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Don recently pointed me to an NPR piece about a new children’s book that explores the concepts of microlending and entrepreneurship.
Katie Smith Milway’s One Hen: How One Small Loan Made a Big Difference tells the story of Kojo, a young boy from Ghana in West Africa. He borrows a little money to buy a single hen. With the eggs she lays, he buys more hens. And more hens. As his farm grows, Kojo is able to spread his wealth throughout the community, providing loans to encourage other people to succeed.
One Hen is based on the true story of Kwabena Darko, who worked on a chicken farm in Ghana when he was a boy. As in the book, Darko’s big break came when a banker took a chance and gave him a loan. According to the NPR story:
650 people now work at his farm and he has granted small loans to entrepreneurs such as bakers, dressmakers and traders in his own community. His repayment rate? 98 percent.
I love the idea of microlending and the way it combines community-based and community-centered finance with good old-fashioned entrepreneurism and free enterprise. I was raised in a family of entrepreneurs, and have seen first-hand how a small business can open doors to financial prosperity, not just for the owner, but for those the employees, as well.
[NPR: Child's 'One Hen' Lays Microlending Success]
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March 9th, 2008 at 4:17 pm
A friend gave me a gift certificate to Kiva.org for my wedding. I was really excited and funded a couple loans for impoverished women in Pakistan and India. I think microlending is awesome, too.
March 9th, 2008 at 5:02 pm
Opportunity International is also a great site to contribute to for micro-lending!
I wish there were easy places to do this for those in our country too! (not instead, just in addition)
March 9th, 2008 at 5:02 pm
Cool post, JD! I agree that microfinance is awesome.
March 9th, 2008 at 5:06 pm
I also recommend http://www.kiva.org !
March 9th, 2008 at 5:38 pm
This sounds like a really good book. Reminds me of “The Richest Man in Babylon” which was the first personal finance book I read. It really simplified everything and made everything easy to understand while keeping it interesting.
March 9th, 2008 at 5:47 pm
Will microlending ever come to the developed world?
March 9th, 2008 at 6:13 pm
Prosper.com now has a business loan feature (for U.S. lending).
I wish Kiva would allow lenders to charge interest.
March 9th, 2008 at 7:03 pm
I’ve just made my second and third loans via Kiva. It’s a good feeling.
March 9th, 2008 at 7:55 pm
Awesome! I love social entrepreneurship! Kiva is a great site. I did a post along similar lines but on philanthropy at http://www.youngandfrugal.com .
-Daniel
March 9th, 2008 at 7:58 pm
Add one more to the kiva.org bandwagon.
I received a gift certificate for Christmas and it was my favorite gift - by far.
I would have never guessed that I’d be helping a craft maker in Peru.
March 9th, 2008 at 9:22 pm
Sounds like a good book. The artwork reminds me of books I read as a kid. Will have check it out sometime
March 9th, 2008 at 10:36 pm
I don’t know. It seems rather risky taking on all that Debt. He probably would have been better off cutting some from his food budget for a few years and…
March 10th, 2008 at 12:12 am
My first Kiva loan has just been repaid. I’m planning on loaning it out again shortly.
March 10th, 2008 at 3:20 am
Has anyone had experience with prosper.com ? Its another lending site, but you can lend ($50 minimum) or request loans. Seems interesting, but I haven’t tried it yet. Possibly an interesting investment along side Kiva (also have not tried).
March 10th, 2008 at 4:47 am
Yea! I love this post and the idea of a children’s book about microlending. I don’t have a lot of spare cash, but this is my chosen cause. I give to Women for Women International, and the cool thing about that particular program is that you get to find out who your “sister” is and exchange letters with her (WFW translates the letters). The other thing I like is that WFW gives loans to female victims of war, which helps them to rebuild their lives. The website is http://womenforwomen.org if anyone wants to check it out.
Microloans are such an intelligent way to fight poverty. I don’t believe that the majority of the world’s poor want to have food and such handed to them–they want a way to provide for themselves, and these programs give them the start.
March 10th, 2008 at 5:19 am
I always got the warm fuzzies about microlending until I read “The Dark Side of Microfinance” in Businessweek (http://images.businessweek.com/ss/07/12/1213_mexico/index_01.htm).
Many of these countries have NO protection for the borrowers in the event they cannot pay back the loan. Interest rates can be 500% or more per year and the folks who take them are usually uneduated and can’t afford the rate. Lenders will harass extended families, take the borrower’s livelihoods and all their possessions, and post pictures of them with the amount they owe up in public areas. Even “responsible” US companies like Wal-Mart engage these tactics in third-world countries, because it is a “standard practice” and “competitive” in that environment.
As a disclaimer, there may be nonprofits that operate more fairly. I don’t know much about the nonprofit side. But if you hear a US company say in an advertisement that they are “microlending” to help a poor woman start her palm oil business, look behind the veil.
Microlending can indeed be a blessing, but it would be nice if it were weighted a little more fairly toward the borrower.
March 10th, 2008 at 6:15 am
@Minimum Wage – Yes, microlending will come to the developed world. Muhammad Yunus has opened an office in NYC. They have lent out $145,000 with interest rates around 15%. The money will go for everything from taxi registrations to sewing machines. Women borrowers take priority.
@Jeffrey – Yes, I have tried Prosper. Most would argue that Prosper and Lending Club are not truly microlending. The model is different. Kiva does not pay interest but Prosper and Lending Club do. The borrowers at Prosper and Lending Club are U.S. citizens borrowing amounts from $500 to $25,000 for various reasons. Check out my website for more P2P lending info.
March 10th, 2008 at 6:45 am
Just goingto repeat what others have already said… kiva.org is amazing!
March 10th, 2008 at 7:10 am
Microlending happens here in the States too. The book Start Small, Finish Big by Fred DeLuca tells the story of several companies that started that way. Two of them are outfits you’ve probably heard of: Subway and Kinko’s. DeLuca was a cofounder of Subway.
Both of those empires started with a loan of less than $1,000.
The appendix of the book lists some resources for people seeking microloans to start businesses.
March 10th, 2008 at 9:42 am
@Tom & Minimum Wage, Yunus also had a version of Grameen going years ago in the American South. He describes the effort in his excellent book “Banker to the Poor.”
One interesting point is how he had to navigate cultural differences; many of Grameen’s rules in Bangladesh sound almost like religious or moral instruction, in a way that doesn’t necessarily translate worldwide.
And while microfinance can be controversial– with the huge interest– I think it’s a pretty good stopgap until traditional financial institutions learn how to serve a market they currently don’t even believe exists.
March 10th, 2008 at 7:22 pm
Im not sure why but this story sounds really familiar. I wasn’t born here in the States so I need to check with my mom to see if this story has any roots within my family.
Still its an awesome tale of “each one teaches/helps one”, I love it!
March 11th, 2008 at 6:36 am
@Minimum Wage – Yes, microlending will come to the developed world. Muhammad Yunus has opened an office in NYC. They have lent out $145,000 with interest rates around 15%. The money will go for everything from taxi registrations to sewing machines. Women borrowers take priority.
Ah, okay, I wasn’t aware of that. I wonder how long it will be before someone files a discrimination complaint.
March 11th, 2008 at 7:13 am
Minimum Wage - What do you think federal “minority” subcontracts are? Many of the companies that are given a leg up by the US government are women-owned. (’Minority’ is a term used loosely here. The full term is actually ’small and disadvantaged business’. Check the SBA.gov and the MBDA.gov for more info.)
I think you miss the point. The main reason why women have no political power in underdeveloped nations is because they have no economic power. The US still has not passed the ERA and women still earn less than men for the same work in many fields.
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General comments on microlending:
1) Kiva in the US has to operate as an actual bank, so take Plonkee’s UK experience with a grain of salt. American lenders cannot participate in the Kiva model the way other folks can.
2) Prosper is NOT microlending at all. Totally different model. It’s open-marketplace bidding on loan rates. (Disclosure: I am a Prosper lender.)
3) In the US, microlending is generally for amounts under $1000. In most Grameen-style microlending programs overseas, the borrowers are asking for loans for less than $200. (Grameen is Yunus’ organization.)
4) The ‘dark side’ of the harrassment of borrowers is part of the contract they sign up for. When you are in a group of borrowers, the other borrowers have to pay back your loan, therefore, they use the community’s social shaming power to get the loan repaid. Yes, it’s ugly, but that is the way these programs are often structured and because of it, they have a remarkably low default rate.
5) Skimming that Business Week article, the Mexican programs are not true ‘microfinance’ programs. They are extensions of commerical banks’ consumer credit. Most microfinance programs are grassroots and for people to start their own business, not buy consumer goods. To participate in a lot of programs you are using the borrowed funds for an entrepreneurial venture. (Read more about Grameen Bank if you want to know what I am repeating to you here.)
5) If you look into microlending in the US, you will find that there are a lot of targeted, small, local programs. You just have to look for them. In DC, there’s one that’s focused on recent immigrants that runs specifically from an Eithiopian immigrant-support organization. That’s how niche some of these programs are. They exist! They need help!
Ok. Just my two cents.
March 12th, 2008 at 2:02 pm
I didn’t see anyone mention Heifer International. A number of my family members and I have gotten in the habit of making Habitat donations as our holiday gifts to each other.
Habitat provides various forms of livestock to families in developing countries so they can do exactly what Kojo did in the book. See http://www.heifer.org
March 17th, 2008 at 5:32 pm
Danielle - Heifer is great but it’s not microlending. It’s a charity. The difference here is that the loan is repayed (usually without interest or at a low interest rate).