Lend to Clodenia and feed her pigs to feed her family
Normally at OurLocality we frown on the use of triple exclamation marks, capitalisation, emoticons and childish fonts. It just isn’t grown up and it looks SPAMMY.
But this isn’t some pyramid scheme, but a simple cost of marketing lesson. Kiva – one of my favourite lending platforms – has obviously calculated that the cost of getting a new lender on its platform is more than $25, so it is using people like me to invite new lenders to the scheme.
How? By offering $25 for them to lend to whomever they wish in the hope they will lend more, once hooked (small print you cannot get this back for yourself – nice thought, but you can re-lend it again and again). The odds of you getting your money back are decidedly higher than on Betfred or similar online purveyors of misery.
Earlier this year – or was it last year? – I got an email to participate in a short survey looking at the feasibility of a microfinance setup similar to Kiva, but operating in the UK. It seemed to me the had mileage. Some months later it looks like Julian Lewis has come up with his response LendLocal. Here is what Julian has to say about his new idea:
LendLocal is a new form of social investment. It gives you the chance to make a difference to the UK’s most disadvantaged communities.
How? By making loans to people and businesses the banks can’t be bothered with – not bad businesses or dodgy people, but those who miss out because of ‘postcode lending’.
Banks aren’t keen on lending in poorer areas, no matter how good a borrower’s prospects. They’d rather just go where their computers tell them (even if that means losing lots of money, as we’ve all seen).
I’ve just lent $25 to Oyungerel. This is loan number 198, so only 2 more and I will have lent $5000 to small businesses and groups in the developing world.
Here is Oyungerel’s spiel, though those veg look a bit too perfect to be organic (no ugly vegetables is always a tell-tale sign in developing countries)!
Mrs. Oyungerel is 36 years old and lives with her husband and 3 sons in a ger in the Darhan province of Mongolia. Her husband Monhbat helps his wife with their organic vegetable retail business at a local market. Her sons Ulsbold, age 7, goes to a local primary school and Torbold, age 4, and Irmuun, age 5, go to a local kindergarten. The borrower has been running her organic vegetable retail business since 2002. She has gained a lot of experience and the customers’ trust over the years. She is now requesting 5,000,000 MNT to purchase larger amounts of organic vegetables to sell at her rental counter. She is a hardworking, active and responsible woman.
After several years of lending on Kiva – the micro finance website that helps small businesses get finance in the developing world – I am just five loans away from reaching my notional $5000 lending target.
When someone offers you an incentive of say $25 to lend on Kiva, you might think there was a scam. Why would anyone give you money to lend out and then potentially take it back when it was repaid? I’ve not read the small print, so this may not be possible, but it is interesting to know how much organisations are prepared to pay to get an extra customer.
Savers and investors alike have been stuck for choice since interest rates have languished at 0.5 per cent for now almost 3 years. So what to do?
The problem for savers, unlike investors who can afford to lose their investment, is compounded as alternatives usually come with greater risks and not so transparent transaction costs. Accounts outstripping inflation may require savers to squirrel their money away for at least 3 years – though for most people this is just fine. Savers should avoid riskier assets and be wary of being misled by banks into buying inappropriate products. Most banks will make more than you out of the deal. Continue reading →
Here at Kivaclub we are interested in numbers behind the current financial market madness. Why e.g. is it that Japan is so much more indebted than Italy, but can borrow at just 1%? The Economist stated somewhere that Italy is basically not insolvent, so one argument is that markets are forcing political change, but undemocratically. See for yourself what happens if you increase the cost of country borrowing by running your own ‘what if scenarios’ using the Economist’s handy calculator below.
The documentary film ‘To Catch A Dollar: Muhammad Yunus Banks On America’ follows the opening of the first American branch of the Grameen Bank, offering collateral-free loans to some of the poorest but most determined women in Queens, New York. The creator of the Grameen Bank, and the concept of microloans, Muhammad Yunus visits the Queens branch in the midst of his whirlwind global travels as he tries to raise awareness and support for micro-finance and social business.