Women Lending to Women: Microloans
I’ve been researching ways to take the success I am generating for my company and pay it forward, especially for other women. After researching options, I’m convinced that microlending is a wonderful opportunity to participate as a partner in women’s business development activities such as farming, retail and services in the U.S. and around the world. This kind of lending allows all of us to band together to support other women and also to reap the paybacks to reinvest over and over to impact an ever-greater circle of women entrepreneurs.
Here are the most promising opportunities I’ve found for microlending:
1. Kiva: Kiva has an impressive 96.9% loan repayment rate. That means that when I invest in a micro-loan, I can expect to be repaid and can reinvest the funds in other entrepreneurs. Kiva has many different categories of loans, including those focused on women, eco-friendly, agriculture, refugees, U.S.-based, artists, and more, so it’s easy to choose categories and borrowers that resonate with you. With as little as $25, I can make a quick impact. Kiva does not charge fees or interest-field partners can collect reasonable interest to offset costs, but Kiva is careful not to work with field partners who charge inappropriately high rates. You can also choose to do a direct loan, in which case there is no interest charged to the borrower at all.
2. Prosper: Prosper is a personal loan platform where you can lend to vetted borrowers whose requirements and FICO score are listed on the site. The loans earn a return, typically of about 6.7%, so if you are looking to balance your portfolio with earning opportunities so you can grow the amount you can reinvest, Prosper might be a good option. However, because Prosper is “for profit,” the borrowers are essentially paying them for the opportunity to get funding. This isn’t necessarily a bad thing, as borrowers need the opportunity to get loans, and the interest return doesn’t seem out of line. You can also invest as little as $25, and diversify your loan portfolio over several borrowers.
3. Lending Club: Lending Club also allows investments of as little as $25, providing flexibility for lenders. Some interesting options are also available with IRAs and 401(k) rollovers-it appears you can open a lending account with your rollover, and allow the interest payments to add to your retirement funds. This is a good potential plan for people looking to diversity their retirement investments, but doesn’t align with my personal goals for lending. But I mention it in case it could resonate with others.
Microloans are not a magic bullet to eradicate poverty. Women don’t always have access to the education, training, support and control of their own money to make a successful go of a business venture. There is a great analysis of the potential impacts and downfalls of microlending in Barron’s. I am motivated to allocate resources where they will be most effective, but that said, I don’t need to be 100% certain that a loan alone will lift a woman out of poverty. It is an extremely complex issue, and I feel like choosing lending opportunities on Kiva, especially direct lending, allows me to ensure fees are not exorbitant and that other women have the chance to go for their dreams and make their lives better while reinvesting their earnings in their own communities.
Image credit: kiva.org