This week Twitter has been abuzz about the interactive, technology, social media focused component of the South By Southwest conference, or as it's tagged on Twitter, #sxsw. Mark Lovett of Global Patriot was particularly excited about a microfinance organization called OptINnow. Though I thought the name sounded more like a mailing list company, I was intrigued when Lovett said they took donations via cell phone. I'm glad I looked. Read on as we learn about an organization that on the one hand is the new kid on the block, and on the other, has been around for 37 years.
Sometimes being in the business that I am, I presume things to be common knowledge that I'm reminded are not, microfinance being one of them. For those not familiar with it, it's the facilitated process of making small loans, typically to people in developing countries, in order to help them create and grow their businesses, thereby better supporting themselves and their family.
OptINnow does it a differently then I've seen before, for example Kiva, where your loan a one time thing, benefiting one person/business. As in you lend money to a specific person, they repay it, and it gets repaid to you. End of story. You can of course choose to fund others, but the cycle ends should you choose not to lend any more money.
With OptINnow, the money gets repaid to the local partner bank, plus interest, then gets loaned back out to additional entrepreneurs. Hang on, it doesn't go back to you, the original lender? And they charge interest? That might be a hard sell for those used to the typical microfinance model made popular of late.
But then, looking at OptINnow's site and the FAQ, they aren't aiming for the same people. Whereas Kiva seems focused on targeting entrepreneurs interested in supporting people like themselves on the other side of the planet, OptINnow takes a plain spoken, direct approach that could, and from the looks of it, already is having a major impact on the world's poor. 1.1 million in 27 countries.
For instance, responding to why they charge interest on these loans, they say, "...collecting interest allows us to provide vital business training and mentoring services. For us these services are break-even expenses, but for those entrepreneurs we help, they are a blessing. They provide the vital tools that entrepreneurs need to work their way out of poverty once and for all. These services are a 'hand up' and not a 'hand out.'"
Addressing why most of the potential loan recipients on the site are women, they say, "...the income their businesses bring in is most often shared with children and extended family, thereby having greater impact. " And sharing something I'm guessing many of us here in the Western world aren't aware of, "A staggering 70% of all those living in extreme poverty are female. Women are often excluded from education and the workplace, from owning property, and from equal participation in politics. They produce one half of the world’s food, but own just one percent of its farmland."
Who are OptINnow?
My eyebrow cocked when I read that OptINnow is part of the Christian based Opportunity International, but there too they address this when, much like Habitat for Humanity, "We serve men and women of all faiths or no faith to join us in the important work of eliminating poverty around the world. "
And how do they do that? It's simple. And powerful. They loan to carefully screened people, then, in a measure that helps ensure good use of them and higher repayment rates, they have "Trust Groups." These are 15-40 loan recipients who meet weekly with a loan officer who trains them in effective techniques to run a business, and frequently other community beneficial things, such as HIV/AIDS prevention. In learning as a community, they teach each other and keep each other in check.
How do they convince people to lend money they won't get back?
By visually demonstrating the path it will likely take, on a scrolling image from person to person to people to school to...you get the picture. And they further elaborate on their How it works page, explaining in clear terms the "multiplier effect," a term common in financial circles but delingofied here: When an entrepreneur has powerful support that started with you, they help others in the community, whether by hiring them, or using their services through the money they've made at their business. This graphic makes it quite explicit:
Given all this, it does indeed seem OptINnow may indeed live up to their tagline of "End Poverty. Faster."
Readers: What other organizations do you see taking the complex and making it accessible? Have you invested in microloans? What's been your experience with it? Did you continue to do it? What other means do you see to effectively address poverty in the developing world?
