This blog is a way for me to share hard learned lessons about money with those who are just starting out on their own. I hope it's a way for you to avoid making the mistakes I made, and to benefit from my experiences

Friday, March 16, 2007

Microfinance and Kiva.org

There is a very interesting article in today's Mercury News about microfinance or microlending and a web site that can help arrange it called Kiva.org. Make sure to check out the graphic of how it all works.

What is microfinance? It's the lending of small amounts of money to people in impoverished nations or poor areas, so they can buy tools or assets, that they can use to earn a better life for themselves. It helps a poor woman in Africa buy chickens so she can sell eggs, or a cobbler in Bangladesh new tools so he can repair or make new shoes much faster, etc.

Usually this is done through very small banks or finance institutions set up for this very purpose. The entrepeneurs then pay the loans back from their increased earnings. That money is then lent to another poor entrepeneur, etc.

I dislike many charities, because they aren't geared toward helping people become self-sufficient, but here's a great alternative. In the past, this was done as a charitable donation. The money was given to these microbanks and it was then lent.

The beauty of Kiva, is that instead of given money to charity to make these micro-loans, you can do so directly. And if the entrepeneur is successful, you get your money back so you can lend it out again. It's a lot like prosper.com, but only geared towards micro-lending for poor entrepeneurs. You can start with amounts as low as $25.

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