I’ve been thinking recently about microloans – loans of $100 or less to people in developing nations to help them get a small business started – and so went ahead and clicked onto the link for MicroPlace (sponsored by eBay!).
I’m thinking about investing a small sum – does anyone know anything about this particular – or other similar – programs? I think it would be a really cool way to support a kind of program I think is very (sorry for the cliche) empowering for individuals.
I’m all for helping, but it seems like it would cost more to do the paperwork for a 100 loan than to just give them the money outright. I realize they may be trying to instill responsible financial habits, but what are they going to do if some hapless woman dosen't make her .07 monthly payment; send out notices? Put her in collections? Also it seems like they would pull out of poverty faster without debt payments to make.
::sigh::I don’t know, I just don’t know what is best.
I have looked into lending money via kiva.org before. I hadn’t heard of Microplace. I assume you have read the Wikipedia article on microfinance that covers the basics and main debates about it? Microfinance - Wikipedia
It seems to me like a beneficial type of program overall, even if there are certain drawbacks. Give a man a fish, etc.
Thanks, tiltypig. I’m familiar with the overall concept, and, as I said, I like it – I’m just trying to identify the specific program I want to funnel my few shekels through. I’ll take a look at kiva.org later.
I made my first microloans through Kiva a few months ago, one to a silk weaver in Cambodia, and one to a woman raising chickens in Mozambique. Both have been paying back on schedule. I do get the sense that many of the people on the site, including those two, aren’t the most indigent of the indigent - both were looking to expand businesses they already had, rather than get started from scratch.
All the money you lend through Kiva goes to the loan recipient, although Kiva will ask you to make a separate, tax-deductible donation to cover their own overhead at the time that you lend. I believe they’re quite well-regarded within the microloan community.
Slate ran a feature earlier this year comparing different microlending programs that you might find helpful.
With kiva.org (which my family has made donations to), the loans are dispersed through international banks local to the recipients. The repayment rate is something like 96%. But from the perspective of the person making the donation, it should be viewed as a true donation; in other words, money you are giving to the recipient and don’t expect to be repaid. If it is repayed (all of ours have been repaying on schedule), you can get those dollars back or you can re-donate them to another recipient.
As an example, we made donations to a couple of different entrepreneurs in Cambodia totalling about $500. Their payments have been $40-80 or so and are made to the bank that originally dispersed the loan.
I (sort of) hate to introduce a mercenary question, but do you get to see any of the interest that the microloan banks charge? Or at best are you getting, say, $50 back if that’s what you loaned?
I’m another Kiva-lender. I set out eight loans last month, and I am very enthusiast about it.
Something that appeals to me is, like GilaB said, that there are three kinds of borrowers on Kiva. There are those who literally start from scratch and want to invest in a couple of hens, a sewing machine, a cell phone, a cart or refrigerator to start a small business. Then there are those who have paid of an earlier loan and wnat to expand a business. And there are those who have paid off several earlier loans and want to borrow for the same consumerist reasons we would; to improve their lives. One of my borrowers uses the money to build some extra rooms on top of her house to accommodate familymembers; one wants to replace the curtain between her business and her livingn room with a real, solid door.
It’s so moving, when you think about it. All mrs Gonzalez from Equador dreams about and wants for Christmas is a door, and she’s willing and able to borrow money for it.
And I’m cool with it being more of a donation than an investment. Sometimes you wonder how much good your charity dollars do – but with this, as tiltypig says, you’re teaching someone to fish.