Which microlender makes best use of my $20?

How to be the best consumer you can be.
March 15 2007 7:03 AM

A Good Run for Your Money

What's the best way to loan a poor entrepreneur $20?

(Continued from Page 1)

Donating is straightforward, if basic. (Trickle Up also accepts donations as low as $5, even by credit card, which is a nice little-guy gesture.) While you don't have much say in where your money goes, I didn't feel as much need to micromanage: Its commitment to the businesses' effectiveness rings true, as does its practice of releasing grant money in increments while a business proves itself. Eighty-one percent of Trickle Up entrepreneurs depend on their new business as their primary source of income, and most report substantial gains in their family's nutrition, education, and sense of financial security. Effectiveness stats like that, plus the organization's respectable history and highly efficient budget—86 cents of every dollar goes toward making loans—add to Trickle Up's credibility.

User Experience: 8
Trust: 8
Effectiveness: 12
Total: 28

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Global Giving
Started by ex-World Bankers, this matcher categorizes its offerings so that you can find the cause that's right for you. Those interested in, say, "economic development" can contribute to projects ranging from safety training and English lessons for Nepalese sherpas, to carpet-weaving equipment and supplies in Afghanistan. Global Giving takes 10 percent of your payment for its operating expenses, but some of that 10 percent also returns to you in the way of meaty project information: a project overview, including e-mailable project contacts; detail on the local lender; regular progress reports; an estimate of what your payment amount will buy for the project. You can't beat that kind of accountability.

Global Giving scored high on all three criteria, although all those numbers-heavy reports misled me into thinking I was making a loan, not a donation. I funded a program that trains battered women in Brazil to make and sell traditional Brazilian dolls; only when I'd paid up (credit cards, PayPal, or check) did I realize this was a tax-deductible gift. Global Giving's very solid offering would work just as effectively to make person-to-person microloans; I'd love to see them focus on that more.

User Experience: 8
Trust: 8
Effectiveness: 13
Total: 29

Grameen Foundation
The Mack Daddy of microcredit, Grameen pioneered the solidarity-circle model used by many microlenders: A group of borrowers guarantee each other's loans—if one woman can't pay back her loan, the others have pledged to cover her—and meet regularly to brainstorm and participate in job training and self-esteem courses. The social pressure keeps default rates low and builds interconnected networks of entrepreneurs in each locality.

Trust-wise, Grameen has a four-star Charity Navigator rating three years running and universal press acclaim—and that Nobel Prize its founder won doesn't hurt, either. On the effectiveness front, however, I craved an opportunity to direct my donation and wanted more feedback once I had parted with my money. Then again, maybe I should just trust the World Bank: It claims microcredit, thanks to Grameen, accounts for a full 40 percent of the reduction in moderate poverty in rural Bangladesh. While I thrill more to the idea of lending to an individual than giving to a big foundation, if you're going with a big gun, Grameen is microcredit's clear leader.

User Experience: 6
Trust: 10
Effectiveness: 13
Total: 29

Kiva
Finally: microlending as I'd imagined it. Kiva (agreement or unity in Swahili) lets lenders choose from individual borrowers, who are vetted internationally by local microlenders. Started as a side project in 2004 by a married couple, neither the lender nor Kiva takes a cut of the interest, saving it all for the local lender to administer to the borrowers day-to-day.

The organization gets strong marks for both usability and payment options (all credit cards, plus PayPal); you can fund loans partially, although the minimum payment is $25. I funded Madam Elizabeth Lomotey in her kitchen-supply business in Ghana and was surprised to see pictures of my fellow lenders next to mine.

Kiva's weakness is the cursory business-plan descriptions: You're really trusting the judgment of the local lender more than the plan itself. I can overlook this, though, given the high number of descriptions local lenders seem to have to write on behalf of the borrowers. Other perks? You're alerted via e-mail every time another loan payment comes in, and it's fun to check back on your lender and review his or her journal entries. (Sadly, Madam Lomotey is a taciturn one; other borrowers and their local loan managers get more chatty.) All that's missing is information on the borrowers' previous loans, which could indicate an expanding business.

Kiva combines online community with microlending in a way that's truly exciting. It's remarkably compelling to see your borrower face to face—you can even contact them via their local lender rep. Given Kiva's shoestring budget, it's a strong start.

User Experience: 10
Trust: 8
Effectiveness: 12
Total: 30

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