Microfinance in China, Helping the Rural Poor

Several months ago, a young individual shared a story with me about his experience giving a microloan to China. Through Wokai, an organization facilitating microloans to the rural poor, he made a small contribution to help another person living in Inner-Mongolia. Wokai are the Chinese words for “I start” and demonstrate their commitment to enable the poor to help themselves. I invited him to write this contributed article sharing about his enthusiasm for Wokai.

Editor, give and tell

"I was first introduced to Wokai when I attended a talk by Courtney McColgan, one of the co-founders of Wokai. Wokai is a Kiva for China, connecting lenders in the first world with micro-borrowers in rural China through the Internet. Courtney and her co-founder Casey initially intended to spearhead the formation of Kiva China, but soon realized that Kiva would have regulatory difficulties expanding into China. They decided to form their own organization instead. Many thousands of dollars, months, and the formation of a Chinese on-shore corporation later, Wokai officially launched in the fall of 2008.

"When considering which organizations to support, Wokai has risen into the top of my list for the following reasons:

1. Money lent to a Wokai borrower will be recycled into a new loan of the lender's discretion. Although lenders will not be able to repatriate their money due to regulatory issues in China, this means that contributions will have years to change many lives!

2. Every gift, however small, is a very efficient use of capital. Because the loan amounts requested are small (hundreds of dollars), every marginal dollar contributed to a borrower has a large impact.

3. Wokai's operations are currently focused on Inner-Mongolia, which just so happens to be where my father's family is from."

Contributing Author

Links:
[1] Wokai. http://www.wokai.org
[2] “About a gift that keeps on giving” yGive, giveandtell.

Disclaimer: The information presented here is based on the contributing author's research and experience, and in no way reflects the official opinion of Wokai or Kiva.

Your own foundation for $50

Today, I started my own foundation, named it, and seeded with $50. That’s right, for $50 USD, or more specifically 500 rand, one can start and name their own Giving Foundation with the GreaterGood for South Africa’s South Africa Social Investment Exchange. So it’s not a foundation in the traditional tax-exempt sense, and it’s not a stock exchange in the traditional Wall Street sense either, but it is a different and terrific way of giving.

Who is GreaterGood for South Africa, and what is a social “stock” exchange?
GreaterGood for South Africa is a four year old online giving marketplace based in South Africa. In their own words, “GreaterGood South Africa brings good causes and committed givers together in meaningful and innovative ways to end poverty in South Africa.” By bringing donors and volunteers together they have been able to quantify their impact since their launch as having donated over 16 million rand (about $1.7 million USD), about 45,000 volunteer hours, and over 500,000 surplus or second hand items.[1] But what I found really intriguing was their social “stock” exchange called the South Africa Social Investment Exchange (SASIX).

Briefly, SASIX “makes carefully selected social development projects available as investment opportunities with a social return.” One can browse funding opportunities by geography, sector (for example food security, environment, HIV/AIDS), and risk (based on, for example, concept, design, capability, control, sustainability). With so many options one can identify a giving opportunity matching many personal values. Once a project has been identified, and if it is not fully funded, one can give by “investing” in “shares” of the project. A share can be a fixed cost at say 50 rand ($5 USD), and a project might be for example 230,000 rand (about $24,000 USD) to refurbish the psychiatric ward of a hospital. A project is fully funded when all shares have been purchased. And “shareholders” are updated regularly with detailed reports.

Setting up a Giving Foundation
More interestingly, a donor has the option of setting up a Giving Foundation – an individualized and personalized charitable fund set up by a family, individual or business. A major benefit for South African tax-payers is tax-efficiency – tax benefits upfront while donations can be distributed throughout the year. But for those outside South Africa, it’s still a fantastic and easy way of discovering, contributing and following projects and charitable donations.

One of the things I appreciate most about this organization is their effort to quantify impact. Knowing how to describe impact has been one of the major challenges and opportunities facing many charities and there is growing demand from donors for comparable metrics of impact. I think GGSA and SASIX are onto something unique not only in how they calculate these metrics, but also how they present it in an accessible way for the new donor or investor.

A low cost to enter
For just 50 rand ($5 USD), one can own a share of a project, and participate in something really special. I find it worthwhile that my small gift can be ever so slightly redemptive for a country historically overlooked by parts of the world. Consider exploring opportunities for greater good in South Africa.


[1] Annual Report. GreaterGood South Africa. April 1, 2007 to March 31, 2008.

Disclaimer: The information presented here is based on the author's research and experience, and in no way reflects the official opinion of GreaterGood for South Africa.

About a gift that keeps on giving

I don't know about you, but I want every dollar I spend to work hard for me. There is a certain grand satisfaction in knowing that I just helped make the world a better place, and maximizing that effort maximizes that joy.

Efficiency, efficiency, efficiency
I came across a Charity Navigator top-10 list one day that shames 10 charities that are drowning in administrative costs, consuming more than half of your donated dollars for anything not directly related to the mission you intended to support. I got curious about thinking about the most efficient ways to give financially and I ultimately landed at opportunities in microfinance, particularly with an organization called Kiva. Giving to Kiva is wonderfully efficient because 100% of your donation goes to the project you want to fund, and afterwards you can make a separate designation for Kiva if you wish (their suggestion is only 10% of your transaction). Also, once the loans have been repaid, you can relend that money to other projects perpetually.

It takes money to make money
Microfinance is a banking principle of providing financial services like small loans to clients with few or no assets, and in my area of interest to the poor in developing countries. With Kiva, you and several other investors can choose to bankroll any amount of the small business needs of any number of people in a shopping cart style. Once they get their need met, they go and make use of the money and return the loan at low-interest. It is said that credit is an incredibly powerful financial tool, and it is, but it is quite generally unavailable to the world's poor. The poor of the world then are not able to take on costly endeavors that jump-start their small business and bring themselves out of poverty: it takes money to make money. Therefore, microfinance has its place in the fight against systemic poverty.

Give it a spin
Microfinance is an incredibly rewarding experience for me, though admittedly I'm helped by never having experienced a default on my loan (but most people don't, since the average default rate is less than 4%). Instead, I've seen people all around the world make wonderful use of their immense individual resourcefulness and my small, humble, financial contribution. If you're interested in business and investing, and you want to see people do well with just a small kick start, microfinancing just might be the game for you.