CNET, February 8, 2008

“Kiva, a peer-to-peer online microlending nonprofit organization, is changing the dynamics of microfinance by linking people who have money to loan up with entrepreneurs in developing countries who need some capital, all over the Internet. What is considered pocket change for many people in the United States can go a long way toward helping a struggling businessman get started in another part of the world.”

In addition to the money, Sam Adams is offering loan recipients education, expertise, advice, access to their employees and networks, all of which is probably a lot more valuable to the entrepreneurs than the loan they'll get.

Why do I think this is brilliant?  It capitalizes on some of the big trends in philanthropy right now: using market forces to help people help themselves, bringing assets beyond the money to accomplish philanthropic goals, aligning business and charity under a common brand, and recycling philanthropic capital instead of just giving it away.  Whoever helped them design this philanthropic program, called "Samuel Adams Brewing the American Dream," I salute you.

The key questions are:

1. What part of the cycle of poverty do you want to tackle
2. What result do you want to optimizing around

Today's post speaks to #1 above.

Put simply:

At Coupongood.org we are focused on the greater good.  We want to help people break the cycle of poverty with a focus on the working poor because they are so close to becoming self-sufficient and breaking the cycle of poverty -- the marginal dollar here could make the difference.

Our oversimplification of the decisions follows...

Choice #1: Feeding people today vs. People feeding themselves tomorrow

There are two basic approaches to battling poverty:

1. Immediate relief: Allocating resources in such a way that 100% of the value is realized immediately. ex. delivering rice to a remote village experiencing famine
2. Sustainable development: Allocating resources so that a portion of the value is realized immediately and the rest is played out in perpetuity. ex. delivering seed and farm equipment to a remote village

One thing I struggled with early in the development of Coupongood.org was, "Hey, there are people who don't have enough food to eat today.  Clearly, you should do something that sends food to hungry people NOW."

This is a big piece of the problem, and, as you might imagine, a ton of money (not enough) is applied to this problem every year.  For example, the UN World Food Programme, alone, dispersed 4 million metric tons of food to 87.8 million people in 78 countries and spent $2.9 billion in 2006.

• Problem #1: Next year, those people will still be relying on the WFP to feed them, and the cycle of poverty continues.
• Problem #2: I must have misplaced my spare $billion, oh wait, I don't have a $billion.
• Conclusion: The marginal dollar spent here has a long way to go before it throws off recurring value.  I'll leave this problem to those with deep pocket books and domain expertise: gigantic governments and world aid organizations.

Choice #2: The ultra poor vs. The working poor

"Okay.  So you want to focus on sustainable development...why not build a water well for a remote village?"

To simplify the discussion we divide the poor into two groups:

1. The ultra poor: lack basic infrastructure like water, food, housing.  Water wells and farming initiatives typically seek to move these people up the curve to "break even".  While these projects are incredibly important to the overall fight against poverty, our focus isn't break even -- its break out.
2. The working poor: possess the basics but live a slightly less than break-even existence and are unable to save and accumulate wealth to break out of poverty.  It is this group, we believe, who is just a few dollars away from the holy grail -- self-sufficiency, wealth accumulation and growth.  We will invest here!

Choice #3: Investment vehicle

"Okay.  How can you help them most efficiently?"

That's the subject of my next post on Microlending.

It starts with Overview: Microfinance unlocks potential of the poor which says:

Microfinance hit the headlines in 2006, when the Nobel peace prize was awarded to Muhammad Yunus, a Bangladeshi banker who pioneered the idea of providing small loans to villagers.

Microfinance may even become an asset class for investors. In May, the International Finance Corporation, part of the World Bank Group, announced an investment of $45m in credit-linked notes to be issued by a vehicle set up by Standard Chartered to facilitate microfinance lending in sub-Saharan Africa and south Asia.

Meanwhile, microfinance has become one of the main instruments through which the poor access financial services. In Bangladesh, ASA, the microfinance group, operates a decentralised model in which simplified accounting and record keeping removes the need to have separate accountants and cashiers in branches.

The article of most interest here summarises the main points of an interview with Lars Thunell, the Swedish-born chief executive of the International Finance Corporation, the World Bank’s private sector finance arm.

Several relevant excerpts from it are included below.

FT.com / Reports - Lars Thunell: Poor farmers need level field

The need for a set of standards to protect poor people while mitigating
against the risks to financial institutions chimes well with the IFC’s mission to promote sustainable private sector investment in developing countries.

The IFC has established a “responsible microfinance initiative” to look at developing a version of its Equator Principles – the project finance standards first developed five years ago in conjunction with a small group of banks – which have been adopted by some 60 financial institutions worldwide.

The IFC is also conscious of the controversy surrounding the profits made by Compartamos, the Mexican lender. Muhammad Yunus, the Nobel peace-prize winning founder of the Grameen microfinance institution, criticised the high interest rates demanded from Compartamos’ poor customers after the company successfully completed a lucrative public offering.

... as commercial banks vie with social enterprises in the microfinance field, the question of how much profit is acceptable lacks a definitive answer.

“The [interest] rates are there, – it’s a fact of life – but I think what would always help in any market is more transparency and disclosure around those rates,” Mr Thunell says.

Furthermore, technology is likely to play a role in widening access to microfinance – for example by allowing borrowers to pay using their mobile phone instead of going to a bank.

But this win-win model is likely to face a serious test this year as millions of people in the developing world struggle with rising food prices.

Conscious of anecdotal evidence that rising costs have left producers unable to plant all their land, the IFC is looking at how it can help farmers expand cultivation by financing the purchase of seeds.

Moreover, microfinance is increasingly about the provision of a broad range of financial services, not just small loans, and these too could play a role in solving the food crisis.

“It’s not only a moral issue I think there’s going to be tremendous business opportunities to look at agribusiness in a new way and be creative,” he says.

Mr Thunell says his dream is to help financial firms provide insurance to farmers to protect them against sudden hardship.

If the rains fail the insured farmer would receive help to repay the microfinance loan.

“These are the types of thing that we should be doing – first showing how it can be done, then incorporating that into our projects, then finding partners and spreading [the idea].

“That’s our job, that’s what makes it fun,” he says.

Loans that Change Lives

I just made a loan to someone in the developing world using a revolutionary new website called Kiva.org.

Kiva lets you loan very small amounts of money to the poorest of the working poor all over the planet.  Kiva's mission is to connect people through lending for the sake of alleviating poverty worldwide.

You can go to Kiva's website and lend to someone in the developing world who needs a loan for their business - like raising goats, selling vegetables at market or making bricks.  Each loan has a picture of the entrepreneur, a description of their business and how they plan to use the loan so you know exactly how your money is being spent - and you get updates letting you know how the entrepreneur is going.

The best part is, when the entrepreneur pays back their loan you get your money back - and Kiva's loans are managed by microfinance institutions on the ground who have a lot of experience doing this, so you can trust that your money is being handled responsibly.

I just made a loan to an entrepreneur named Norah Huanca in Bolivia.  They still need another $1,750.00 to complete their loan request of $4,950.00 (you can loan as little as $25.00!).  Help me get this entrepreneur off the ground by clicking on the link below to make a loan to Norah Huanca too:

http://www.kiva.org/app.php?page=businesses&action=about&id=46289

It's finally easy to actually do something about poverty - using Kiva I know exactly who my money is loaned to and what they're using it for.  And most of all, I know that I'm helping them build a sustainable business that will provide income to feed, clothe, house and educate their family long after my loan is paid back.

One of the best parts is:   Once that loan is paid back -- with interest -- I can simply loan it out again to another entrepreneur.  That way my money gets put to great use over and over and over again!  Imagine what would happen if we ALL did this.  There would be no more poverty!

Join me in changing the world - one loan at a time.

Thanks!

_______________________________________

What others are saying about www.Kiva.org:

'Revolutionising how donors and lenders in the US are connecting with small entrepreneurs in developing countries.'
-- BBC

'If you've got 25 bucks, a PC and a PayPal account, you've now got the wherewithal to be an international financier.'
-- CNN Money

'Smaller investors can make loans of as little as $25 to specific individual entrepreneurs through a service launched last fall by Kiva.org.'
-- The Wall Street Journal

'An inexpensive feel-good investment opportunity...All loaned funds go directly to the applicants, and most loans are repaid in full.'
-- Entrepreneur Magazine

~

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Select an aspiring business owner through Kiva and make a grant using your Advanta business card. Advanta matches the amount of your grant, dollar for dollar. Kiva distributes the funds. As the funds are repaid, the money is deposited into your Kiva account. You will be able to withdraw those funds or use them to fund another business owner.

A "typical" beneficiary is shown, a Haitian woman with her own cosmetics business--from which one can infer that this foreign aid is a matter of having petty-bourgeois in rich countries send money to petty-bourgeois in poor countries. Is this really the best way to fight global poverty?

Among the reasons why the answer might be 'no':

1. The site's language to the contrary notwithstanding, these are not grants; they're loans. Telling people they can eradicate poverty without actually giving anything to charity is false, and only increases the impatience with which they regard perfectly legitimate claims on their generosity (such as taxation to support foreign aid). Giving people in the developing world a decent life will require some sacrifice on the part of people in the developed world, and the longer we try to conceal that truth from our fellow citizens the harder it's going to be to separate the said citizens from the necessary money.
2. In a country where there are food riots, is a person who starts a business selling luxuries--even small luxuries, like cosmetics--really going to be better off? Is the country as a whole really going to be better off for having an indigenous cosmetics mogul?

If the point is to rally the energy and commitment of American small business in support of its counterparts worldwide, Rotary (among other fraternal organizations) has a range of programs for just this purpose. Simply swiping your credit card isn't really a substitute for that.

Banks in France and Bangladesh, notably banks that began as village banks are deeply linked to the well-being of their community. For U.S. banks, that mindset is a considerable change in concept. The concept started small. Small amounts of money were loaned to the rural poor trapped by an old system of moneylenders and politics. The concept has grown into a bankable system that allows the poor to help themselves.

Loaning to people without collateral is exactly the opposite approach that banks use when extending credit. Some bankers like Muhammad Yunus believe that credit should be considered a human right. He created his bank by turning banking upside down. Yunus likes to loan to women and to people with no access to loans. He considers attitude as the collateral of banking. He loans to people with self-respect and trust. He extends the same courtesy, working around the world to benefit people that need money most, while working to smash unfair banking laws. He is a Robin Hood of bankers.

Goldman Sachs has already taken steps to see if they can make a similar program profitable for themselves using the same models and ideas that some French bankers and microlending institutions are using. They plan to throw $100 million at an experiment to finance microlending outside of the United States. Is the plan being deployed as a method or a mindset for Goldman Sachs? Will Goldman involve themselves in a loan sharking business with 100% interest rates like Banco Compartamos?

You may be able to make money without the desire to help others, but lenders like Muhammad Yunus aren't just about making money. You may feel the same way. You desire to provide assistance to someone that needs help with a good idea to lift and elevate their life.

Finding a grass roots way to alleviate and eliminate poverty is the goal and heart of original microlenders. A large measure of philanthropy has been important in the past. Finding respectable organizations to work through is always an initial concern. Organizations like Kiva are using the power of the internet to facilitate one-to-one connections that used to be prohibitively expensive or impossible. You can offer whatever money you have available to make a difference in the life of someone else. MicroPlace is a new venture owned by Ebay that is registered with the Securities and Exchange Commission. On the surface, both organizations appear to be the same, but are quite different.

Lenders on MicroPlace invest in microfinance by purchasing securities. Funds generated by these sales are then invested in microfinance institutions around the world. The institutional investors receive their loan plus interest. The people who purchased the original securities are then paid back.

Kiva is a privately-owned non-profit organization. As a result, lenders on Kiva receive their loans back without interest. Lenders provide capital to microfinance institutions directly, who then lend directly to clients.

Microcredit Ratings International Limited has taken the time to evaluate microlending institutions. Other valuable sources of microlending information are the Virtual Library on Microcredit as well as USAID.

Regardless of what bankers believe, you can get in on the action by helping someone else out with your pocket change. You can become your own private banker for small loans and even make money doing so if you choose.

"The Kiva B4B Project is based on the principle that the simple actions of few can change the world for many." The new Kiva BusinessCard, the product of a partnership between Kiva and Advanta, is an exciting new program designed to help entrepreneurs Here help other entrepreneurs There. "Here" refers to the developed world - the US and Western Europe. "There" refers to the developing world - places like sub-Saharan Africa and rural Asia.

The B4B project is innovative and truly beautiful in its simplicity. Advanta cardholders (whether they have a Kiva BusinessCard or not) simply log onto Kiva.org and make a donation using their Advanta card. Advanta will then match that donation, dollar for dollar, up to $200 per month. As an added bonus, those entrepreneurs who make the loans get to keep the total amount that's repaid.

So, if you were to donate $300 to a young mother in Nigeria to help her open up a grain shop, Kiva would match $200 of that donation to give the recipient a total of $500, which she is obliged to repay over time. Once the $500 has been repaid to your account, you can withdraw the funds, or re-lend to another developing world entrepreneur.

To date, Kiva.org has facilitated the lending of nearly $29 million to developing-world entrepreneurs. Over 280,000 individual lenders have participated, making nearly 42,000 individual loans. Lenders know their money is safe, as Kiva boasts a repayment rate of 99.68% (a default rate of only 0.32%).

To learn more, visit Kiva.org and the Kiva B4B Project.

[via PSFK]

Banks in France, notably banks that began as village banks are deeply linked to the well-being of their community. For U.S. banks, that mindset is a considerable change in concept. French banks like Credit Agricole began to loan small amounts to the rural poor trapped by the old system of moneylenders.

Loaning to people without collateral is exactly the opposite approach that banks use when extending credit. Some French bankers like Muhammad Yunus believe that credit should be considered a human right. He created his bank by turning banking upside down. Yunus likes to loan to women and to people with no access to loans. He considers attitude as the collateral of banking. He loans to people with self-respect and trust. He extends the same courtesy, working around the world to benefit people that need money most, while working to smash unfair banking laws. He is a Robin Hood of bankers.

Goldman Sachs has already taken step to see if they can make a similar program profitable for themselves using the same models and ideas that some French bankers and microlending institutions are using. They plan to throw $100 million at an experiment to foreigners that need help. Is the plan being deployed as a method or a mindset for Goldman Sachs? There is a difference and you probably know the answer.

Unfortunately, the United States is being ignored for this approach. However, bankers may believe that the American population does not hold self-respect and trust in high regard. Honesty and trust may be the issue for spoiled Americans that believe that they are entitled to do as the please and that debts can be ignored when they become inconvenient. Bankruptcy over pride is always an option. Are Americans too sophisticated? Are Americans so corrupt and jaded? Whether banks will cozy up to the U.S. marketplace in such a way remains to be seen as the U.S. economy continues to display a greater disparity between "the-haves" and the "have-nots".

Is microbanking a future double-digit profitaking event to be exploited by the banking and finance industry? Can big banks without a heart and the drive for profit use similar methods to drive double-digit profits and growth? Does the United States have a Robin Hood banker that has a real interest in building community over massive profits?

By ELISABETH MALKIN
Published: April 5, 2008

VILLA DE VÁZQUEZ, Mexico — Carlos Danel and Carlos Labarthe turned a nonprofit that lent money to Mexico’s poor into one of the country’s most profitable banks.

But not all of their colleagues in the world of microlending — so named for the tiny loans it grants — are heaping praise on the co-executives of Compartamos. Some are vilifying them as “pawnbrokers” and “money lenders.”

They are the center of a fractious debate: how far should microfinance go toward becoming big business?

At one end stand traditional microlenders, like the economist Muhammad Yunus, founder of the most famous microlender, the Grameen Bank, and winner of the 2006 Nobel Peace Prize. At the other are the Two Carloses, as they are widely known in this tight-knit world that gave them their start as starry-eyed idealists.

Microlenders, the original and still the most common type of microfinance organization, help the poor start or expand businesses in places most banks shun, like the slums of Calcutta or these impoverished hills in Mexico’s sugar cane country, three hours south of Mexico City. Their efforts are widely considered successful in transforming the lives of developing-world entrepreneurs, particularly women, and their families.

Many microlending advocates, including Mr. Yunus, say that success is threatened by Mr. Danel and Mr. Labarthe’s market-oriented model, with its emphasis on investor returns.

“Microfinance started in the 1970s with a focus on using this breakthrough to help end poverty,” said Sam Daley-Harris, director of the Microcredit Summit Campaign, a nonprofit endeavor that promotes microfinance for families earning less than $1 a day. “Now it is in great danger of being how well the investors and the microfinance institutions are doing and not about ending poverty.” He said the situation posed the danger of “mission drift.”

Mr. Danel and Mr. Labarthe say microfinance will help more poor people by tapping the boundless pool of investor capital rather than the limited pool of donor money.

“It’s marvelous to have one creditor but it’s marvelous to have one million creditors,” Mr. Labarthe said, “and that’s where we really start to change the face of opportunity.”

Compartamos (“let’s share” in Spanish) expects to reach one million borrowers this year. Its profits are healthy, some $80 million last year, and its portfolio has grown to almost $400 million. Since it went public nearly a year ago, return on equity has been more than 40 percent.

Both sides agree that there is a need for capital, too great to be met by the donor groups that initially financed microlending. Deutsche Bank estimates the global demand for microfinance loans at about $250 billion, 10 times the amount that has been lent.

But Compartamos’s decision to go public last April became a flashpoint in what had been a genteel debate over how microfinance could tap into the financial markets’ vast resources. The initial public offering gets special mention at every microfinance conference, and has been condemned by Mr. Yunus, the Nobel laureate.

Alex Counts, president of the Washington-based Grameen Foundation, said Compartamos’s poor clients “were generating the profits but they were excluded from them.”

Lynne Patterson, a founder of Pro Mujer, a nonprofit microfinance group with branches in several Latin American countries, agrees. “We use the profit to reinvest in the service of the clients,” she said, referring to loan repayment profits.

Since lack of access to credit is just one of the problems the poor face, Pro Mujer also offers services like breast cancer screenings, advice on dealing with domestic violence and financial education.

Still, in three decades microfinance has evolved — from small nongovernmental organizations lending $50 to women to buy sewing machines or fruit to sell at market to, in some cases, formal banks that cover costs and grow through profits, like any business.

On Wall Street, investment banks package microfinance loans to sell to institutional investors, many of them “socially responsible” and looking for steady returns rather than trading profits. A few equity funds have even taken stakes in microfinance institutions.

Critics say that Compartamos manages its business to benefit its investors, not its borrowers. The bank began as a nongovernmental organization in 1990, started by a Catholic social action group called Gente Nueva, whose inspiration was a visit by Mother Teresa to Mexico.

After Compartamos became a for-profit company in 2000, costs fell as efficiencies increased, but the bank kept interest rates high. On average, customers pay an annual interest rate of almost 90 percent, which includes 15 percent in government tax. In much of the world, microfinance interest rates range from 25 to 45 percent. But in Mexico, high costs, inefficiency and limited competition keep interest rates much higher. Compartamos’s rates are only a few percentage points higher than Pro Mujer’s, for example.

Like microfinance businesses around the world, Compartamos makes loans without collateral. Its borrowers, who are nearly all women, are organized in groups, which guarantee the loans. Stop paying and your friends must pay for you: the system keeps default rates down.

Historically, microlenders point out, such borrowers are excellent risks. For instance, Compartamos’s nonperforming loans were just 1.36 percent of its portfolio at the end of last year.

Servicing those loans takes labor and that pushes up rates on such small amounts. A Compartamos collection agent visits each group every week, riding public buses out to villages.

Compartamos is more efficient than other Mexican microfinance institutions and its own borrowing costs are lower, thanks to its strong credit rating. Critics charge that it has not passed those savings on to its customers.

The numbers seem to bear that out. A study last year by the Consultative Group to Assist the Poor, known as CGAP, a microfinance industry group based at the World Bank, estimated that 23.6 percent of Compartamos’s interest income went to profits. Its return on average equity is more than triple the 15 percent average for Mexican commercial banks.

Profit is not a dirty word in the microfinance world. The question is how much is appropriate. CGAP estimates the average return on assets for self-sufficient organizations to be 5.5 percent. The figure for Compartamos was 19.6 percent in the fourth quarter.

Mr. Danel said Compartamos’s interest rates have fallen 30 percentage points over the last five years. “They go down based on efficiencies, and we pass this benefit on to the customer,” he said.

Compartamos grew to 840,000 customers last year, from 60,000 in 2000.

Last April, Compartamos’ owners sold 30 percent of their stock on the Mexican stock market in an initial public offering. The public offering brought in $458 million. Private Mexican investors, including the bank’s top executives, pocketed $150 million from the sale. More than half of the public offering proceeds went back to development institutions that had invested in Compartamos when it moved from being a nonprofit to a commercial venture in 2000.

One of them was Acción International, a Boston-based nongovernmental organization that helps build microcredit institutions and provides them with technical assistance. Acción invested $1 million in Compartamos in 2000. It sold half its 18 percent stake at the time of the public offering for $135 million.

“This is one strategy to address poverty that doesn’t remain small and beautiful,” said María Otero, president of Acción.

Charles Waterfield, a microfinance consultant who has been among the most vocal critics of Compartamos’s model, disagrees. “Not only are they making obscene profits off poor people, they are in danger of tarnishing the rest of the industry,” he said. “Compartamos is the first but they won’t be the last.”

There has not been a rush to market yet. In part, the subprime mortgage debacle and the ensuing selloff on global markets has made this a poor time for initial public offerings. Compartamos has not escaped the turmoil; its stock price is up nearly 17 percent since the offering, but down 32 percent from its high last July.

Those who argue for more such public offerings say that Compartamos set the right example.

“Boy, you got a lot of people’s attention with that I.P.O.,” said Bob Pattillo, who runs Gray Ghost, a fund that invests in microfinance. “This has got Wall Street’s eye, London’s eye, Geneva’s eye — to have one out there to say that if all the dots got connected this can be quite profitable.”

Mr. Danel and Mr. Labarthe argue that successful microlenders in a middle-income country like Mexico should use the capital markets, instead of crowding out donations.

As part of their defense, they argue that Compartamos’s success has prompted a number of institutions, including traditional banks and retailers, to start offering financial products to the poor. “We don’t only see ourselves as a specialist in microfinance but also as the builder of an industry,” Mr. Danel said.

Compartamos estimates that its target market is 14 million households, more than half of the country’s population, most of them with little or no access to banking services.

At the recent weekly meeting of a group of Compartamos borrowers in the village of Valle de Vázquez, the interest rate was not a great concern. Indeed, several women said they had left another microfinance institution because it charged more.

The group was well established, 35 strong and well into its third year of borrowing. The meeting, which took place in the living room of one borrower’s home, was the start of a new four-month borrowing cycle.

A Compartamos manager, Claudia Ayala, began with a pep talk, pointing to a house plant set on a chair beside her. “This plant grows and this group can grow,” she said to the women, who were listless in the afternoon heat. “How? By inviting more compañeras,” or friends. “By fertilizing it with responsibility,” she said.

Though the village depends largely on remittances sent by relatives in the United States, the Compartamos loans have helped some women become self-sufficient.

Silvina Martínez started a little restaurant in her house a year ago to sell her homemade snacks to students at a nearby high school. It has grown steadily since then. With this cycle, she was going to borrow about $1,100 to paint the restaurant and expand her menu. “It’s my own business,” she said. “You are a slave to it, but at least it’s mine.”

Other women were successful entrepreneurs to start with, but the Compartamos credit gives them a push, allowing them to hire an employee or help ease their cash flow.

Alejandra Abúndez, 57, keeps pigs and cattle, and produces 330 pounds of cheese a day, which she sells in the local market. She and her daughter, Micaela Rivera, were borrowing $3,550 from Compartamos to buy animal feed and to stock the tiny store in her front entryway.

“Everything I have, I invest,” said Ms. Abúndez, who was left a widow with five children at 35. “No gadding about for me.”

"The cult of the entrepreneur that the microfinance boom has helped foster is understandably appealing. But thinking that everyone is, and should be, an entrepreneur leads us to underrate the virtues of larger businesses and of the income that a steady job can provide."

via Ethan - thank you!

The world of peer-to-peer (P2P) lending keeps getting better. The latest entrant: Fynanz, a site devoted solely to P2P student loans. When the site officially launches later this year, users will be able to farm out their educational financial needs to friends, family, and most interestingly, to traditional student-lending institutions.

Here's how it works: students log on, and specify the details of their loan (how much they need, desired interest rate, desired payment term, etc...). Fynanz then rates each potential borrower based on credit history and information gleaned from historical student loan records. Potential borrowers; whether they be friends, family members, or banks; then bid on the loan. The more potential lenders bidding for a given loan, the better the terms for the student. Fynanz will charge borrowers service fees that are comparable to those of traditional lending institutions, and the entire platform is built using the same characteristics as traditional lenders to ensure the preservation of educational loans' distinct tax status.

In related news: Home Equity Share is another P2P lending site that specializes in fulfilling the needs of would-be home buyers. Other P2P lending sites include Zopa (US & UK), Kiva, Prosper (US), Lending Club (US), Boober (Italy, Holland), Smava (Germany), Community Lend (Canada), and PPDai (China).

Click to read more

Within the Marketing and Fund-raising section of KivaFriends.org I located several references to iGive.com.  This is an affinity fundraising site featuring 680 merchants who donate a percentage of sales to the charity or cause of your choice.  KivaFriends has an account where 75 affiliated shoppers have generated enough money to fund 55 micro-loans in developing countries.  For more details, you can visit the site via this link:  http://www.iGive.com/html/refer.cfm?memberid=550794&causeid=41751 

In addition to the risk rating, Kiva posts the delinquency rate and default rate of each MFI.  The risk rating is based more on how long the MFI has been involved in microlending and their record or ability to collect and repay the loans.  Some MFI's have a newly established working relationship with Kiva and a high rating while others have worked with Kiva for several months and still have lower ratings despite delinquency and default rates of 0%.  Once you find a business you wish to invest in, I would recommend doing a little research on the MFI/field partner.  A delinquency or default rate of 0% may provide a false sense of security given that the relationship with Kiva is just a couple of months.  The lender (BRAC Uganda) working with the entrepreneurs I invested in, have only been working with Kiva for about a month, but they have an established record in microlending.    

Kiva lets you connect with and loan money to unique small businesses in the developing world. By choosing a business on Kiva.org, you can "sponsor a business" and help the world's working poor make great strides towards economic independence. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates from the business you've sponsored. As loans are repaid, you get your loan money back.

Once I landed on the site, I found that with an amazing influx of funding (thanks to publicity from Oprah, NBC and others) there were no registered businesses anywhere left in need. This was incredible news!

Upon visiting this week, Kiva has since scouted for more and I was drawn to help Yudaya, a 42-year-old widow with five children. Yudaya is seeking funds to help stock her hardware business where she sells equipment and supplies. As with any business, one hopes for profits and Yudaya's dream, beyond running a sustainable business, is to buy a mortocycle (a boda boda).

Group Name: Kamuli C1 (c) Group
Group Members: Irene Kutesa , Roseline Komugisha , Sophie Nalubango , Dorothy Nanfuma , Yudaya Dorothy
Location: Kireka, Uganda
Primary Activity: Hardware
Loan Requested: $1,650.00
Repayment Term: 12 months - repaid monthly
Loan Use: To stock her hardware store
Date Posted: Jan 20, 2008

If you feel inclined, you too can support Yudaya's needs and follow her progress, or visit Kiva.org to choose a different business. Help buy a goat, sell clothing, fund a mini-bus shuttle service.

Because the number of lenders continues to exceeded available business prospects, Kiva has temporarily restricted loan amounts to $25. While $25 may seem insignificant, this restriction has provided an interesting opportunity. Sometimes it's not about the money. It's about having the grand force of positive energy and of many individuals who believe in you and your dream. It feels good to be one of the supporting team, no matter how small the role.

I've received a couple of emails from friends and family asking about the legitimacy of the email they received from Kiva.  When you make a loan, Kiva asks if you'd like to invite any of your friends or family to also participate.  I wouldn't normally provide referrals/email addresses, but I made an exception in this case because I am confident that Kiva honors it's privacy agreement.  Perhaps a better way to share this opportunity with friends and family would be to add a link or banner at the bottom of your personal email.  I'm sure I'll receive a few more inquiries over the coming days.  For those that have filled my inbox with bad jokes and chain letters, I offer no apologies, for everyone else, I'll take my lumps.

You can diversify or choose to place all of your money in one plan. I chose to place my $50 in the Aggressive plan. Prosper.com then bid on several different loans before finding me one at 18.25%. If you like, check the details of the loan. I should have my first payment of $1.81 on Feb. 11. Fascinating.

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Today in the Baton Rouge Whole Foods checkout line, I saw the Whole Foods Market 2008 Calendar for sale for $2.00.  What a deal!!  I needed a calendar to hang in my office and this one was the perfect choice.  It is a glossy page calendar with great photos from various countries and of Whole Foods team members with $13 in savings coupons inside for a super deal of a price…AND…100% of sales of the calendar go to benefit the Whole Planet Foundation.  On the January page of the calendar, it states that Whole Foods covers Whole Planet Foundation’s annual operating budget and that donations received by the Foundation are directed to microlending programs in the developing world.   The calendar reports on every photo page that “As of November 2007, Whole Planet Foundation has authorized over $5.9 million to support microlending programs in Costa Rica, Guatemala, Honduras, Nicaragua, India and Indonesia with plans to expand to east Africa in 2008. This support has helped 14,429 entrepreneurs create small businesses in the developing world.   Average loan size is $157 with an average repayment rate of 99.8%.” 

Go buy your own calendar while they are still available! 

For information, go to:  www.wholeplanetfoundation.org  

Its US operation, however, is a bit different. Circle Lending, which was started in 2002 by Asheesh Advani, made a name for itself by helping to structure and facilitate loans between an individual and his/her family and friends. The concept is simple - a borrower signs onto Virgin Money US to initiate a loan, specifies the desired terms, and then reaches out to specific people from whom to borrow money. Virgin Money US handles all the "dirty work" such as loan documents, payment process, reminders, and financial statements. Borrowers and lenders get better deals than through traditional banks, and everyone is happy. The operation is similar to Zopa, in that it facilitates P2P (peer-to-peer) lending, though its not clear that Virgin performs credit checks since the aim is to keep loans "all in the family."

Either way, its great to see that Circle Lending will be able to grow and expand with the help of Richard Branson and the Virgin Empire. Virgin Money US plans to expand operations beyond "circle lending" in the upcoming months, so stay tuned. In the mean time, learn more at Virgin Money US.