The Microfinance Movement - Articles - Zimbio

future headline: microfinance ends poverty!

Tue, 15 Oct 2008 01:15:00 GMT

posted by danbelieves
Consider these statistics...

Almost half the world — over three billion people — live on less than $2.50 a day.
At least 80% of humanity lives on less than $10 a day.
More than 80 percent of the world’s population lives in countries where income differentials are widening.
The poorest 40 percent of the world’s population accounts for 5 percent of global income. The richest 20 percent accounts for three-quarters of world income.
According to UNICEF, 26,500-30,000 children die each day (that is one child every three seconds) due to poverty.
10.6 million died in 2003 before they reached the age of 5 (same as children population in France, Germany, Greece and Italy).
An estimated 40 million people are living with HIV/AIDS, with 3 million deaths in 2004. Every year there are 350–500 million cases of malaria, with 1 million fatalities: Africa accounts for 90 percent of malarial deaths and African children account for over 80 percent of malaria victims worldwide.
Some 1.8 million child deaths each year as a result of diarrhea.
Based on enrollment data, about 72 million children of primary school age in the developing world were not in school in 2005; 57 per cent of them were girls. And these are regarded as optimistic numbers.
Nearly a billion people entered the 21st century unable to read a book or sign their names.

Source: Global Issues, Poverty Facts and Stats

If you have not thought much about it, then it is time to start. Poverty is one of the biggest issues that our world faces today. The worst part is that the solution is completely within our means. As Christians, we have been tasked with taking care of the sick and the needy. Just one look at the list above, and you can see that there is a great deal of work that needs to be done. Check out this video of Jacqueline Novogratz, founder of Acumen Fund, a nonprofit that takes a businesslike approach to improving the lives of the poor. Novogratz applauds the world's heightened interest in Africa and poverty, but argues persuasively for a new approach.

The good news is that many of these people want to be free from the bondage of poverty, but simply do not have the means. That's where the idea of microfinance comes in. In developing nations where there are people that have the desire, microfinance organizations give people the loans that they need to start small businesses. Often the business is something like a sewing machine, a fruit and vegetable stand, a rickshaw, or some bakery equipment. Basically it is money for the tools that are needed in order to help them help themselves. The best thing about this is that microfinance loans are, as the name implies, small sums of money. Some only require $25 of capital to get someone started!

One organization that is doing some great work in this are is Five Talents International. Five Talents’ mission is to fight poverty, create jobs and transform lives by empowering the poor in developing countries using innovative savings and microcredit programs, business training and spiritual development. The folks at Five Talents point out that there are three things that you can do to help make in impact on world poverty...

Pray :: You can pray for the ministries that are doing this amazing work and for the people that benefit from these ministries that God would free them from the bondage of poverty through these microfinance loans.
Pledge :: The money to support ministries like this doesn't grow on trees! Your investments (even small ones) can touch many lives. With repayment rates around 95%, the money can then be used to give someone else a loan later on, multiplying your investment.
Participate :: Organizations like Five Talents even have Business as Mission trips that you can go on to help train people in the entrepreneurial skills that they need in order to start and maintain their own businesses.

So my challenge to you today is not to settle for simply thinking about what others are doing, but to act. Help stamp out poverty once and for all. Consider what you can do to join this fight and make a difference. Who knows, maybe we can go on a Business as Mission trip together someday!

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Kiva or MicroPlace: Which One is More Suited for You?

Mon, 6 May 2008 01:57:32 GMT

posted by tha_human
Want to get started in microlending but don't know where to begin? This post is for you. I've talked about the microlending organizations Kiva and MicroPlace in my previous posts and have detailed their models and characteristics. These two organizations are currently the main players in the field of peer-to-peer microlending and have generated a lot of attention. They have also generated a degree of confusion as people wonder what the difference between them are. The Microfinance Gateway has a great article detailing the structural differences between the two organizations, so I will not get too much into that. Rather, I want to outline these differences so that you can decide which site is more suitable for you to participate in. Both sites are fantastic, but the subtle differences make one more conducive to a certain audience than the other.

I will start out with MicroPlace, the eBay-owned for-profit company. As I mentioned in an earlier post, MicroPlace is an SEC-registered broker-dealer that actually offers microcredit securities for you to invest in. Think of it as the Charles Schwab or TD Ameritrade of microcredit. Because your investments will actually generate returns through interest rates, you will have to file taxes on your monetary gains. You will also have to confirm with MicroPlace your financial/tax information when you start an account. When I started my own account with MicroPlace, they were required by law to confirm my information and ask for additional verification because of my low net worth as a college student. The communication was smooth and it worked out easily once everything was confirmed, but it did pose an extra step in getting started. This is something that you should consider when starting with MicroPlace. If you are not interested in profiting from your contribution or do not want to take the step of confirming your financial standing, then MicroPlace may not be right for you; try Kiva. MicroPlace does offer an intriguing financial instrument, so if you are really interested in finance/microcredit, then I suggest giving it a whirl and making some extra bucks. It won't make you rich, but it's definitely an interesting and fun thing to try out. As a finance student and stock investor, I was willing to go through the process of setting up an account and purchasing an investment. I also want to point out that, although MicroPlace's website has a more technical and investor-geared spin, there is still a high amount of intimacy in terms of reading success stories and seeing where your money is going.

is right for you if you are:

Interested in making some profit from your contribution
Intrigued by the microcredit security and want to try it out
An investor who wants to invest in something with a social impact
Willing to provide the financial information necessary to start

Now I will go into Kiva, which I believe to be more suitable to the average person. Your contributions through Kiva, unlike with MicroPlace, are not investments and will not generate profits. The money you dedicate is essentially a temporary donation, as it eventually gets paid back (without interest) to you. Thus you don't have to worry about paying taxes or providing financial information. This simple model makes starting an account with Kiva extremely quick and simple. I recommend Kiva as the fastest way for anyone interested in P2P microlending to get started and begin loaning money to change lives.

is right for you if you are:

Someone who just wants to get started right away!
Willing to loan money to someone without being paid interest

I hope this has helped you decide which site to go with in your microlending activism. By the way, PayPal is accepted on both these sites, so the process is even faster and smoother if you already have a PayPal account. Both Kiva and MicroPlace are great sites and are making great strides in furthering microfinance and alleviating poverty. Get involved today!

Organization Update: Kiva

Sat, 1 Jun 2008 07:56:03 GMT

posted by tha_human
A few days ago, on May 27th, my first Kiva loan to Esperanza Aguayo's group in Paraguay was fully paid back. I made the $25 loan out on March 27 and, as per the loan's 3 month repayment term, was paid back on time and in full. I was a little disappointed that I didn't receive more journal entries on the group's progress, but it was still satisfying to see my first loan come around full circle. As I had mentioned earlier, when you are repaid on Kiva, you can either withdraw the money or lend it out again. I turned around and lent the money out again quickly and easily to a woman in Lebanon who runs a cosmetics shop.
So there you have it! The first success story of this blog. It's not very surprising that I got successfully repaid considering that Kiva's default rate is 0.2% for over $8 million of loans (read more here ), but hopefully my personal experience will assure you that it is a harmless and helpful program to participate in.

Organization Focus: Prosper

Sun, 14 Apr 2008 05:53:11 GMT

posted by tha_human
One of the most exciting things about microlending is that it doesn't only serve and benefit people in developing nations, but also people in developed countries. It is a concept that allows for a scalable and transposable model across geographics and demographics. Prosper is a US-based microlending organization that offers a peer-to-peer lending system, and it is the first website to do so for the American consumer.

www.prosper.com

Prosper was founded in February, 2006, and is backed by organizations such as the Omidyar Network, run by the founder of eBay. The website employs an auction-style bidding process where someone who wants to borrow money posts the amount they need at the maximum rate they can afford. Lenders then post the amount they can lend out at their desired rate. At the end of the auction, the bids with the lowest rates are then combined into a single loan for the borrower. Prosper profits from the lending and borrowing activity from charging transaction fees.
Prosper also provides a forum for groups to form that are socially or culturally affiliated, and allows them to connect and support one another. This adds to the community aspect of peer-to-peer lending and makes it more socially oriented. Like other microlending systems, the human element and feeling of personal interaction is present and an integral part of the system's success and philsophy.

Even though Prosper may not appear as adventurous or progressive as other organizations in terms of social change, I feel that it is just as beneficial as groups such as Kiva. You don't need to be lending money to someone in a developing country across the world to be making positive change. I like to think of Prosper as a way to be locally active and to help people who are trying to get by right here in the US. The money lended through Prosper is helping individuals and families send kids to school, pay off credit card debt, start businesses, and make essential purchases. The concept of social lending sidesteps banks and brings lending to the level of people, creating a self-supporting and connected community of citizens.

Organization Update: Kiva

Sun, 28 Apr 2008 07:35:56 GMT

posted by tha_human
    This post will detail my experience so far of participating in Kiva's microlending program. Since late February and early March, I've lent out $100 through Kiva's program. Up until this point, I have been repaid 22% of that amount. I have lent money to three entrepreneurs: Samuel Kamara in Sierra Leone, Beoun Moy in Cambodia, and Esperanza Aguayo's group in Paraguay. Esperanza Aguayo and her group of entrepreneurs have already paid back 67% of their total loan amount to their lenders. Samuel has repaid 9% and Beoun has repaid 6% of their total loans.
    In Kiva's system, you do not get credited for your loan amount until it is completely repaid. Kiva sends you an e-mail each time the entrepreneur makes a monthly payment and updates you with how much they have repaid. Kiva also e-mails you with journal posts about the entrepreneur. So far, I have gotten entries about how the loan has been dibursed to the individuals, but I have not yet received detailed entries about how the money has helped or contributed. I'm looking forward to these type of entries, and I hope to receieve one soon.
    All in all, the process is a very gradual, but not without updates. I definitely feel like my money is contributing directly and making a difference. Instead of sitting idly in my bank account, this $100 is funding individuals across the world, and it really gives me chills that such a great thing is possible. Once this money is repaid, I intend to keep it in my Kiva account and lend it back out again to other individuals. I really encourage everyone to set aside some money to lend through Kiva. It's quick, easy, and painless to set up, and is a very gratifying and rewarding process. Whether it's $20 or $200, any amount of money advances these individuals closer to securing a loan to help them help themselves.



    Let me know if you start an account! I'd love to hear your opinion and experience as well.