Microfinance

[Pyraxis]

Anyone know anything about it?

The idea is that you loan small amounts of money via PayPal to entrepreneurs in developing countries, through sites like Kiva and Microplace. $25 range, though some people spread amounts like a couple thousand dollars between a lot of different entrepreneurs. You can do it either as a charity or with a return on investment. On Kiva the amount you invested is repaid over time and interest goes towards keeping the organization running. On Microplace you can get 2-3% return on investment, which is more than some USA banks offer for their CD's.

I think it's an interesting idea. Tap the internet to minimize the overhead costs that bloat big-name charities. Remove some of the eternal pandering and politically-correct report writing to corporate donors, and let entrepreneurs make blog posts directly to the people investing on the other end. I've spent the evening reading various reviews to try and figure out how much scamming is involved. Curious for anyone else's opinion.

[Peter]

I put £100 into Zopa in April of last year, and have been getting a return of about 9% on it with no defaults and one late payment so far.  It's split into £10 lumps that are each loaned out to a different person, so if someone wants to borrow £1000, they'll borrow £10 from 100 different lenders, which spreads the risk amongst the lenders.  Zopa's not a charity thing for the third world; the borrowers are all credit-checked first-worlders.

[McGiver]

probably similar to the madoff scam.

all he was doing was making people richer in the short term and spreading the money around, then asking for more.

[Pyraxis]

Interesting. *googles Madoff*

Do you think that's what they're all doing? I've found a half-dozen sites with a similar service.

[McGiver]

Interesting. *googles Madoff*

Do you think that's what they're all doing? I've found a half-dozen sites with a similar service.

i wasn't sure of the sppelling of madoff. 

[Peter]

probably similar to the madoff scam.

all he was doing was making people richer in the short term and spreading the money around, then asking for more.

Also known as a Ponzi scheme, after Charles Ponzi.  It could be a Ponzi scheme, and if I was going to invest a significant sum, I'd do a bit of digging to see if there was anything suspicious going on, but I've not noticed anything so far that would make me think it was anything other than an honest business ('honest' being relative to the usual standards of businesses).

[McGiver]

probably similar to the madoff scam.

all he was doing was making people richer in the short term and spreading the money around, then asking for more.

Also known as a Ponzi scheme, after Charles Ponzi.  It could be a Ponzi scheme, and if I was going to invest a significant sum, I'd do a bit of digging to see if there was anything suspicious going on, but I've not noticed anything so far that would make me think it was anything other than an honest business ('honest' being relative to the usual standards of businesses).

so true.  i tend to be leary of business.  especially mega businesses.

[Pyraxis]

My friend in Africa finally got back to me...

I don’t know lots of nitty-gritty details, but I do know that people who are stuck in a poverty trap sometimes need an opportunity that they can use to pull themselves up, just a bit.  A low (or no)-interest loan in the amounts that are appropriate for their own small enterprise seems to be one of the best opportunities out there for the poor.  Here in Ghana, interest rates at banks are 30%+, and never appropriately marketed to the poor.  And hey, when done right, it’s been proven that the poor are bankable – they can organize into groups, repay loans, start revolving funds, and basically just ROCK OUT on micro-finance.  When it works.

When it works being the key, I guess. Probably some microfinance organizations are better than others and you have to investigate them one at a time to know for sure.