Jonathan Brun

Micro-Finance, the way of the future

Just read this book. Amazing. I cried. It is the way of the future.

Micro-Finance empowers the very poor with small loans to help them overcome their cycle of just having enough money to feed themselves, and not enough to save and invest in their activities or children.

The website www.kiva.org has just got a ton of press in the past few day (oprah, SVN…) (i just gave it more). The site allows you to directly loan small amounts of money to people around the world who are trying to improve their lives. This is taking micro-loans and opening it up even more, make the market more liquid and the community more global.

I have been watching the site for while and they seem to have a good set-up.

What I love about micro-finance is that it is based on the same logic as open-source technologies and collaborative work.

Some of the features are

• Strict rules: repayment in one year with weekly payments
• This is similar to strong rules set by central body of programmers who do open source software
• Easy way to identify delinquencies
• Groups are made of 5 people, the first two must complete half their loan before two more in the group receive theirs.
• This reduces the work of enforcing loans as they pretty much self-enforce themselves. This is much like wikipedia or linux where people in the community weed out the useless individuals without the intervention of the central body
• Anyone can participate – no collateral needed
• Primarily focused towards women – who are more honest and better at managing money (among other things)
• Scalable and applicable anywhere in the world – even the industrialized world
• People get bigger and bigger loans upon completion of their previous loans

Great stuff, really, run out and get the book.