I have something incredibly exciting to share with you all, and it’s something I’ve been wanting to talk about for a while; I want to talk about micro credit and eliminating extreme poverty!
This isn’t directly under my blog’s theme of self improvement, but I believe we are to improve ourselves so we can better useful to help others. So here is how we can be able to create positive change in other people’s lives!
If you don’t know what micro credit is, it is basically super small loans given to people in extreme poverty (World Bank defines “Extreme Poverty” as one living on less than $1.25 a day) so that they can purchase supplies to either raise crops for food or start a micro business to generate an income. Dr. Muhammad Yunus is the one who is credited with creating this concept back in the late 70s and won a Nobel for his work through his company, Grameen Bank in helping millions of people cross the poverty line.
What is crazy about this whole concept is that Grameen Bank isn’t a non-profit, nor is it a government-funded organization; it is a business that is self-sustaining and runs a profit… by helping people!
The concept is simple: They loan out $100-$1000 to an extremely poor person (most likely a woman) at a low-interest rate, and they then buy a few chicks and raise them and can then provide egg protein in their diet and sell the excess in the local market for a profit. They then pay back their loan and take out a bigger loan and either buy more chicks or can buy a goat and then be selling milk and eggs. This continues to expand as they gain more and more business and soon the family is making enough money for the children to go to school and get an education, they will have enough food to not be malnourished, and to provide proper shelter.
Where we come into the picture.
That concept is great and all, but what about us? What can we do to help?
Last month, I came across an organization called Kiva and they did something incredible: They gave us the keys into the micro credit community! No longer are we forced to just admire Dr. Yunus from afar, but Kiva allows us to crowd-fund loans so that all of us can provide these loans to people who are trying to pull themselves out of desperation.
Kiva works with local micro credit firms and posts the loan applicants on their site, and then ask for people to back the loan up. The loan usually is anywhere from 3-12 months and then the borrower will pay back her loan to us after she’s used it to help her move forward.
The point of it all:
I know I’m throwing out a lot of financial terms, so let me rephrase all of this and why this is so significant.
Why is charity so hard to raise money? because it is hard to see what real good $25 is going to do. You can donate that to a wonderful organization like World Vision and it’ll probably feed a family in Kenya for like a month or something. But once that month is over, World vision needs to come back to you and ask for another $25. Not that is wrong, it just is hard to see any impact from a distance. Where Kiva changes things is if you give $25 to that same family in Kenya, they’ll probably buy supplies that will help them economically so they can survive and pay back that loan… Did you catch it? You get the money back!!
Let’s say theoretically you loaned $25 to someone on a 4 month loan. At the end of the three months you get your money back and then you turn around and help another person out with another 4 month loan, and once you get that money back you can do that yet again (WITH THE SAME $25) to a third person. At the end of the year, you got your $25 back in your pocket, but that $25 was just used to help three other people in that year. It essentially didn’t cost you anything, but you helped people!
Here’s a way to look at from a economic perspective: based on that theoretical model of three 4-month loans of $25, your investment in economic terms grew to be worth $100 since each borrower would have spent that $25 you gave them and then got back at least $25 to give back to you. Or in other words, your $25 bought $75 worth of products and then you got your $25 back as well.
While you did not personally grow your net worth by $75 dollars, the investment itself did grow and you basically just gave all the growth of your investment to other people.
I know this can still be kind of confusing, but what this means is that no matter how small of an investment we make in poor people, as long as it remains staying invested in them, it will continue to grow exponentially to produce incredible change in people’s lives.
I’ve already made 5 loans through Kiva and I just got my first payment of $2.67 back from a lady who needed money to refurbish her food cart that she sells tacos on the streets of Mexico. I also tested out another organization called Zidisha where you have direct contact with the borrower and I helped a lady in Kenya build inventory for her upstart shoe store. She already told me that she’s expanding to coats because her business is exploding (I guess it’s not super hot currently over there?)
You can check out Kiva through my personal page here:
“Banker to the Poor” – Dr. Muhammad Yunus
“168 Hours” Laura Vanderkam
Life verse: “But a generous man devises generous things and by his generosity he will stand.” -Isaiah 32:8
Life Mission Statement: To be intentionally focused on providing opportunity and adding value to others.