I went to a special lecture last week about microcredit and its powerful impact on the developing world. From wikipedia:
Microcredit is the extension of very small loans (microloans) to the unemployed, to poor entrepreneurs and to others living in poverty who are not considered bankable. These individuals lack collateral, steadyemployment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial services to the very poor.
Basically, the working poor apply for small loans, usually starting around $100, to buy capital and start making greater profits in their businesses. The loans are repaid with very low interest, and then the borrower can then take out a larger loan to grow their business even more.
The reason that the borrowers need a special microcredit bank is because traditional banks will not give them any loans because they lack the usual paperwork, such as deeds and titles, collateral, and even a credit history; Thus, the banks see the poor as a credit risk. But, according to World Vision, 96% of the loans in their Microenterprise Development Program are repaid on time.
Organizations like the Grameen Bank, Kiva, and World Vision are taking the chance to help people escape from poverty. I would encourage everyone to take a look at these organizations and consider donating as much as you feel comfortable with. Even $25 can change the life of farmer.
What does this have to do with the University Microcredit Network? Well, the UMN is an idea I’ve been considering for a few days since the lecture. Since microcredit is all about small sums of money (which is college kids have), why not tap into the vast resource of poor, but activist-minded, age group of college students? If every university in the United States collected enough money for one $100 loan… well, it would be a lot! Better yet, what if universities and colleges built this into their budgets? Just a miniscule $1000 could provide much need start-up money for several businesses. And it is a drop in the bucket for many schools!
The UMN would be the eyes, ears, and hands for organizations like Kiva and World Vision. The purpose: collect money and educate students. There are a lot of lives that could be changed with small donations from poor students.
Heck, if people really couldn’t donate, what about investing. Places like MicroPlace (owned by eBay) offer up to a 3% return on investments. Good way to make a few bucks. (But I like places like World Vision where the funds are returned to the pool – a revolving door fund, if you will.)
Teach a Man to Fish 