Monday, August 25, 2008

Microlending: Charity, Investment, or Entertainment?

A lot of frugality and personal finance bloggers write about the importance of charitable donations. I have to admit that historically I haven't been much of a giver money-wise. I'm much more likely to donate my time and efforts than to give money. I work at a local food bank about six times per year, bagging food for the clientele. And this year I've pitched in as a volunteer at the local library and for a local agricultural organization. But yesterday I tried something different.

I read Flexo's post on the Kiva credit card. Kiva is a non-profit middle-man organization for microlending. Microlending is pretty much what it sounds like - loans of very small amounts to entrepreneurs who wouldn't normally be eligible for conventional loans from a bank. Kiva offers the opportunity to browse real-live loan candidates from developing countries all over the world. You can see pictures, read short descriptions of the people who are seeking loans, and choose to "invest" as little as $25 to help an individual half way across the world improve their life and those of their family as well. You can even search by what sort of business the person is pursuing. The great part is that 100% of your donation goes directly to fund the loan. Kiva doesn't take a cent off the top.

Now it so happens that last week I sold a fancy cookbook from a fancy restaurant on eBay. I'd gotten the cookbook as a gift and had never cooked a single thing from it. Clearly, it was a good candidate for clutter reduction. I made almost exactly $25 on the auction, and I had that money sitting in my Paypal account. I had planned to snowflake that money towards an extra principle payment on our mortgage next month. But then I got to browsing the Kiva website, and I started thinking about what someone else could do with that $25. Soon enough, I'd chosen a female dairy farmer in Central Asia as my loan recipient. She wants a loan to buy another milking cow. Her total requested loan amount of $875 is not yet fully funded, and there are only a few days left for lenders to fund it.

Some bloggers have actually examined microlending as a viable investment option. As a lender, I may actually earn some interest from this loan if it is repaid. My view is a little different. True, I may get my money back. But in my mind, I just donated that $25, or I spent it on edutainment. Giving money to someone in a part of Central Asia I'd never heard of spurred me to fire up Google Earth and look at the satellite images, and then see what Wikipedia had to say about the place. I know I'll look forward to hearing the updates about this woman's business over the next year or so. If the loan is repaid, I intend to re-loan the original amount plus any interest it earns through Kiva.

Bloggers often talk about the feelings of satisfaction, benevolence, and wealth that come from giving to charity. I don't know why, but I resist these warm fuzzies. I don't like to feel benevolent or noble, or view my actions as anything but self-serving. Satisfied perhaps. I guess I just need to maintain some image of myself as a hardass. I believe I'll get my money's worth by watching how this tiny $25 drama unfolds. If the "investment" pays off, in time I'll get to watch larger dramas. And it'll all be funded by selling a book I never wanted in the first place.


BonzoGal said...

Hey- good job with this post- she's fully funded now! What a cool idea to promote. Thanks!

Kate said...

Oh, I don't think my post made any difference with her funding. But I'm pleased she'll get her full loan. And I'm glad to help spread the word to other interested people.

Anonymous said...

I found your blog a few days ago, and am working my way through the archives, which is why I am commenting on an old post. You are a woman after my heart in so many ways, and I would like to thank you for drawing my attention to Kiva, which I have just joined.. I had heard of microloan schemes before, but not in such a personal way such that I can choose who to lend to.
London, UK

Kate said...

Margaret, I'm happy to help spread the word, and glad you found a way to help others that feels right to you. Thanks for stopping by.