I’ve been a fan of organisations such as Kiva and Zopa for a while now. Peer to peer loans make many-a-business-ideas and lives possible around the world and today I found out about an equivalent type of service for students in developing countries. Vittana is still in beta, but is already creating connections with many microfinance institutions in the developing countries to stimulate regional student loans.
I never fully agreed with the idea of free education, but I’ve always looked for systems that make it universally accessible whether through loans, scholarships or offering students part-time work. In principle, if you really want to go to university and you’re willing to work hard for it, nothing should stand in your way. If it’s complicated to get a loan in the EU, I can’t even imagine what it must be like in developing countries. Back in my student days, when I first moved to the UK, I was denied student loans in this country and the Polish banking system back home told me that since I’m not studying in Poland they didn’t want to have anything to do with me.
Education is a key way of changing societies, governments and the economies of developing countries. Ironically, the countries that most need educated people often cannot support their own domestic intellectual potential. Provided they take off, organisations like Vittana might be the single non-governmental way to allow more students to have a university education in developing countries.
Online microlending co-ops are still few and far between, but so far they seem to be another successful symptom of the Internet’s potential for empowering individuals. The most prominent representative of microlending are the London-based Zopa and the San Francisco-based Prosper. Prosper has so far facilitated $178,000,000 funded loans and has 830,000 members. Borrowers get low-cost loans and lenders get good returns, all without the involvement of banks. All the loans are spread out over groups of lenders rather than the equasions being 1-1 relationship situations. This makes it safer for lenders to get their money and easier for borrowers to get their loan applications picked up. On both Zopa and Prosper all applications are subject to interest rate auctions between lenders and those who can offer lowest interest get the deals. Borrowers and lenders enter into legally binding contracts upon reaching a deal. All in all, for smaller scale loans, this is a smarter and fairer way to go about lending and borrowing money than giving more of it to the rotten banks.
Micro credit is a form of facilitation of small loans to individuals in the developing world, who are otherwise considered not bankable and as such unable to obtain any loans in their own countries. I was first struck by the deep contrast of human existence and owning capabilities between Africa and the Western world when I read ‘The Shadow of the Sun’ by Ryszard Kapuscinski. It seemed utterly inconceivable that a family’s income could depend on a single pot, in which they would cook a dish and sell it to the fellow villagers for a small sum of money. The book inspired me to strive to understand more aspects of poverty and inequality both in Africa and worldwide.
Micro credit focuses on supporting forms of micro entrepreneurship and employment generation for mostly community based initiatives. The project started in Bangladesh, where it has enabled impoverished people to engage in self-employment projects that allow them to generate income, begin to build wealth, and at times exit poverty. The biggest micro-credit organisation is probably Kiva, which facilitated loans for nearly 2000 entrepreneurs. It’s strange to think that so much can depend on so little.