Fueled
by last year's Nobel Prize for a man nicknamed "banker to the poor,"
microlending to small businesses in the world's
poorest countries is booming as individuals discover they can be their own mini
World Bank.
And
you don't have to be Bill Gates to get in on the act.
A microfinance Web site that lets
people lend as little as $25 to small businesses from Vietnam to Kenya is
drawing so much interest from lenders that it's struggling to keep up.
Kiva.org, described by founder Premal Shah as an "eBay for microfinance," has
been operating for two years but saw traffic surge after Bangladeshi economist
Muhammad Yunus won the Nobel Peace Prize last
year as the founder of Grameen Bank.
"Overnight
the volume of the traffic to our site pretty much doubled," Shah said of
the Nobel Prize's impact, noting recent publicity and a mention in Bill Clinton's new book "Giving" prompted
another surge in interest that has left Kiva seeking
more borrowers to take all the available money.
Kiva works with dozens of microcredit groups who
pick needy businesses -- from a Honduran woman selling cosmetics to a Cambodian
weaving business or a Ghanaian car repair shop.
"We're
providing an online platform for connecting the microfinancing
people in the field with someone in Des Moines, Iowa, or someone in London,"
Shah told Reuters.
Shah
said the average user funds four businesses on the Web site, putting $25 into
each business and that about $11 million has been lent so far with no interest
charged. He hopes to loan $100 million in the next three years.
The
site has photographs and business plans from people seeking amounts that range
from $75 to over $1,000. In a system that mirrors online stores, each microcredit firm is rated according to whether loans have
defaulted in the past, how long it has been operating and the total amount of
loans.
"If
they're not reliable they're not able to raise more money," Shah said.
PHILANTHROPIC
BOOM FOR RICH AND POOR
Jacqueline
Novogratz, an ex-banker who founded the Acumen Fund in 2001 as
"a venture capital fund for the poor," linked "new
philanthropy" to the tech boom and the changing economy.
"Philanthropy
has traditionally mirrored the economy in which it's functioning, so Rockefeller
who created the first foundation mirrored the industrial revolution
approach."
"What
you saw even before the Nobel Prize was people starting to look at Silicon
Valley and seeing whether there could be more innovative ways of using
philanthropic resources for change," she told Reuters in an interview.
The
Acumen Fund now has $20 million invested in East Africa, Pakistan and India
in firms ranging from an ambulance service in Bombay
to a mosquito net factory in Tanzania.
It
operates at the other end of the scale from Kiva,
investing money from the likes of Bill and
Melinda Gates, the Rockefeller Foundation and companies including Nike
and Coca-Cola . Its average investment is $600,000 and the fund
hopes to invest another $100 million within five years.
Novogratz said Acumen seeks socially responsible businesses with
potential to expand rapidly and become self-sustaining, targeting health care,
housing, water and energy.
Among
its projects, entrepreneur Satyan Mishra
in Delhi set up
drishtee.com, a franchise
of village kiosks selling goods such as eyeglasses, books and agricultural
products and services such as computer training and health advice.
"He's
growing at a rate of three new kiosks a day and our goal is to get to 10,000
kiosks in the next couple of years," Novogratz
said.
She
said such loans were not intended to supplant traditional aid institutions,
especially in post-conflict situations or after disasters.
In
another project in India,
Novogratz said a company was delivering cheap water
to 160,000 people in 61 villages.
"When
we first entered that field, the whole conversation in India was 'Is
water a human right that should be given free to everyone or should you let the
market deliver it?' And the point was 700 million people had no access,"
she said.
Research
is now under way to see if the business model can be scaled up and made to work
for the public sector.
Measurable
results are the key for new philanthropists, she said. "We have over 200
individuals who give to Acumen. No one has ever said 'Is my name going on a
building?"'
Small
lenders are just as concerned with results, Shah said, noting that Kiva posts repayment histories online as well as journals
by the business owners on how their loan was used.
"What's
mind blowing for my Mom and her friends in Chicago is the fact that you're getting
repaid, because you don't expect it when you give," Shah said.
And,
he said, while the new philanthropy is closer to banking than charity,
"You still get that warm fuzzy (feeling) of knowing that you're helping."
