Ebay announced today it is entering the world of microfinance, giving credence to the emerging world-wide trend. MicroPlace.com will allow people to invest as little as $100 to support development in impoverished areas around the world.
Microfinance involves making small loans to working poor in developing countries. These loans are usually less than $100-$200 and are made by local organizations called microfinance institutions. The loans are given to the working poor to establish or expand small businesses that generate additional income for their families. These loans are critical to helping lower income people as they cannot typically obtain traditional bank loans in developing countries.
Today, microfinance is at work in over 100 countries, and is typically provided by financial institutions or wealthy investors. This trend gained wider renown last year when Bangladeshi economist Muhammad Yunus, who pioneered the concept in 1976, won the Nobel Peace Prize.
There are several other microfinance organizations, including Kiva.org â€“ which has built a $13 million loan portfolio in the past two years, helping about 20,000 entrepreneurs in impoverished parts of the world. Others include Finca International's Villagebanking.org and Action International's Accion.org.
1. Microfinance Expansion - The trend of microfinance is gaining wider recognition and expanding globally, providing an opportunity for businesses to invest in and support development in impoverished areas.
2. Financial Inclusion - Microfinance is addressing the need for financial inclusion by providing small loans to the working poor in developing countries, creating opportunities for businesses to develop innovative financial products and services.
3. Social Impact Investing - The rise of microfinance and platforms like MicroPlace.com presents an avenue for businesses to engage in social impact investing, supporting small businesses and generating positive social outcomes.
1. Financial Services - The financial services industry can explore disruptive innovation opportunities by incorporating microfinance principles to reach underserved market segments and promote financial inclusion.
2. Technology - The technology sector can leverage advancements to develop innovative platforms and digital solutions that facilitate microfinance transactions, making it more accessible and efficient for investors and borrowers.
3. Social Entrepreneurship - The social entrepreneurship industry can leverage the microfinance trend to create sustainable business models that address social challenges while generating a positive financial return.