Microlending is a popular means of borrowing money because small loans are capable of making large differences for many people. Not only is microlending popular for borrowers, but it also benefits those individuals who are willing to give out loans as well. Some microlending websites, like Microplace.com offer interest in the loans that you give out. While some other microlending websites, like Kiva.org do not offer interest, they do make it easy for you to give out gift certificates. Microplace has paid as much as 3 percent in interest in the past, but as of Tuesday, they have announced that they have a fund that is now paying out 5 percent.
If you have checked out CD and bank account rates as of late, you probably know that in comparison what other lending institutions are offering, 5 percent is nothing to sneeze at.
The money lent out through these microlending websites is offered to poor people, most who are women, who are located all over the world. The portfolio that is now paying 5 percent is going through an organization known as Micro Credit Enterprises. This organization makes loans for working poor in many countries, including Armenia, Bolivia, Azerbaijan, Cambodia, Ecuador, Indonesia, Honduras, Mozambique and numerous other countries. In countries such as those mentioned above, a little bit of money can easily go a long way.
Microlending, like many other types of uninsured investments, is subject to numerous risks. However, based on past performance, the odds are still high that you will see your money again. Historically to date, 97 percent of all low income borrowers have completely paid back their microlending loans.
According to the Microplace General Manager, who is Ashwini Narayanan, Micro Credit Enterprises has a high return rate because there is a system in place for guarantees. The organization has wealthy individuals guarantee their investment, so even if the borrower defaults on the micro loan, the investor still is repaid. There are still some other risks to consider, however.
The people who manage in micro loans in other countries are often referred to as bankers on bicycles. They work with organizations on the ground in developing countries. They actually get on bicycles and ride out to the villages to meet with the borrowers directly every week. The interest that is paid by microfinance borrowers is around 31 percent on average. Microplace is a subsidiary of eBay, and is a for profit broker. They allow you to invest through your checking account or paypal account, and no extra fees need to be paid. When you sign up, you are showed a sample borrower scenario, but when you make a loan it is actually to an organization rather than an individual, and the organization distributes the fund to a number of different borrowers as a result.
Another microlending option is Kiva.org, which is a non profit organization. One of the biggest apparent differences between these two organizations is that Kiva does not pay any interest. Kiva is more of a peer to peer microlending service in that you are lending to one specific individual rather than to an organization.
Related Posts -
Lending Club Liquidity and Capital Resources I read through the Lending Club S1 finally... I found a few parts of the S1 interesting... Over the next few day I will lighlight a few of my favorite sections. I am not a lawyer nor do I claim to fully understand everything that I am reading.  I am simply copying...... - November Prosper Marketplace Survey Released Prosper released the November marketplace survey and coresponding comentary from Chris Larsen... I particularly like the insight in the last paragraph... Of great interest is the anecdotal evidence of prime and near prime borrowers turning to Prosper for loans that would have historically been steered toward mortgage, auto, and home......
- Forbes (P2P Lending) and CNBC (LendingClub) This week has been a great week for p2p lending news. Forbes did an article (Banking 2.0: New Capital Connections For Entrepreneurs) and Lending Club CEO Renaud Laplanche was on Power Lunch at CNBC. I found this of interest from the Forbes article (small business loans from your local bank......
- P2P Lending Article in BusinessWeek Will a Stranger Lend You $25,000? I can't get enough p2p lending articles, but this one is fairly standard... I am not sure what I expect or how the mainstream media could cover this any differently... The average joe needs to find out about and understand p2p lending if the paradigm......
- Get Your Lending Club Loan Documentation Early For a Few Days of Free Money I was reading about LendingClub loans (I forget where, sorry) and I came across the following statement from Lending Club made to a lender on LC. Our loans expire two weeks after posting. This expiration date is the borrowers actual payment date, however some loans will fund early. Here is......
Related Websites - Reader Question: What Damages Your Credit Score The Most? Reader Phillip writes: "In this economy, I am concerned about getting a loan for a car and a house because of tighter lending restrictions being put out by lenders. If I am trying to build up my credit score, what kinds of things should I be doing to avoid damaging......
-
How to Minimize Your Taxes and Pay for Your Kid’s College The goal of tax planning is to arrange your financial affairs so as to minimize your taxes. There are three basic ways to reduce your taxes, and each basic method might have several variations. You can reduce your income, increase your deductions, and take advantage of tax credits.Putting your...... -
How Much Does Your Money Matter to You? If you were to ask anyone on the street that question, odds are the majority would answer, “very much.” However, these same people will easily turn around and drop a small fortune on something without a second thought as to how it would return to them. Before you get started...... - The Peer to Peer Lending Guide (P2P Lending) What is Peer to Peer Lending? Peer to peer lending (P2P Lending) simply refers to the process of individuals loaning each other money directly rather than through a third party institution such as a bank. In the context of the internet, peer to peer lending generally refers to the business......
- Savings Goals In The New Year And Beyond Making just one goal with regards to your savings can make a real difference. Here are savings goals which can help you have a financially secure and less financially stressful 2010, so know your situation and choose one which best suits you. Why You Need a Savings Goal Goals are......
Categories:
In the News, Kiva, MicroPlace, P2P Lending
Tags:
1 comment so far ↓
We need more of these organizations helping people all over the world – including the United States – change their staus in life. While these groups provide knowledge and financing – their success relys on the hard work and deidaction of both lenders/donators and of course the borrower.
Leave a Comment