0% interest but I feel good

calypso_rhapsody

Not strictly a savings topic but i felt that i had to share with you a site that i found when i was (unusually) browsing the charities forum.

www.lendwithcare.org allows you to make loans of £15 or more to entrepreneurs in developing countries to help them start or develop a business.

There is no interest and they have a default rate of about 2% - so the return is entirely altruistic. I am very keen on the idea of helping people to help themselves and view the few small loans i made last night as a revolving donation - i will lend repayments on to other entrepreneurs on the site.

As i had never heard of it i thought i would pass it on (i've done a forum search and it seems it's not been mentioned before).

atush

what an interesting idea- I had heard of charities that do this, but not peer to peer.

should you want your money back at the end of the loan is that possible?

jimjames

Thanks for the info - a very worthwhile cause.

I remember my brother in law being involved with projects for Grameen Bank some years ago and they operated on very similar principles of low value loans to promote business development primarily for women in developing countries.

SnowMan

Thanks calypso rhapsody.

Looks very interesting and the structure looks extremely open and good.

I found their FAQs quite good for understanding how it worked (you can withdraw money paid back via paypal questions 51 and 52)

Newbie2saving

I read an article on Deborah Meaden (Dragons Den) and she is heavily involved with this and didn't want to support it without actually going out and seeing for herself how it all operates. It sounded really positive & I like the idea that it isn't really charity, in that the people wanted to help and support themselves but just needed a little lift in doing so - it is interesting...

calypso_rhapsody

The loans are repaid monthly over 1 to 2 years (the detail is on the entrepreneur's page) - it then goes into your lendwithcare account and you can either withdraw the funds or re-lend (in tranches of £15). It seems you get updates from the person who has borrowed though as i only started with this yesterday i've not seen that yet!!

I'm glad this thread has been of interest as i really do feel that it is much better than making donations (though of course you don't get the higher rate gift aid relief and there's no tax relief for any losses). It's a sort of non-commercial Zopa or Funding circle ...

rb10

Kiva (https://www.kiva.org) is a very similar (identical?) idea to this.

I think it's fantastic. You are part of a relatively small loan, that can kick-start someone's life. Your initial short-term investment in their business means that they can then go on to earn a wage for themselves.

The first one that I did went to someone who wanted to start up a small shop. But they needed stock to start off. So the loan paid for the stock, and thereafter they can replace the stock with the income that sales are making - and get a profit on the top for themselves.

What's more, since the money is all repaid to you, the same small amount of money (I have £25) can be used time and time again, to support lots of different people.

Ilya_Ilyich

It's worth bearing in mind that microfinance can be very damaging without proper oversight. When you 'lend to the poor' through these type of programs you're generally financing local lenders (at e.g. 0% for this site) who then lend on to the debtor, typically at very high interest rates (as posted on the LendWithCare site "MFIs generally charge annual interest rates of around 30%, although there are many occasions when MFIs regularly charge higher"). There are many cases where these local lenders employ strongman tactics to recoup their loan -- intimidation, harassment, public shaming in communities where owing an unpaid debt may lead to being ostracised -- which helps towards the low default rate but increases the number of people harmed by punitive costs of repayment. If the lender knows they can resort to these tactics to make a profit this encourages lending even to people who really can't afford it and will have to make substantial sacrifices to repay the debt.

I don't know about this specific site, so it's possible they do keep a close eye on the ethical activities of their MFIs. Even so I personally believe that the extent to which lending to the poor at extremely high interest rates is effective in improving their lot is pretty questionable in general.

I think it's worth carrying out research into exactly how your funds will be used and the effect it's likely to have on the people they're lent to -- it's a much deeper issue than cheap loans to budding entrepreneurs.

PurpleCat

Thank you for the link. For the last few years my siblings and I have been looking for ways to spend the money we would have spent on gifts on one another in a more useful way. This wins this years choice award in our family, we will all be making a loan. Many thanks.

calypso_rhapsody

Ilya - you make some very good points! I notice however that several of the entrepreneurs appear to be taking second or third loans which would suggest that they have found the experience beneficial (I know you could put an alternative gloss on it). Also i have some knowledge of Care, having once worked with a trustee of the organisation, so i think i am happy to trust Care to do the due diligence to make sure that the microfinancier is 'kosher'.

atypical

Ilya_Ilyich wrote: »

When you 'lend to the poor' through these type of programs you're generally financing local lenders (at e.g. 0% for this site) who then lend on to the debtor, typically at very high interest rates (as posted on the LendWithCare site "MFIs generally charge annual interest rates of around 30%, although there are many occasions when MFIs regularly charge higher").

Lendwithcare.org does say they vet their MFI partners:
"MFI’s do charge interest to their clients in order to cover operational costs. When we select our MFI partners, though, they have to meet various criteria, including charging a reasonable and fair interest rate relevant to the local context.

The interest free capital they receive from lendwithcare.org enables them to either lend to slightly poorer clients than they might otherwise, or to move into other more distant areas."

It appears MFI partners do more than just lend money:
"The MFIs’ roles are not only to arrange small loans but to help entrepreneurs by supplying ongoing support and initial business training when needed."

http://www.lendwithcare.org/info/faqs#11