Joined: Feb 2009 Gender: Male Posts: 34,559 Location: Paris, France
Microcredits to help the world « Thread Started on Feb 4, 2010, 2:46pm »
I finally took a leap of faith today and signed up at www.babyloan.org to help finance some microcredits in the developing world. The Babyloan site has a catalogue of specific projects that you can help to finance, with the name and photo of the person needing the funds and a description of the project, such as “buy chickens and feed” or “purchase fabric to make clothes.” The average cost of the projects is 288€, and the minimum loan that you can make is 20€. The loans are made when a project has enough lenders to cover the amount.
The projects are selected rigorously by the local microcredit institutes who examine all of the requests and provide technical support to the small entrepreneurs. And – what is important to any lender – in case of default, the local microcredit institute reimburses the loan instead. However, the default rate is only 1.5%, compared to about 6% in a country like France.
It is important to know that you do not earn any interest from these loans, but they are repaid in full as per the schedules indicated in the profiles (often over 12 months). The money returns to your account on the site, and you can use it to finance new projects – or you can withdraw it. Babyloan has only existed since the end of 2008, but only 2% of the lenders have pulled out along the way.
On the other hand, the borrowers have to pay between 20% and 40% interest, but that is only because of the high inflation rate in these countries. If they borrowed the money locally, the interest would be up to 300%.
So anyway, I chose two projects in Vietnam – one to buy chickens and one to buy pigs. The financing is not complete yet, but I’m pretty sure that these things fill up fast and get replaced by a new list of projects. I put 50€ into each project, plus 1€ administrative fee (“which will never be used for advertising or mail campaigns of any sort”).
If this turns out not to be a bad idea, I was thinking that perhaps some of us could get together on a common project and sponsor some people with the Anyport seal of approval. It would please me to think that we could do some good with this site other than just warming the cockles of each other’s hearts (not that it is a bad thing). And it would be a nice way to mark the beginning of our second year by doing something really useful. There is absolutely no risk, but nobody is going to get rich either.
Naturally, there are other microcredit sites that work on the same principle, so if anybody has a better idea, why not?
Joined: Feb 2009 Gender: Female Posts: 4,441 Location: England
Re: Microcredits to help the world « Reply #1 on Feb 4, 2010, 4:07pm »
I will join you in this venture. not sure for how much though because I'm already supporting one family of 5 in Nepal plus sending another boy to school!
Joined: Feb 2009 Gender: Female Posts: 25,338 Location: Mexico
Re: Microcredits to help the world « Reply #2 on Feb 4, 2010, 4:24pm »
This is most interesting, Kerouac. As for the interest rates -- as you say, they have to be seen in perspective.
I know that interest rates in Mexico are outrageous by US standards, so did a little googling after reading your OP. This article is from Dec. '07, but gives a good idea overall. I remember when Banco Azteca was inaugurated, with President Fox, may his name live in infamy, all over the tv touting it to consumers.
From what I saw with the little bit of researching I did online, it is most important to find out what the real lending practices are of a microlender, as you did with Babyloan.
I will join you in this venture. not sure for how much though because I'm already supporting one family of 5 in Nepal plus sending another boy to school!
I saw that plenty of people were just fine contributing the minimum of 20€, but that is plenty when there are enough lenders.
And don't forget that you are not spending or giving the money -- you are lending it and will get it back.
The official interest rate for tax exempt savings accounts in France right now is down to 1.75%, so keeping money there or lending it at 0% is not a tremendous difference for a small amount...
What finally convinced me was the guest editor of my daily newspaper today, Muhammad Yunus, from Bangladesh, who was awarded the Nobel Peace Prize in 2006. He is the inventor of microcredit.
Joined: Feb 2009 Gender: Male Posts: 34,559 Location: Paris, France
Re: Microcredits to help the world « Reply #11 on Feb 5, 2010, 9:56am »
Great, the more places the better! The main thing is just to convince people that it is usually better to do this sort of thing than to just give to charity. I have been particularly annoyed in recent years by all of the mailings that I receive from the Red Cross, Doctors without Borders, Amnesty International, etc., containing "free" Christmas cards, address labels, wrapping paper, keyrings, pencils, notepads and god knows what all to try to "shame" (?) me into giving them money to cover the expenses of all that crap I didn't ask for. And those are some of the more reputable, better managed charities! What incredible waste!
Joined: Feb 2009 Gender: Female Posts: 3,997 Location: South-West France
Re: Microcredits to help the world « Reply #15 on Feb 5, 2010, 12:50pm »
Oh, I give a small amount every month to Doctors without Borders too.
Kiva is based in the States and if you go to their website http://www.kiva.org/about/how, you can see which loans are available. You lend $25 at a time. You can also choose where in the world you want to lend, to a man or woman or a group.
In fact, it has changed a bit in the past year. Before, you would choose who to lend to. Now, it seems that the loans are disbursed beforehand and when you choose to lend, it goes to "backfilling" the loan. There was also a lot of emotion when people in the States started applying for loans -- usually quite big ones of several thousand $ to start service businesses. A lot of people, including me, thought that thousands going to some guy in LA to start a party-holding business deprived small lenders -- like the majority -- of funds. Apparently this is not the case, and these people would not have access to regular credit. Anyway, each time something like this happens, a little more transparency is available.
I personally am on my 5th loan. I have always been paid back, although as Kerouac says, there is no interest on it. But $25 is not very much and with other people's loans, the sum can be important for a group of women in Bolivia or elsewhere. I tend to lend to women because I see that they seem to work really hard in poor countries, and mostly to S America because of personal preferences.
Joined: Feb 2009 Gender: Male Posts: 34,559 Location: Paris, France
Re: Microcredits to help the world « Reply #16 on Feb 5, 2010, 6:02pm »
That's interesting, but do you choose the precise person that you are funding, or do they do the choosing? (I'm not saying that it is not the right way to do it, because after all, I doubt that many of us here are qualified to decide who is more deserving in these cases.)
I received a message that one of the projects that I selected is now already fully funded, so I should be receiving more information soon.
I asked my bestfriend to contribute 20 Euros today and (blow me down) she prevaricated about this small amount.
I understand that (even though I find it unfortunate) because people are suspicious of everything these days. "What are the motives? I'm sure they're ripping me off. Human nature ensures that nothing good will come of this. Is Kerouac getting a commission?"
I just deleted a rant about this, and I would just like to recommend to everyone to do whatever they think is appropriate with their lives.
And I certainly hope that other people will make their own suggestions if they have a better idea, even if they prefer to buy a Playstation or a bottle of whisky.
Joined: Feb 2009 Gender: Female Posts: 3,997 Location: South-West France
Re: Microcredits to help the world « Reply #22 on Feb 6, 2010, 7:41am »
Kerouac, on Kiva I choose who I want to fund. As I said, I choose women and mostly in South or Central America although I also lent to a lady in Bosnia.
I know what you mean about people being hesitant -- probably because of all the fund-raising scandals for cancer research, etc. When I first signed up for Kiva, I told friends about it and one of the questions that came up was, "how do you know your money is being used the way you think?". And nobody I sent the information to joined up.
Joined: Feb 2009 Gender: Male Posts: 34,559 Location: Paris, France
Re: Microcredits to help the world « Reply #23 on Feb 6, 2010, 7:13pm »
I just added a lady from Ecuador to my list today, because there was just a small amount missing to start her clothing boutique. And I already have the repayment schedule for the first loan to Vietnam.
Joined: Feb 2009 Gender: Male Posts: 34,559 Location: Paris, France
Re: Microcredits to help the world « Reply #25 on Feb 7, 2010, 4:26pm »
Well, my three choices are all now fully funded, with precise dates for the repayment of the loans, so I am quite convinced that this thing really works, especially after the additional information provided by bjd.
The only problem with this "Babyloan" thing to which I was directed is that it suddenly got a lot of press coverage due to Muhammad Yunus who is visiting France right now, so lots of the listed requests are getting funded really fast (Yay!) for the next few days until the excitement dies down.
Nevertheless, I think it would be great if we could find someone on that site, or any other comparable site, to which we could all make a loan so that we could be the people sponsoring and following the progress of the person. I think it would give real meaning to the concept of "Any Port in a Storm" -- providing a safe port to help motivated people in need.
I do know that there are plenty of people with vinegar in their circulatory systems instead of blood, and who immediately question or reject the validity of such projects, but we really do not need many participants to fund some of these projects -- one of the ones that I funded only has three lenders and the one with the most lenders has seven.
If somebody else can find a project now, I'm pretty sure that I will be the first person to join in with my support.
Joined: Feb 2009 Gender: Female Posts: 3,997 Location: South-West France
Re: Microcredits to help the world « Reply #26 on Feb 7, 2010, 5:23pm »
Your idea is nice, Kerouac, but if you have a look at most of the loan requests, they are for a minimum of several hundred dollars, at least on Kiva. You need quite a few $25 loans to complete that. But that of course does not prevent groups from lending -- if you look on any Kiva loan demand, they show who is lending to that specific person or group. I often see group lenders rather than just individuals.
Joined: Feb 2009 Gender: Female Posts: 3,997 Location: South-West France
Re: Microcredits to help the world « Reply #28 on Apr 2, 2010, 5:34pm »
I just had a mail in my inbox telling me that I had $27 in my Kiva fund, so made a new loan. And right afterwards I went to the BBC home page and found an article about Kiva. http://news.bbc.co.uk/2/hi/business/8594560.stm
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