MicroPlace Microlending: Free $20 to Invest

As you may know, I support microlending to poor entrepreneurs in developing countries through Kiva and Microplace. I have a little under four thousand dollars spread across both sites, and intend to continuously reinvest my principal and any earned interest to create a “foundation” where my money keep being lent out over and over. Kiva is non-profit, while Microplace is for-profit. I have lost some principal at Kiva, but none at Microplace yet. Here are my previous posts mentioning Microplace.

Yesterday after reinvesting some funds, the website provided me a link to share that appears to give any new investor a free $20 to invest. No strings attached. When the investment matures, you have the choice of either withdrawing the investment (plus interest) to your Paypal or bank acount, or reinvesting it again in another loan. Why not try it out?

Update: Apparently this link is open to any investor once, not just new investors. I just tried it for myself and it did not give me a choice in investments. The $20 will be invested in “Reduce extreme poverty in Haiti and help reverse its fortune – Sevis Finansye Fonkoze via Oikocredit GC Note”, earning 2.0% per year until April 30, 2014. You do have an alternative to simply donate the $20 instead and receive the tax deduction.

‘Tis The Season For Giving… Away Your Extra Stuff

It’s the Season of Giving, so why not give away the things you don’t need anymore? I think right now is even better than “Spring cleaning”. We just spent a chunk of this past weekend making a box of stuff to give to various charities. Here’s why, along with some tips:

  • Get started. In order to break out the Christmas or other holiday decorations, you’re already rummaging around the attic, basement, or garage. Don’t stop there! One helpful tip I read about recently was to get three big boxes and mark them Keep, Undecided, and Toss. Then you can just barrel through quickly without getting stuck on any single semi-sentimental object.
  • Full Closets? Most people probably have gone through all four seasons of 2010 and not worn a lot of their clothes. If you haven’t worn something in an entire year, it’s seriously time to consider donating it. This time of year, places are always looking for winter clothes like coats, gloves, and boots. If you need some extra spending money, sell your trendier stuff to vintage and thrift shops like Buffalo Exchange.
  • Getting kids involved. The young ones are probably very exciting about the incoming gifts. Now that they are a “big boy” or “big girl”, isn’t it time to look through their toy box and see what they don’t play with anymore? Santa may not bring them as much stuff if they don’t have any more room… šŸ˜‰ Gently used toys can easily be donated, even if you can’t re-gift directly.
  • End-of-year tax deductions. If you donate by December 31st, you can claim any charitable donations as a tax deduction for your 2010 taxes and reap the benefits sooner (assuming you itemize). Here are a few donation valuation guides from a Salvation Army, another Salvation Army, and a Goodwill branch. I used ItsDeductible from the Intuti TurboTax folks last year and liked it.
  • Use the internet to maximize your effectiveness. Sites like Freecycle and Craiglist allow you to give your stuff away to someone who can actually use it. There are also many niche charities popping up here and there, specializing in redistributing everything from sporting goods to business clothes for job-seekers to partially used gift cards.

Take a break from the holiday accumulation frenzy and declutter instead. Even though I put it off as well, it always feels great afterward.

Creating Our First Charitable Giving Plan

Up until this year, our charitable giving has been all over the place. If we saw something we wanted to support, we’d write a check. If our workplace had some sort of matching grant or charity drive, we’d participate. I always buy whatever a kid is selling when they come door-to-door because I remember how much I hated doing that when I was younger. (Although a pet peeve of mine is getting hit up for $1 at Safeway every time I buy some milk.)

We were sitting on a plane on so-called “Cyber Monday”, and thought it would be cool instead to decide on which organizations we wanted to support. (We also spent Sunday shopping at some outlet malls.) We weren’t alone. Payment processor PayPal just reported that charitable giving was up 45 percent during Thanksgiving 2010 as compared to last year.

Choosing Where To Give

Who should you let essentially spend your hard-earned money for you? Here is a list of the best charity comparison websites out there. In their holiday giving guide, Charity Navigator suggest that you pick charities that are financially healthy, committed to accountability and transparency, and creating measurable results.

However, giving for us is still personal, so we tend to include groups that are either local or have personally affected our lives. For example, Mrs. MMB and I both received some form of scholarship from our alma maters, so we give back to them.

Spreading The Love

In the beginning, I wanted to have us pick four organizations to support, and then divide our money evenly. For example, if we were to give $2,000 then each place would get $500. However, once we got going we ended up having so many different charities we “had” to give to, so we decided to split the money in half, and then we could give how we wanted. We could each give all of it to one single charity, or split it between 20 of them. Here’s what we ended up with:

Universities (Alumni)
Local Humane Society
Local Hospital Foundation
4-H Youth Program
Microplace Microfinance*
KIPP Schools
PSI (Global health: HIV/AIDS, malaria and family planning)

*Microplace is not a non-profit, but instead a for-profit site owned by eBay that packages microloans to entrepreneurs in developing areas into interest-paying investments. All of my interest earned is reinvested, so that each year the outstanding loan balance grows. Right now, if you give a $20 investment gift to someone, you get another $20 matching gift for free. $40 impact for $20. The recipient picks where the investment goes, and when it matures they get $20 back to re-invest or keep.

Find The Best Charities: Best Charity Comparison Websites

With the recent natural disasters and also economic recession, many people are being extra careful to make sure their donations go as far as possible. Earlier this month, BusinessWeek ran an article Philanthropy: Rethinking How to Give which did a good job exploring the many websites now available to help you do just that. Initially, most websites focused on financial factors like what percentage of donations go to administrative or fundraising expenses, whereas now many sites tackle the harder task of measuring actual impact for the dollar.

Here is a list of the links, along with a quick description of that makes them unique, as they each have a slightly different approach. What was new to me was the idea of giving to a mutual fund-like portfolio of charities focused on a specific area, like education or global health.

  • CharityNavigator – Largest and well-publicized charity rating site, provides a 4-star rating based primarily on financial criteria.
  • GiveWell – Tries to identify the best charities, not rate them all. Focused primarily on charities working internationally
  • GreatNonProfits – Allows clients, volunteers, and funders to post personal reviews based on their experiences.
  • GuideStar – Tries to be a one-stop shop for both financial data and personal reviews of charities. Must register to see a lot of things, and pay a subscription fee for premium in-depth data.
  • Partners for Change – Tries to educate and direct “mass affluent” philanthropists (who donate at least $10,000 per year) towards a mutual fund-like portfolio of charities.
  • Philanthropedia – Ranks non-profits based on opinions of experts, and groups them to mutual fund-like portfolios.
  • Root Cause – Provides detailed “social impact research” reports to larger groups and financial advisors.

Discover Card Matching Haiti Donations

If you have a Discover More Card from the old $50 bonus, or any Discover card that has the earns their CashBack Bonus, you can donate your balance towards Haiti relief directly to the American Red Cross and Discover will match it 100% dollar-for-dollar, up to $1 million total.

Support Haiti Recovery Effort Through Microlending

I received this e-mail today from Microplace, which provides loans to low-income entrepreneurs around the world. I think it’s a great idea, although of course you should remember that you are lending money and it may or may not be repaid. You may consider augmenting your charitable contributions with this type of investment.

Haiti earthquake increases need for microfinance to support rebuilding

Dear Jonathan,

A massive earthquake with a magnitude of 7.0 hit Haiti on Tuesday near the capital, Port-au-Prince, and is feared to have killed thousands. This disaster requires both immediate emergency relief and longer term rebuilding efforts. Microfinance will support the financing needs that inevitably arise from this type of catastrophe as Haitians look to rebuild their country.

You can help today by investing on MicroPlace in Fonkoze, the largest microfinance institution in Haiti.

Even better, I see that Microplace is still running their Buy-1-Get-1-Free promotion, where if you buy a $20 gift certificate towards any fund, you get another one for free. That’s $40 of microlending funds for only $20. To find the Fonkoze Haiti fund, click on Find a Gift Now, and use the Geographic filter > Latin America > Haiti.

MicroPlace: Buy a $20 Gift Certificate, Get $20 Free

Here’s a good last-minute gift idea for socially conscious friends – a $20 gift certificate to MicroPlace, which provides loans to low-income entrepreneurs. They have a B1G1 holiday promotion where if you buy a $20 GC, you get another $20 to send to the person of your choice for free (could be you if you wanted). Ends December 31st.

The cool thing about this gift is that you’re not just giving $20 to some charity “in their name” that they’ll never see. They get to help out a poor borrower, then then when the loan matures they get $20 + any interest! Your friend can then spend it however they wish (thus making it better than some Best Buy gift card), or reinvest in another microcredit fund. Thus the whole “gifts that keeps on giving” slogan. And you get $40 for spending $20!

Give a Gift that Keeps on Giving
Give a unique and special gift this holiday season. It is a gift of connection, a gift of hope, and a gift that believes that poor people can use their ingenuity and hard work to break out of the cycle of poverty.

Your gift can help fund loans to poor people who could start a business, save, and work their way out of poverty. And when you purchase a gift certificate of $20 or more on MicroPlace, we’ll give you a free gift certificate of $20 to send to someone else on your shopping list!

I now have over $2,000 invested at MicroPlace and also $2,000 invested at LendingClub (P2P Lending).

What? Kiva Is Not Really Person-to-Person Lending

I’ve written about Kiva before – They allows individuals to make loans starting at $25 to low-income entrepreneurs in the developing world, also known as microcredit. By doing so, you can provide affordable working capital for the poor (money to buy a sewing machine, livestock, etc.), hopefully empowering them to earn their way out of poverty.

However, Kiva may not work exactly like it suggests on their website. You’ll notice that they post up pictures and stories of people needing loans, and you get to pick the exact person you want to lend to. Back in 2007, I thought I loaned $25 to Vitolina:

Vitolina owns a set of beach fales that she rents out to back-packers or picnickers passing through the village and works hard to keep the structures in good condition. Fales are simple, small open huts with thatched roofs built in the style of the traditional Samoan house. Vitolina?s fales are situated on a white sandy beach on the Samoan coast. She readily welcomes guests and provides them with a simple roof, unbeatable views, and home-cooked meals. She will use the loan to renovate the beach fales.

However, chances are that the person you clicked on already got the loan months ago. Your money is simply going to the microfinance institution (MFI) who already lent to that person, and will use that money to lend to another future person or general project. The direct “person-to-person” link does not exist like it does, for example, at LendingClub.

There is a lot of recent discussion on the web on this issue. Thanks to the commenter who made me aware of it. Check out this NY Times article and the blog post by David Roodman that started it all.

After reading the posts and several follow-ups, it does make practical sense that Kiva can’t actually match a lender to a specific borrower – it would take too long for the borrower to get the loan. However, it does show that “good stories” do matter. Remember those “Save The Children” commercials where you’d get a letter from the child you helped? Same deal. Your money goes to the general organization, not any specific child.

As a result, Kiva has changed how it explains their loans and their homepage tagline went from “Kiva lets you lend to a specific entrepreneur, empowering them to lift themselves out of poverty.” to the more generalized “Kiva connects people through lending to alleviate poverty.”

The other common variable that is somewhat hidden away to new visitors is that while you loan money at 0%, the actual MFI will likely go on to loan money to the entrepreneur at around 30% APR. The difference pays the operational expenses of the MFI and may partially subsidize defaults in order to maintain the advertised tiny 0-2% default rates.

None of this means Kiva or microcredit is bad. Sure, it’d be nice if I could lend at 0% instantly to a borrower in Cambodia who could pay 0% interest too, but right now that’s not possible. I still plan on lending at both Kiva, but will no longer get the “warm fuzzy connection” feeling from Kiva and may direct more funds towards Microplace or Grameen Foundation.

MicroPlace: Buy a $20 Gift Certificate, Get One Free

Just got an e-mail from MicroPlace that they are running a gift certificate promotion where if you buy a $20 GC, you get another $20 GC free. The gift recipient can then lend out the money to a poor entrepreneur and receive interest + $20 back later. Since the person actually gets the money back (or at least most of it assuming some defaults), and thus isn’t the same as a “$XX has been donated in your name” gift, I think it’s a cool twist on gift cards.

Give a Gift that Keeps on Giving
Give a unique and special gift this holiday season. It is a gift of connection, a gift of hope, and a gift that believes that poor people can use their ingenuity and hard work to break out of the cycle of poverty.

Your gift can help fund loans to poor people who could start a business, save, and work their way out of poverty. And when you purchase a gift certificate of $20 or more on MicroPlace, we’ll give you a free gift certificate of $20 to send to someone else on your shopping list!

To learn more about Microplace check out these posts, including my last microlending update.

Microlending Update: Kiva and MicroPlace Loan Performance

I saw some ads for Microplace today (probably targeted due to my internet browsing habits) and decided to check on my Microlending portfolio. If you’re not familiar, microlending tries to alleviate global poverty by offering small loans to entrepreneurs in developing countries who would otherwise not have access to credit.

Microplace is actually a for-profit site owned by eBay that packages microloans into investments with varying risks, focuses, and returns. Some people think that “for-profit” equates to evil, but I don’t agree. Here’s a link to a recent newscast done by CBS News.

I currently have $1,200 invested there, ranging from a 100% liquid note paying 1.75% interest to a 3-year note paying 5% interest. Payments are made quarterly, and I haven’t gotten my first interest payment yet. You can even fund using your credit card via PayPal.

Here are my previous posts on Microplace.

Kiva is a non-profit site where you can match up your contributions to a specific individual, starting with as little as $25. The entrepreneur is still charged a certain interest rate, but you don’t get any interest. I have lent out $350 to 14 loans, and all have paid back my principal so far except for one which paid back 92% total. Still, my overall default rate is only 1.32%.

Here are my previous posts on Kiva.

I am still very intrigued by the idea of setting up a pseudo-“foundation” to which I can contribute money and have it perpetually reinvest the principal and any interest earned into future microloans. It would be really cool to have something like $100,000 constantly being lent out to entrepreneurs around the globe.

Microplace Review: Investments, Application, Funding Methods, Bonus

I finally got around to looking closer at Microplace, a site owned by eBay that tries to alleviate global poverty by offering investments that enable loans to hardworking poor people. I wrote about them previously in Earn a 5% Return and Help Fight Poverty Too? but never ended up investing.

These microlending investments offered do carry risk to principal, although historical repayment rates have averaged 97%. I have just finished putting in $1,200 across three different loans of different maturities and interest rates. This a decent chunk of money, but again this is both an investment and a charitable gift. As you’ll see below, I have the potential to earn some interest and/or maintain liquidity. I like the idea of this money being repayed and then loaned out again later, ideally over and over again. My own little mini-foundation. šŸ˜‰

My Investments
This is an experiment for me, so I wanted to try a variety of investments. I believe that if microlending can be both profitable and successful in reducing poverty, it will really take off. I went with some of the higher-yielding notes and also one with high liquidity. We’ll see how the repayment rates are.

Investment #1: Helping Poor Women in Nicaragua, Earns 4% interest per year, Principal repayment on 12/31/2010.

Investment #2: Help Nicaraguan farmers, Earns 5% interest per year, Principal repayment on 12/31/2011.

Investment #3: Called the Oikocredit Global Community Note, this investment enables loans to the working poor in several developing countries. 1.75% return per year, can redeem anytime. This last one is interesting because you can withdraw your principal at any time. I can already redeem only a day later:

Application and Funding Methods
The application process is very similar to signing up for a stock brokerage account. They will ask you identity information as well questions about your income and investment experience because they are selling securities that carry risk of loss. As for funding the loan, you can either use PayPal or a bank transfer:

Since eBay owns PayPal and Microplace, there are no fees for using PayPal. That means you can switch to a rewards credit card and earn some points or cash along with your investment. Why not? Just be sure to change your PayPal funding source. My credit card charge went through fine.

Got Bonus?
You know me and freebies. After signing up I received another e-mail about a Father’s Day promotion where you can even get a free solar-powered flashlight:

Invest as little as $20 in honor of Dad and MicroPlace will send a free solar-powered flashlight, to Dad. This eco-friendly flashlight will remind Dad how grateful you are for his caring and love. And your investment will help fathers and families work themselves out of poverty so their children can get an education.

Buffett: Wealth, Estate Taxes, and the Ovarian Lottery

I’ve finished reading The Snowball, and one of the things that struck me was how Buffett thought about individual destiny, meritocracy, and wealth. For one thing, he is a wealthy person who supports an estate tax for those with very large estates (currently for those greater than $3.5 million). Here’s a glimpse of why:

Wealth is just a bunch of claim checks on the activities of others in the future. You can use that wealth in any way that you want to. You can cash it in or give away. But the idea of passing wealth from generation to generation so that hundreds of your descendants can command the resources of other people simply because they came from the right womb flies in the face of a meritocratic society.

I also connected strongly with a related concept Buffett termed the “Ovarian Lottery”.

I’ve had it so good in this world, you know. The odds were fifty-to-one against me born in the United States in 1930. I won the lottery the day I emerged from the womb by being in the United States instead of in some other country where my chances would have been way different.

Imagine there are two identical twins in the womb, both equally bright and energetic. And the genie says to them, “One of you is going to be born in the United States, and one of you is going to be born in Bangladesh. And if you wind up in Bangladesh, you will pay no taxes. What percentage of your income would you bid to be the one this is born in the United States?” It says something about the fact that society has something to do with your fate and not just your innate qualities. The people who say, “I did it all myself,” and think of themselves as Horatio Alger – believe me, they’d bid more to be in the United States than in Bangladesh. That’s the Ovarian Lottery.

He also made a comment that if born several hundred years earlier, he and Gates probably would have been some other animal’s lunch because they did not see well and could not climb trees well. I’ve had the exact same thought, as my eyesight is really horrible. If was born in the 1700s, I’d probably be considered a cripple.

This led me to a post by a Kiva Fellow working in Uganda. Kiva is the site where you can lend as little as $25 to low-income entrepreneurs.

Any one of these people could be tremendously successful in America (economically speaking). Maybe a CEO of a prominent company, or a hotshot lawyer who wears a two-thousand-dollar suit to work everyday. But they arent. And the only reason for that is because of where they were born.

[…] I won the ovarian lottery. I am a US citizen; got a good education; enjoy great health; and came equipped with a ā€œengineerā€ gene that allows me to prosper in a manner disproportionate to other people who contribute as much or more to society. Iā€™m in the top 1% of the entire population of the world.

Kiva, to me, is simply a way for those of us who drew the best tickets in the ovarian lottery to help those who drew less fortunate ones.

Something to spread a little humility. You or I may have worked hard, but that’s doesn’t mean we didn’t get a huge head start from winning the Ovarian Lottery. Would you be where you are if you grew up in a country where nobody would even teach you how to read?