Powering Virtuous Circles

Let’s say you were interested in a “tool” to leverage the least amount of money into the largest measurable effect over time. For that I’d like to recommend a type of giving that multiplies itself. Over the years, these are the criteria I’ve adopted for this challenge:

1) The help is aimed at the lowest, those with the least, where small makes a huge difference.
2) The gift expands itself, gaining amplitude with each cycle.
3) The range is global.

Think of it as enabling philanthropy: take a minimum of money and aim it at the precise point where it can do the maximum good, multiplied by many generations. Maximum good is measured simply: when you enable someone to enable someone else. That is a virtuous circle.

I’ve found the following three do-good organizations to meet these criteria: Heifer International, Opportunity International, Trickle Up. They fund the neediest in the world. They are highly-evolved programs that produce amazing results. And one tangential result is that when we give to these three, we feel optimistic. — KK

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Peer-to-peer microfinance

Kiva

Micofinancing is among the better ways for the haves to help the have-nots. Small loans are made to poor but ambitious workers, who expand their livelihoods with the small loan and then pay it back. Which is then lent out again. The previously recommended agencies Opportunity International, and Trickle Up are great tools for individuals in developed countries to kick-start other folk’s self-development. These agencies do the hard work of identifying and training the recipients, and tracking loans and performance.

But why not use the peer-to-peer model to allow individuals with money to loan to specific individuals in need of a small loan? That’s what Kiva does and it works wonderfully.

Kiva enables you to make small $25 or above loans to an individual or small group of individuals in a developing country. They use these small loans (aggregated to about $200-$400) to finance a food stall, repair shop, hair salon, sewing machine, new cash crop, etc. When they pay it back to you in about 11 months, you can then re-lend it to another person of your choice.

The advantages of Kiva over the other worthy agencies are three fold. One, you can direct your loans to the kind of projects or livelihood you deem the most important or the most sympathetic. Maybe you are into food so you gravitate to funding small cafes or local fruit growers. Or maybe you think women’s sewing centers are a key. Secondly you have more direct contact with the borrowers. They have names, faces, stories. Not a few Kiva lenders have met up with folks they have lent to. Thirdly, while most microfiance agencies are thrifty, Kiva is particularly thin in administration thanks to the well-designed software platform that runs this service.

The payback rate for Kiva is about 97%. That’s a better “investment” than stocks this past year! The variety of folks you can lend to is exhilarating. The karma is good. These loans make a difference. Kiva lends $1 million dollars every 10 days. It is easy to do. A few folks are already on their third cycle of re-loaning the same money they first put up three years ago. —KK

Global micro seed funding

Trickle Up

Rather than dispense loans, Trickle Up issues outright grants, but with strings attached. They provide seed capital and training for micro-enterprise hopefuls. Maybe someone with ambitions for a food stall, or a repair shop. A typical deal is a $100 conditional grant. Unlike in a micro-loan program, grantees don’t have to pay the money back, but they do have to get trained. Grantees must commit a minimum of 250 hours in the first 3 months to their venture, reinvest at least 20% back into it, and keep an account ledger, among other conditions. Last year 10,000 business started via Trickle Up donations, and 30,000 budding entreprenuers benefited from this global program. There is huge emphasis on training for very basic business skills. And follow up expansion grants are offered, too. About 70% of grantees are women. — KK

Gifting breeding animal pairs globally

Heifer International

For fifty years the Heifer Project has been providing families in developing countries (and parts of the US) with breeding pairs of animals: cows, goats, pigs, rabbits, water buffalo, ducks, and so on. Even in the world’s poorest regions the cost of a cow or goat can exceed a year’s income, preventing many families from acquiring animals. When a family receives a breeding pair they get meat, milk or eggs, but more importantly, they now have a source of income as the offspring are sold.

The deal with Heifer Project is that the recipient must agree to give one breeding pair of offspring away to another family, thus paying the gift forward. Therefore a small amount of money contributed now will multiply manyfold as families gain food, pride, a source of income, and the means to help someone else. It’s hard to imagine a better gift, or a more practical, proven lever in making a difference in communities of need. —KK

Micro-credit loans globally

Opportunity International

Micro-financing is quite the rage in international circles for one very amazing fact. The payback rate on tiny loans to the workers in developing countries is greater than the payback rate for large loans to their home countries. In other words, from an outright profit perspective, you are better off loaning money to a Bolivian peasant than to the Bolivian government. Furthermore, there is now no doubt that Bolivia itself, and any other country, is much better off if investment goes directly to their poorest citizens than to the government. Several non-profits, starting with the Grameen Bank in Bangladesh, have pioneered micro-credit loans on a large scale and for large investors. I’ve found the easiest way for a helpful citizen to contribute funds to a wide variety of micro-loan programs in different parts of the world is through Opportunity International. Opportunity International has been providing micro loans for 30 years, even before the term microcredit was coined. —KK

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