microloans

A little microlending goes a long way

This was originally posted at CBSNews.com.

If someone loaned you $100, maybe it wouldn't change your life. But in many countries, it could be the difference between prosperity and poverty.

Tiny loans like these are called microfinancing. And last year, some $36 billion of them went to more than 99 million borrowers, as CBS News technology correspondent Daniel Sieberg reports.

With a new apartment in Harlem, 29-year-old urban planner Justin Moore doesn't have a lot to invest. But through a YouTube video, Justin learned how he could help the poor--and his bank account.

The video was from … Read more

Microlending site now pays 5 percent

I've long been a fan of microfinance or microlending where a small loan can make a big difference. To date, I've made several small investments via both Microplace.com and Kiva.org. And, in addition to doing good, I'm doing well. Kiva doesn't pay interest but it does make it easy to give gift certificates. Microplace, in the past, paid up to 3 percent interest, but Tuesday it announced a fund that's paying 5 percent.

Have you checked bank and CD rates lately? Five percent is great compared to the rates paid by most banks … Read more

At microloan sites, the new college try

With banks scrutinizing loan applicants with renewed fervor, students who need money to cover college tuition could start looking to friends, family, and social networking for cash.

Two start-ups are banking on the premise, with Web sites that help college students secure small loans for school from relatives, close friends, and their extended social networks. Their timing couldn't be better, given that banks and other private lenders are pulling up stakes on risky loans (e.g., those granted without a proven credit history) and students need to bridge the gap between a $40,000 tuition bill and a $20,000 government loan.

One such start-up, Redwood City, Calif.-based GreenNote, will officially launch its service Tuesday to help students solicit as little as $100 from friends and family at an interest rate that's on par with subsidized government loans. For a percentage fee, the site legally formalizes what would otherwise be a transaction sealed with a handshake or nod. Its rival, Fynanz, launched in March.

"They're essentially playing the role that banks had in the past," said Forrester Principal Analyst Brad Strothkamp. "Banks have tightened up lending standards, so if you're looking for a small loan, and you don't have a credit history, this may be the only option."… Read more

Microformats (II): The limitations of microloans

In an article in this week's New Yorker, James Surowiecki ("The Wisdom of Crowds") scrutinizes the effectiveness of microloans in bolstering the economies of developing countries. He posits that the hype around micro-finance neglects the small-to-medium sized enterprises (SMEs), the "missing middle" that is vital for a stable economy: "This isn't because microloans don't work; it's because of how they work," so Surowiecki.

The focus on the micropreneur, he argues, is "understandably appealing, but thinking that everyone is, and should be, an entrepreneur leads us to underrate the virtues … Read more