To help me jump back into blogging waters, I wanted to share about one of my favorite things. But unfortunately I’m not Oprah so you will be be receiving a dern thing at the end of this post. Except motivation to invest in microfinance.
The main idea is to avoid dumping huge amounts of money into poverty stricken countries that often gets lost in beauracracy, government, fraud, etc. but to instead of invest from the bottom up. (Kind of a reverse Reaganomics in some sense.)
People in poverty often lack the resources to even get them started in some sort of business venture and banks take on huge costs when they try to provide small loans to a multitude of people. (It’s more cost effective for them to make one $100,000 loan than to manage 1,000 $100 loans.) Also, even if someone in poverty were to actually obtain a loan from a traditional bank, interest rates make it difficult for them to repay the debt.
Enter a microfinance organization like Kiva. Kiva does the ground work of finding those that need loans in developing countries. They then put their profile up and allow for investors (such as you or me) to donate as little as $25 upwards to the entire amount of the loan to whomever they select. Here’s their “How Kiva Works” page.
The recipient of the loan uses the money to build into their business and then pays the loan back when they can. At this point the lender (you or me) is notified that the money has been put back into their account. You can either pull the money back out or reinvest it with another person! SO FUN.
A couple of years ago, John got a little bonus and gave me $100 for play money. I’d wanted to try Kiva and that was the perfect time to jump in.
Here’s an example of a profile of the last woman I’ve lent to:
So in just 2 and half years that $100 turned into this:
My measly hundred bucks has turned into $400 worth of capital for people working hard to build their business and provide for their loved ones. SO great to be a part of.
As of November 2009, Kiva has facilitated over $100 million in loans. Join in! It’s as cheap as $25, but for someone who needs the capital, it’s value is much greater than your dollars.