities, 75% repay their loans on time and customers very rarely default on their loans. The company works on a model of mutual trust wherein the lender puts their trust in the ability of the borrower to repay, and the borrower works to maintain that trust by repaying in a timely manner.
Since its founding in 2014, Rukula has provided more than 25,000 loans and continues to grow at an exponential rate. Despite being a for profit organization, their goal is not to increase sales, but rather to expand their reach. They were recently awarded up to $100,000 in grant capital as well as advisory services from Catalyst Fund, an initiative that supports innovation in the inclusive fintech space.
The company hopes to continue serving those at the bottom of the pyramid and to hopefully expand into other areas of financial services in order to give purchasing power to those typically overlooked. As the company’s founder Reeza Zarook says, “It’s not about everyone having the same wealth, it’s about everyone having the same opportunities.”