Social entrepreneurship is all about finding out the social problems and implementing a social change by employing entrepreneurial principles, processes, and operations while Local money lender is a person whose job is to lend money to people in return for payment. When we combine the functions of both social entrepreneurship through local money lender arises. Local moneylender acts as a financial intermediary between an individual with surplus and deficit, also related to borrowing and lending both function.
India is a country where remains inequalities of income, wealth, and consumption. It means the rich get richer and the poor get poorer also the rich are getting richer at a much faster rate than the poor. The income of an individual is based on their salary, business, profession, house properties, capital gain, agriculture, and animal husbandry also the consumption of individual depends on food, clothes, shelter, health, education, and entertainment. The balance between income and consumption decides the individual with surplus or individual with a deficit. According to the common three-stratum model whole society is divided into three classes. The first one is the upper class, it is the social class composed of those who are rich, well-born, powerful, or a combination of all. The second one is the middle class it is the broad group of people in contemporary society who fall socio-economically between the lower and upper classes. The third one is the Lower class also described as working-class these are those who employed in low-paying wage jobs with very little economic security. The term “lower class” also refers to persons with low income.
In this blog, I have divided society into mainly two categories
Individuals with a surplus: those whose incomes are greater than consumption and leave the savings. They are Government Employees, Retired Persons, persons with high earnings, and savings.
Individuals with a deficit: their investments higher than income generated by them, the gap they fill-up through borrowing from individuals with a surplus. They are persons willing to purchase houses, Vehicles, etc. for social ceremonies like marriage, etc. and persons want to pursue businesses.
In direct dealing between an individual with surplus and individual with a deficit, there is the absence of proper allocation of funds and also the chances of defaults. The individual with a surplus cannot invest its funds due to limitations of defaults so they cannot get the reward of their funds. Also, the individual with deficit cannot get the funds when they need. It results in delays in their functions or unable to pursue them. Due to such limitations cited above new sector arises which is known as Financial Intermediary.
Financial Intermediaries act as intermediaries between an individual with surplus and individual with a deficit in the process of funds movements. They borrow from an individual with surplus and lends to the individual with a deficit. Banks and non banking financial companies are organized, financial intermediaries. While Moneylenders, local bankers, traders, pawnbrokers, landlords are part of unorganized financial intermediaries.
A moneylender is a person or group who offers small personal loans at high rates of interest. The high rate of interest charged by them is justified in many cases by the risk involved. They play an active role in lending in places with less access to banking activities or in situations where borrowers do not have a good credit history. Social entrepreneurship is, at its most basic level, doing business for a social cause. It might also be referred to as altruistic entrepreneurship. Social entrepreneurs combine commerce and social issues in a way that improves the lives of people connected to the cause.
Microfinance in simple terms means the provision of microloans to small businesses and small entrepreneurs lacking access to bank and financial services. Microfinance is provided based on social groups than the chances of default decreases.
Yes, it is possible to combine social purpose with financial sustainability it is also possible to make a profit from social entrepreneurship. It is beneficial for moneylenders to create an interest-rate spread to borrow from an individual with a surplus at the low rate of interest and lend it to the individual with a deficit at a high rate of interest. A local moneylender can create simple borrowing and lending schemes and provide innovative services to the society which is easy to understand. If the money lender adopts the socially-responsible lending practices than it makes the business sound and less risky. It is possible to give rewards to the surplus sector and the short term and long term financial needs of the deficit sector fulfill with a small amount of sacrifice also the financial intermediary makes the profit while fulfilling social cause. So it’s a win-win situation for all.
PROF.SUHAAG MAHERIA
ASSISTANT PROFESSOR
R.B.INSTITUTE OF MANAGEMENT STUDIES