Microlending: Support a Cause and Earn Interest Doing It

When people ask a bank for a loan, they usually have to provide collateral, prove steady employment, and have a fairly good credit history. But what about the people in developing countries who don't have any of those things? That's where microloans, very small loans designed to spur entrepreneurship, come into play.

Microlending was designed to help poor people in developing countries get access to capital to start small businesses, and is becoming increasingly popular. The site that got ball rolling, kiva.org, allows you to make very small loans to poor entrepreneurs in developing countries. With Kiva, you're allowed to pick the person you want to make a loan to, send the money ($25 minimum), get your money back, and repeat. But since Kiva is not a registered broker and is a non-profit organization, you'll get no interest on your principal. Even if you didn't make money off of your donation, you can feel good knowing that you helped some poor person in a far-away country make something of himself.

If you want to help people but make a little interest (1-3%) doing it, you'll want to take a look at microplace.com. Unlike Kiva, Microplace is a registered broker and you'll make interest off of your donation, which with this site is technically an investment. The minimum investment amount is $20 and you can increase that number to whatever you want to give. As stated earlier, the current interest rates range from 1 to 3 percent, beating many investments today. With Microplace, you won't be able to pick and choose from different entrepreneurs, but instead you'll pick different organizations to invest money with. I would suggest going for the highest interest rate, but as always with greater reward, there is greater risk. The repayment rate for both Kiva and Microplace are in the high-nineties, 97% and 96%, respectively. 

There is some debate, however, about whether or not microloans are actually helping the poor. You can read it about it here and here.

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