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.
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.
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.