We have so much that we have to give back to people that are less fortunate. I know, I know it’s my liberal fantasies emerging once again–I can make make a difference and make the world a better place! For better or worse, I still believe in that stuff.
The World Bank and the UN say that 4 billion of the world’s poor live on less than $3/day and that 1.2 billion live on less that $1/day. To me, that is unimaginable, especially when I think nothing of spending $5 on a Starbuck’s latte.
Microcredit, according to The Microcredit Summit organization, are programs that provide credit for self-employment and other financial and business services(including savings and technical services) to very poor persons. Microcredit is not new, having been around since the late 1970S, but it has recently accelerated through the proliferation of charities, banks and investment funds that specialize in providing credit to the poor on all continents, including the U.S.
Microcredit recipients are 80% women and the repayment rates exceed 95%–better than any big banks I know. The loans are used to build small businesses to take a family out of poverty, not for building bigger businesses in the capitalistic sense. Many women use the profits from their businesses to better feed their families, educate their children, and help their husbands start a business. Ninety-three percent have put their children in school. Their goals have often been to lift the family out of poverty via the businesses they develop. Some are serial entrepreneurs and have founded numerous businesses, often with loans of less than $100.
These women find a niche in the market, for example, making inexpensive shopping bags out of discarded cement bags (try finding a plastic/paper bag at a store in Bangladesh), employing other women to make them and then selling them in local markets. These businesses supply basic needs and are not affected by global economic cycles. The loans are often made in "communities" of poor women, so if one has trouble repaying her loan that week, say, due to a sick child, other will make the payment for her and expect the same when they have problems.
People-to-people lending is also emerging in the US and the UK, allowing small businesses or individuals to receive loans based on their credit ratings. Based on the traditional Asian models, such as the hoi, a cooperative of Vietnamese neighbors who pool money to lend to one another, the aspiring pizza shop owner can get loans at more favorable interest rates than local banks, assuming he or she has good credit and a sound business plan.
There are many ways to get involved in microcredit, either as an investor or a donor. The following organizations are some of the many banks, non-profits and venture funds that are active in the microcredit space:
Representative Charities
Representative Venture Funds
Finance Co-ops
More Information on Microcredit
Supply Chain Ventures has invested in microcredit funds and will continue to donate a 10% of our profits to additional microcredit programs. It is the least we can do to help local entrepreneurs in less developed countries realize their dreams, as we do for the entrepreneurs in the US.
A VC in Vacationland 
Leave a comment