Micro Lending is the extension of very small loans, called micro loans, to impoverished borrowers who typically lack any form of collateral, steady full-time employment and a verifiable credit history. It is designed not only to support entrepreneurship and alleviate poverty, but also in many cases to empower women and uplift entire communities. In many communities worldwide, in developed and developing nations alike, women lack the highly stable employment histories that traditional lenders tend to require. This reality might result from factors such as leaving the paid workforce to care for children and elderly relatives. As of 2010 an estimated 75 million men and women held micro loans that totalled US $38 billion. Grameen Bank, who first founded micro loans, reports that repayment success rates are between 95 and 98%. As of 2012, micro lending is widely used in developing countries and is presented as having "enormous potential as a tool for poverty alleviation."
The principles of micro lending have also been applied in attempting to address several non-poverty related issues. Among these, multiple Internet-based organizations have developed platforms that facilitate a modified form of peer-to-peer lending where a loan is not made in the form of a single, direct loan, but as the aggregation of a number of smaller loans, often at a reduced or negligible interest rate.
New platforms that connect lenders to micro-entrepreneurs are emerging on the Web, for example Kiva, Zidisha, and World Vision Micro all provide aggregate loans to micro-entrepreneurs. In 2010, US based non-profit Zidisha became the first peer-to-peer micro lending platform to link lenders and borrowers directly across international borders with any intermediaries. One of the great features of the program is that lenders can track the progress of the recipient of their loan.
If you are looking to a philanthropic alternative to direct giving of cash to a charity, web-based micro lending sites may be a viable option to consider.
