Microloans (or microcredit) are granted to those with aspirations of starting up a small or home based business (both in the U.S. and impoverished countries alike). Most of the time, these entrepreneurs are unable to obtain such funding through bank loans or investors due to lack of credit, regular employment, etc.
Microloans have been around since the 1970s, but have only in the last decade taken notice by major creditors as an investment opportunity. Even everyday citizens with money to loan can get in on the action at various websites.
Skeptics however, have unearthed aspects of microloans that can cause many to question the legitimacy of the issue at hand. For example, the nature of the loans are so minimal that it does nothing for the impoverished country as a whole and simply just helps out certain individuals (the entrepreneur themselves). Another problem is it has been found that sometimes the loans will simply go towards paying off another creditors debts or even personal expenses.
I believe however that people are generally well meaning. There will always be bad apples, but in general I have a positive viewpoint of any entrepreneur.
I also believe the first step towards helping an impoverished country isn’t just providing a handout, but rather funding entrepreneurs who can in turn create economic growth. Economic growth equals jobs which equals a rising standard of living. A tide of economic growth will lift all boats. A handout will provide for a day, economic funding to a well meaning entrepreneur can provide for a lifetime!
After much research and thought, I’ve decided to start a microloan program through REDROCK WEALTH MANAGEMENT. The channel I chose for it’s size and reputation is www.Kiva.org.
Through Kiva, I can select a borrower and make a direct loan. For my first recipient, I chose a male in the Phillippines who is part of a group of 5 borrowers looking to purchase materials and equipment to start a plumbing business – Manuel Nitura’s Group.
They’re looking to raise $1,250, and I chose (as my first microloan) to start with an amount of $25. The repayment term is 8 months, the schedule is monthly and there is no default protection (some loans do offer default protection).
It will be interesting to see this work in real time. Ideally I’ll fund many more loans. After being repayed I plan on adding to the amount and continue to find other borrowers.
It’s a neat project, and the fact is I’m much more about helping someone – or a group of people – in this manner than I am giving the homeless man at the gas station beer money so he’ll leave me alone.
If you haven’t heard of microloans – it’s worth looking into. I’ll blog updates as this initial loan progresses!
