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This NGO is providing interest-free loans to small businesses

Bengaluru-based Udhyam Learning Foundation is helping over 500 local small businesses restore their revenues by providing interest-free loans of Rs 10,000. The loans are repayable in instalments of Rs 100 per day for a period of 100 days.

This NGO is providing interest-free loans to small businesses

Thursday January 21, 2021 , 4 min Read

Anjala, a tea shop owner in Bengaluru, has restarted her business with the hope of bringing revenue back to pre-COVID levels. She has added coffee, lemon tea, and bakery items to her stall’s offerings.


A few months ago, Anjala did not believe resuming business was possible, let alone adding new products. With next to no customers due to the pandemic and lockdown, she needed financial support to revitalise her tea stall.


However, banks and financial institutions consider lending to micro businesses too expensive. This is due to the small ticket size of the loans. Further, legacy credit systems usually don’t have significant data on credit histories of India’s micro-enterprises.


Looking to address this credit gap, Bengaluru-based Udhyam Learning Foundation made it possible for Anjala to restart her business. Through its Udhyam Vyapaar initiative, the NGO provided her with an interest-free loan with an easy repayment option.


“If I had taken a loan anywhere else, there would have been a high-interest rate. With Udhyam’s interest-free loan, I reopened my shop, learnt how to use PhonePeand , bought extra flasks and started selling coffee and lemon tea,” the entrepreneur says, adding:

“Repayment is easy. I have to repay Rs 100 per day for 100 days. Right now, I’m earning Rs 250 more per day than before.”
small business

Anjala was able to restart her tea business after receiving an interest-free loan from Udhyam

Addressing a credit gap

Anjala isn’t alone - Udhyam is helping over 500 micro-entrepreneurs in the city build their businesses back by providing them with interest-free loans and financial and digital training. A vyapaari is eligible for a Rs 10,000 collateral-free loan and the repayment model is Rs 100 for 100 days.


Most micro and small businesses were badly hit during the lockdown, and found it difficult to sustain business. Loan sharks and high-interest loans were not feasible options.

“We decided to offer monetary support and enable vyapaaris to undergo finance and digital lessons after the loan is availed. Creating business plans, managing profit and loss accounts, and developing capabilities in marketing decisions and customer service are included in the training curriculum. This enables the vyapaaris to better utilise the funds,” says Mekin Maheshwari, CEO, Udhyam Learning Foundation.

The micro entrepreneurs are provided with on-demand consulting and are also a part of a WhatsApp group for easy communication.

small business

Mekin Maheshwari, CEO, Udhyam Learning Foundation

A framework for lending

According to Mekin, a micro entrepreneur earns around Rs 500 per day on an average. Informal money lenders sometimes charge exorbitant interest rates of up to 60 percent for a small loan of Rs 10,000, he maintains.


Micro entrepreneurs and small business owners also do not usually possess assets, documents, and evidence to avail credit from the formal banking system.

“Udhyam Vyapaar’s lending model is thus a framework that can be used by NBFCs and banks to lend viably to this neglected segment of entrepreneurs. We hope to dispel myths around non-payment by these hard-working entrepreneurs,” Mekin says.

For funding Bengaluru’s micro and small business owners, Udhyam has relied on crowdfunding and corporate donations. It raised Rs 40 lakh for its interest-free loans - Rs 25 lakh came from corporate donations and Rs 15 lakh from crowdfunding initiatives.


So far, the company has sanctioned over 70 loans to tea shops, ironing/laundry services, homepreneurs, fruit and vegetable vendors, and more, Mekin says, claiming that over 61 percent of these small entrepreneurs were able to scale their existing businesses, while 39 percent kick-started new ventures.


Venkatesh, the owner of an ironing business in Bengaluru, was turned away by his relatives when he asked them for financial support. When Udhyam gave him an interest-free loan, he started a new business of selling dry cleaning chemicals.


“I now purchase chemicals on a wholesale basis and sell it in retail packets at dhobi ghats. I do this from 6 am to 8 am in the mornings. From 9 am, I start my regular ironing business. Overall, I am able to earn a profit of Rs 150 more each day,” he says.

small business

Venkatesh started retailing dry cleaning chemicals in addition to his ironing business after receiving an interest-free loan

Entrepreneur outreach

Small and local entrepreneurs like Anjala and Venkatesh have been brought into the fold through Udhyam’s mass-marketing outreach. There is no feet-on-street team on account of the pandemic, so Udhyam uses pamphlets, interactive voice response calls, WhatsApp updates, YouTube videos, and digital media campaigns to reach micro entrepreneurs.

“Pamphlets are distributed in main markets around Chikpet and Koramangala. We also started the campaign #StartAConversation to invoke the emotions of people who can reach out to nearby local businesses and spread the word,” Mekin says.

If a business owner is interested, they can contact Udhyam and share their details in order to avail the interest-free loan and skills training.


Since May 2020, Udhyam has been helping micro entrepreneurs. It raised Rs 21 lakh and gave grants worth Rs 5,000 to 420 vyapaaris to resume their business, Mekin claims.


Edited by Megha Reddy