Umamiblog

One of the areas of economics that has interested me the most was the concept of Microfinance. Put very simply, they are very small loans (not gifts or grants) that are typically given to individuals who are unemployed and living in poverty in a third world economy who would otherwise not have access to any kind of credit. Wikipedia has more on it here.

Evidence suggests it is an extremely effective method of helping lift people out of poverty via self-employment and putting them in charge of their own destiny. Not only that, it is also suggested that from a financial risk point of view the idea works surprisingly well. Repayments are actually made and in some cases microcredit programmes have lower bad debt/failure rates than traditional banks and lending organisations in those countries. And usually those very same organisations refuse to lend to these people.

Those same repayments are then typically poured into more microloans and thus the process repeats itself.

I had often thought that this type of framework would be excellently served by the internet. A website has the ability to detail, categorise and organise the giving of loans and the receiving of payments. It was an idea that excited me a lot and here are the notes I scribbled down a long time ago on the subject:

* Sponsor real needs
* Categorised on site
* See exactly where it is going
* Actively engaged
* No passive monthly income giving
* Just project, need by need
* Micro-enterprise => micro-donations
* Not committing for any length of tme
* Updated on progress of project
* Has the need been met
* “I helped a 25 y.o. brother pay for his siblings primary school tuition because his parents aren’t alive. It cost me $80.”

I remember at the time thinking if I was ever going to get real about it and take it beyond the idea stage that you would need to partner to an existing organisation operating in these communities.

I am heartened to see that banner being taken up by Kiva. You can view individual cases and donate loan via services like Paypal from as little as USD$25. When that money is repaid, you can reinvest it or take it out. Beautiful, simple and effective.