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Microfinance

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When most people want to start a business, they quickly realize they need a little cash to get it going. What if you don’t have any cash, or live in a place where finding a job to earn extra money is nearly impossible?

This is where microfinance — the concept of lending money to someone for a small business loan — is an option. Micro-lending allows people to support themselves and their family, by funding the creation of a new business. The idea is based on a financial transaction, not charity because the business allows the borrower to pay back the lender easily. Many believe it will eventually alleviate poverty in places, like China, Africa and India, where there has been little hope of it.

When the internet began to spawn social networks, enabling potential lenders to easily find potential borrowers and enable secure financial transactions with tools like Pay Pal, the idea really took off. Sites like Kiva and Wokai.org, micro-lending has enabled farmers in China to invest in their land, women in Africa and India to start selling clothes they make and everything in between.

The sites typically partner with a non-profit group in a country, which finds the individuals interested in a loan and helps them to set up a profile — similar to a Facebook profile — explaining their need and the terms of a loan. The amounts loaned out are typically less than $1000 and the term usually is between 6 months and two years. The repayment rates for the loans are impressive — depending on the source between 95 and 98%, which means that lenders typically earn their money back and make some too. Everybody wins.

Want to know more? Check out the links below for some safe micro-lending sites and find out what types of projects you, or your class or school, might be interested in funding.

Adriana Diaz investigates microfinance loans and new online programs that connect borrowers and lenders across ...

Watch reporter Adriana Diaz speak Mandarin with locals in Central China.  

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