MicroFinancing - Be a Banker Today!

As most of you know, Mohammad Yunas won the Nobel Prize in 2006 for his innovative work in Microfinancing. Microfinancing is the process of loaning impoverished people small amounts of money to help them get out of debt or to help them start small businesses in underdeveloped areas. Dr. Yunas started this trend by loaning a whopping $27 to 42 people in a small village in Bangladesh to help them get out of debt from loan sharks who were treating them harshly for lack of payment. Breaking some of the most basic finance prinicples such as using credit ratings and collateral as the basis of loans, Dr. Yunas loaned them the money on good faith, not requiring any written contracts.

Today, Dr. Yunas has carried out his microfinancing on a much larger scale, through the opening of his own bank. Grameen Bank was opened in 1983 with the mission of extending small loans to entrepreneurs in extremely impoverished areas. While most people balked at the notion of a "social bank", it has proven itself in many dimensions.

As of 2005, its branches covered 59,912 villages, had 5.58 million members (96% women), and made a profit of $15 million, all while keeping its humble roots of helping the poor, not requiring credit scores, collateral, or written contracts. In addition, 64% of its members who have been members for five years or more have been risen above the poverty line.

Critics of MicroFinancing claim that it still doesn't help alleviate the major structural issues in most countries, such as road systems, a constant stream of electricity, running water, etc. In addition, MicroFinancing isn't enough to help get the necessary capital or machinery for industrialization. However, MicroFinancing does start people in the right direction by helping them survive by themselves. If there are enough small business owners and economic growth, there could be a snowball effect to get larger capital investments through previous profit streams.

Are you starting to believe that you can donate to charity wihout losing any money?


If so, here's your chance. eBay has its own MicroFinancing Division, MicroPlace, allowing users ("investors") to provide MicroFinancing loans of $50 or more to those entrepreneurs who don't qualify for regular loans. Investors will be able to charge an interest rate on the loan, usually ranging from 1% to 4%. While there is no guarantee of loan or interest repayment, Grameen bank's impressive 24 year record does give us hope. If this is true, then we have a brand new way of donating money to help those in need. After all, if $50 can help a family start a small business to help themselves live above the poverty line, while you can receive between 1%-4% on your loan, then why wouldn't you make a loan earning almost the same interest rates you can get in a checking account. If the loan defaults, then you've only lost a small amount of money. If it doesn't default, then you've been charitable without losing too much money.

MicroPlace was started by Tracey Turner and was bought out by eBay for a small, undisclosed amount in 2006. Her hope is to expand the MicroFinancing Industry from its current base of 100 million people to 1 billion people, with the help of the middle class from affluent nations (The U.S, EU, etc.).

Check out MicroPlace here: http://microplace.org/