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View Diary: Microcredit: be a Venture Capitalist. (185 comments)

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  •  This post confuses my sensors (none)
    Half of it seems sincere, and half snark.

    With the low-to-no interest on the microloans, it's not something one should look at as a profit-making mechanism (with a weakening dollar, your return may even be negative).

    Jumping on the bandwagon: (-3.63, -3.03) - Does that make me part of the right wing here?

    by someone else on Thu Oct 27, 2005 at 06:14:47 AM PDT

    [ Parent ]

    •  Well, it's serious. (4.00)
      Kiva may or may not be the program to deliver it, but the potential is there for an actual for-profit investment vehicle, just as I explained it.

      It won't necessarily be the vehicle of choice for those seeking to maximize their profits, but it has real potential as a "micro" program on the investor side. I don't have huge chunks of cash lying around to invest in mainstream vehicles here in the U.S. But I could certainly consider participating on a micro scale in projects overseas.

      I don't need a huge profit. Savings accounts, CDs, money market funds, etc. aren't returning a whole hell of a lot as it is. And nobody in real need benefits from those investments anyway, as far as I know. So if there was a way to get even the same relatively low returns out of a program of microloans that I get now, I'd actually be excited about participating.

      But yeah, there'd have to be a profit in it to make me pay close attention and commit significant resources. I don't think that's inappropriate to say. I can't afford to give the money away, and if I'm going to put time and effort into parceling out what little I've got to invest, then I'd like it to be worth something as well as be somewhat socially responsible.

      Ultimately, I find that to be the biggest potential motivator for expanding participation. And it shouldn't be any secret as to why.

      But I'm absolutely serious about my interest in the way it leverages relative advantage for small investors. Why should that arbitrage value be left on the table for multinational corporations to take, and for God knows what purpose? Why not take some for yourself, and help someone else while you're at it? Do what you want with the profits, but there's no shame in there being any.

      •  right, and what's unique about Kiva (4.00)
        Is that it is truly person-to-person. The other programs that people have brought up in comments so far seem to only accept donations, or have loan programs for accredited investors only. (For those who don't know, for an individual to be an accredited investor means you have a net worth of $1M or more, or consistent income for several years of $200K or more.) With Kiva it's person-to-person and you can take your money back out. That's very cool.

        But ... I'm not sure that there is any sort of way to get even a modest personal profit out of something like this just yet. The reason Kiva doesn't provide interest is to avoid a lot of extra regulatory rigmarole. The instant it starts returning profits to investors, there's a LOT more paperwork involved.

        It does seem like it'd be possible for something like Kiva (or Kiva itself, after several years of growth beyond its current infancy) to be created that would allow for some sort of profit-taking. There are a lot of logistical problems, though. Paperwork and regulatory filings are one.

        Then you have the problem of limiting it to your target market of ordinary investors -- if the investment looks safe enough that some big corporation decides to drop a measly (to them) $10M into it, well, that turns it into a substantially different operation. You need a way to make sure that doesn't happen and that it stays in the "micro" realm.

        I don't know. It just seems like there's a high risk of power (money) corrupting. Kiva can work because it's small and socially-oriented, not profit-oriented. Once you start bringing in profits, it seems like it might have difficulties. But if you manage to find or start something like that, let me know.

        •  Yeah, I see that now. (none)
          But boy, would I be excited about a program that was set up for profit. Not so much because I demand a return on my investment, but because it could potentially bring in so much more money to the program, from fence-sitters. And being Internet-based, it leverages the same pooling power of small donors investors that "netroots" politics can -- that is, a reach so wide it makes small dollars worthwhile to collate.
        •  So how about it? (none)
          Do we have anyone with the experience to tell us whether this is possible? How about to actually do it?


      •  Bigger individual lenders do get interest (none)
        Individuals who make more significant investments in microloans get interest. I don't know what the minimum level is, but I expect it's probably around $25K or $50K. If a philanthropist invests that much, she does get a return on her money, but it's of course not as much as she'd get with a more traditional investment. Some philanthropists just think of the difference as a donation.
      •  I respect that (none)
        I guess my snarkometer needs recalibrated.  I'm thinking it was the !'s that threw it off.

        Jumping on the bandwagon: (-3.63, -3.03) - Does that make me part of the right wing here?

        by someone else on Thu Oct 27, 2005 at 08:30:12 AM PDT

        [ Parent ]

    •  A way to leverage your contribution (4.00)
      While you can ask to get from one to three percent interest from microlending, I see it as more a way to leverage my contributions.  If I put $1000 into a microlending bank and say I don't want interest, it is costing me from $10 to $40 a year compared to what I would get in a bank. At the end of the time (hopefully more than 1 year) I take back my $1000.  That money has had much more impact that my $30 contribution would have. I was a venture capitalist - but my added capital was hope.

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