Saturday, April 5, 2008

Green Saturday: Microfinance

Microfinance has become a household buzzword lately, but what is it really? Wikipedia says "Microfinance services are financial services that poor people desire and are willing to pay for. The term also refers to the practice of sustainably delivering those services. More broadly, it refers to a movement that envisions “a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers.” " It's really about providing financial services to those who would not be able to attain such services in a regular market because of the cost to the lender in doing so.

There are several peer-to-peer lending organizations out there. Kiva.org is a not-for-profit organization that uses a network of growing Microfinance Institutions (MFI's) in over thirty countries to provide loans to small businesses using the paypal donations of folks like you and me. Here's a great story by Matt Flannery, co-founder of Kiva.

I lend to Kiva myself, and as an example of who these loans help, here's the bio of one of the small business owners my loan is currently assisting.

Amrahova Dunya was born in Sumqayit city. She is 34 years old and the mother of two children. Currently, she lives with her family in Sumgayit city, situated in the eastern part of Azerbaijan. She started her business in 2002. She sells creams, lotions, perfumes, shampoo, etc. With this business she earns little money. The money is enough for only some of her family's basic needs. She has difficulty in covering other family consumption needs for medication, clothes, school etc. Her best clients at the moment are young ladies who work at the offices. She needs $800 to buy merchandise in order to have a bigger inventory and be able to offer her clients a larger variety and better quality. She will be able to support her children’s studies and help with the family’s expenses with this income. She will repay the loan within 12 months.


Another microfinance portal - and a relatively new one- is MicroPlace Recently placed on the map by it's parent company eBay, MicroPlace is a portal that allows the lender to collect interest on their loans. There are similarities and differences between MicroPlace and Kiva (the important one to me being for profit (MicroPlace) vs. not for profit (Kiva).) NestBillion.net has written an excellent article about it here.

A third portal, and one of the largest in the newsmedia, thanks to Natalie Portman (a spokeswoman) and HM Queen Rania of Jordan (on the Board of Directors and an avid spokeswoman) is FINCA. FINCA primarily lends to women, and has an excellent FAQ page on their site outlining the reasons for lending to their target borrower. From the website . . . "Why does FINCA lend primarily to women? 
For several reasons. First, the feminization of poverty is a worldwide trend. Seventy percent of the world’s poor are women, largely because of their limited access to education or to productive resources like land and credit. Another worldwide trend is an increase in woman-headed households, in which a mother provides the sole support for her children. Most victims of severe poverty are children. According to UNICEF, at least half of the 12 million children aged five or younger who die each year, die from malnutrition associated with severe poverty. The most direct way to improve childrens’ survival and welfare is to strengthen their own mothers’ ability to take care of them."

I hope I have helped put a face or two on the growing wonderful trend of microfinance, perhaps you will consider lending yourself. For more information, the United Nations Capital Development Fund has some great research and a very infomative website.

1 comment:

ArtsyChaos said...

That's very interesting ! Sounds like a great program.