Financing with a Cause
By Sojourner on 02-29-2008
Since Muhammad Yunus and Grameen Bank received the Nobel Peace Prize in 2006 for their efforts to provide loans to the poor, microcredit has been brought to the fore front of international attention. Microcredit is the provision of very small loans (and hence the name ‘microloans’) to those who are barred from the formal banking sector. Microcredit targets those who lack collateral, do not have a credit history, and hence do not meet minimal qualifications for applying for traditional credit. Microcredit enables those who are extremely impoverished to become entrepreneurs and to finance their own income-generating projects. Given its tremendous success, the United Nations actually declared 2005 as the International Year of Microcredit.
In recent years, the expansion of e- commerce and social networking have allowed more individuals to invest as well as to benefit from microcredit and microfinancing through the internet. For example, a San Francisco-based nonprofit Kiva connects entrepreneurs and potential investors through the internet. There are inspiring stories and photographs of loan recipients on the website. It financed more than $1 million for more than 2,000 businesses within the first year that it launched its website in 2005. In a New York Times interview , the founders of Kiva, two Stanford graduates, relayed stories of small loans making a big difference in the lives of the poor. In one instance, it only took money for a bus ticket to enable a Ugandan fish seller to buy from a cheaper distributor and to increase her profit margin. Sometimes small amount of money may make a big difference in somebody else’s life.
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Posted by unders on Mar 10, 2008
I honestly think kiva.org is one of the best entrepreneur projects ive hear of. |
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Posted by bsaunders on Mar 18, 2008
Disappointingly, Kiva got some bad press recently for allowing lenders to support a cockfighting business in Peru. Their Latin American partnership manager responded to complaints from users by saying that Kiva "won't judge" the "rich cockfighting tradition" or any business "as long as it's not illegal." Since one of the options on Kiva is to give loans out random, people can be contributing to this abomination without realizing it. |
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Posted by cwlesli on Mar 20, 2008
I'm involved in a student run organization on my campus that is promoting and developing microcredit options for entrepreneurs, beginning in the village of Amauta within Lima, Peru. This model is proven to alleviate some of the worst conditions of poverty and isolation where it is employed, and I believe it is the surest tool of economic development available due to its accessibility. The trick with this system is to continually rethink it and make sure that microcredit institutions continue to reach the poorest of the poor and don't become another mechanism too ineffective to help the culturally isolated. |
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Posted by Badlands17 on Apr 3, 2008
I'd have to say that something like this is better than just giving the third world poor what they need to live. Best of luck to these guys. |
Thanks for writing about this topic. It is really amazing how much good such small amounts can enable. For all the money our government pours into the drain of foreign aid to despots and dictators, perhaps our presidential candidates should be looking more to innovative methods such as microcredit to put money where it can best build the positive outcomes we Americans desire.