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Can micro-lending eliminate world poverty?
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If your portfolio isn’t doing well, trying doing good instead!
Even as the market begins to levitate, some wary investors are sinking their gains into cash. But with today’s low interest rates, they won’t be earning much of a return on those assets.
Say you’re sitting on a mountain of cash, but can’t figure out how to put it to good use. Why not consider micro-lending? By loaning out money in small increments, you’d be putting your hard-earned cash toward a good causing helping people, often women, earn their way out of poverty. You’ll be forgoing interest, but think of it as a donation that goes beyond a simple one-time handout.
In many developing nations, the banking system is not equipped to make the small loans that individual entrepreneurs need to start a business or keep one running. Micro-finance organizations were created to supply the capital needed by rural communities to jumpstart their economies. Often these loans are merely hundreds of dollars, but they’re vital to the survival of these fledgling businesses. Where the process had previously been complicated and expensive, leading to high interest rates counter-productive to the goals of micro-finance.
Enter Kiva.org.
The group aims to match, via the Internet, generous lenders in developed countries with recipients in the developing world. The idea is to help eliminate world poverty one loan at a time. Initially, it sounds like a risky proposal, but Kiva uses a vast network of field partners to vet entrepreneurs. So, this tactic has netted impressive results.
Lenders create an account and then browse the partner-approved entrepreneur bios and business plans before selecting a worthy cause. Loans are made in $25 increments, allowing newcomers to start small and test the waters.
Kiva has a repayment rate of 98.45% with the more than $48 million in loans made so far. That’s substantially better than what Wall Street has been averaging lately.
Micro-lending helps teach people to fish instead of handing them a filet-o-fish. The only way for communities to permanently lift themselves above the poverty line is to become self-sufficient.
Kiva.org is recommended as a charitable act and not an investment.
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