Micro-Loans Online

One-click high leverage giving

This year the father of micro-finance and founder of the Grameen Bank won a Nobel Peace Prize for his work in inventing and promoting micro-loans in the developing world. A micro-loan is as little as a few hundred dollars invested into a one-person business with minimal qualifications. That tiny borrowed amount can launch a vegetable stand, repair shop, or bicycle taxi — a living in other words. As each micro-loan is repaid (and most are), the effects of that small goodness are amplified and leveraged by being loaned out and invested again and again. Micro-loans are the world’s only perpetual motion machines.

Previously I’ve recommended the micro-finance cool tools of Trickle Up, Opportunity International, and my favorite, Heifer International, as three ways to leverage small amounts of money for maximum global good. (Micro-finance programs are not a panacea. For a critique start with this article in Forbes.)

The news now is that it is there are many other outfits that offer individuals (like us) ways to leverage as little as fifty dollars via micro-finance programs online. Unleashing compounding good is only a few clicks away. Make a loan, or outright grant, using your credit card, or even PayPal.

Grameen Foundation
Inspried by the original Grameen Bank in Bangladesh. Minimum contribution, $100. One of their projects is Village Phone — cell phones that women buy on loans and then can rent to others for income. “The Village Phone program in Uganda, the first of GF’s efforts to replicate the pay phone program outside Bangladesh, continued exceeding expectations in 2005. More than 3,500 microfinance clients have bought and now operate a Village Phone as “Village Phone operators.” Besides the boost to operators’ incomes, the program is creating a national telecommunications network. Of Uganda’s 56 districts, 53 now have at least one Village Phone operator. Often, Village Phone is the first local telephone that villagers have. Having a quick means to communicate has contributed to higher levels of productivity, savings, and safety for entire communities.”

Namaste Direct
This is one of the most direct person-to-person micro-lending programs. When you give to Namaste Direct, you are informed of the person who receives your loan, how they used the money, and their progress. ND can also arrange a visit to the lendee — this will turn your loan into a life-changing experience for you as well. But because of this directness the giving area is limited — currently to Mexico and Guatemala. No minimum contribution.

FINCA Village Banking
FINCA makes loans directly to the poorest villages. They aim their lending to 10-50 neighbors who come together to form a village banking group, and who in turn decide who should get what and how much. FINCA specializes in small loan amounts ($25-$500) for the very poorest. The minimum contribution to their program is $25. While a few hundred dollars is powerful, with only $5,000 you can start a whole village bank for micro-loans, thereby compounding the power of micro-finance to an entire small community.

Minimum contribution, $100. Since they accept PayPal, I found this program really easy to contribute to. (Get with it, others!) Unitus, like Accion below, funds other local micro-finance programs, rather than direct loans to individuals. “Unitus seeks to identify highest-potential emerging MFIs (Micro-Finance Institutions) and help them to achieve exponential growth.”

Accion is an umbrella institution providing technical assistant to local micro-lending institutions. Minimum contribution, $35.”ACCION is leading the effort to make micro-lending financially self-sustaining. Micro-lending programs have the potential to cover their own costs. The interest each borrower pays helps to finance the cost of lending to another. In most poverty alleviation efforts, every person helped brings the program closer to its financial limits. Successful micro-lending programs, on the other hand, generate more resources with each individual they help. As a result, well-managed micro-lending programs generate more income than they spend. Once they become economically viable financial institutions, they have the ability to access a virtually unlimited source of lending capital – the billions of dollars invested in the world’s financial markets. Several of ACCION’s partners have already made the transition from nonprofit, charity-dependent organizations to banks or other regulated financial institutions.”

My suspicion is that over time the inherent self-sustaining qualities of micro-lending will mean it won’t need charitable support to keep expanding. But the idea is still in its infancy; billions of people are still out of its reach. That means that every dollar given today will not only cascade its blessings on many others, but funding micro-lending now will also greatly accelerate the time when anyone in the world will have access to a small loan.

God bless us all, everyone.

-- KK 11/13/06

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