Grassroots Capitalism

logoleafy2.gifIf I hear about an idea twice in one week, then I know it is time to blog about it. Ever heard of a concept called ‘micro loans’?

A micro loan is a small amount of money (and I mean small) that someone (usually from a western, developed, economy) loans to an entrepreneur (often in a third world or other developing country) at a specified interest rate to help them build a business that allows them to become self sustaining.

These loans can be as little as $25. But $25 US or Canadian goes a long way in a third world country and when 10 people loan $25 to the same project, well that goes even further.

The website www.kiva.org allows you to lend as little or as much as you like to a specific project, that you can read about on the net, and then track the progress of over the term of your loan. The organization is backed by the people that run Paypal., the secure internet payment people that drive all the transactions on eBay. For a recording of a really interesting interview with the person who is spear heading Kiva’s development , go to this link and either download the MP3 to your iPod, or listen on your computer. It’s a real eye opener what someone with a Stanford education and a social conscience can achieve.

To me micro loans represent a better bang for your buck than a simple charitable donation on so many levels. Aside from the fact that it allows the person receiving the money more dignity than just a hand out, whilst at the same time making them responsible for the success of their business, it is also better for the person making the donation. 100% of your micro loan goes straight to the person it was designed to help, no overheads, no admin. fees, no Executive Director’s salaries to fund and no marketing costs.

Kiva.org is currently operating at a loss so they can get some critical mass, but they will soon charge a small fee to the loan/aid agencies who introduce the entrepreneurs to the scheme, but the fees they charge will still be minimal compared to the type of cost your average aid agency incurs. The popularity of the site is due entirely to viral marketing (other people in the print media and on the Internet spreading their message).

Check out their site for the wonderful journals and success stories that document where the loans to date have gone. The site works a lot like eBay in that people who loan the money ‘recommend’ the recipients based on how well they paid back their loan and how effectively they used their money. If you want to know more about the person and their business before you invest, you can actually write to the entrepreneur directly.

I am not going to go on at length about it, but I think it’s a wonderful idea and just another great example of how the internet has democratized person-to-person communication and the way we do business on a global scale.

1 thought on “Grassroots Capitalism”

  1. Another site just launched is going to bring P2P for profit investment lending to the marketplace to expand funding and scale far greater than non-profit funding has done and will do. Feel free to check out the beta site, with alot more improvements on the way.

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