Curb Microfinance Spending

Microfinance Sites Can Do a World of Good

Many people say there’s no better feeling than helping others — especially when the people you’re helping live in impoverished areas and do not have access to traditional financial services. Microfinance sites allow you to lend some spare money to an entrepreneur halfway around the world and you can feel like you’re making a small difference in someone’s life. He or she eventually pays you back (at least that’s how it’s supposed to work), the credit goes into your account, and you can start the process all over again. One of the most popular microfinance sites is Kiva. According to writer Chris Taylor’s Reuters article, Kiva has 1,276,189 lenders, who have doled out $691 million in loans. Kiva is not the only microfinance site that has taken off in recent years. Indiegogo, a similar site, has increased their funds 1,000 percent over the past two years. They currently have 275,000 campaigns in total. Likewise, Kickstarter has 8.3 million users who have pledged $1.6 billion to 81,000 different creative projects. Clearly, the microfinance model has caught on in this country and people are eager to help those less fortunate.

Why Do People Like Microfinance?

It’s easy to measure the success of microfinance sites, so now the questions becomes, why are people so enamored with this particular model of giving? Unlike other types of charitable contributions, people like microfinance because it is so specific. You have the opportunity to see exactly where your money is going — whether it be Rosa in Ecuador who wants to start her own jewelry business or Bob in Kenya who wants to buy a cow and sell the milk to finance his child’s education. The concept plays into people’s emotions and allows them to feel connected with individuals thousands of miles away. You are donating money and have the ability to see the direct impact of your generosity. Plus, you can search for specific stories on sites live Kiva and find one that pulls at your heartstrings. When it comes to microfinance, you have the power to decide who gets your money and how it is used. There is a personal connection you simply don’t get when you blindly send a check to a national charity. Both acts are admirable and worthwhile, but people have strongly responded to microfinance due to its specificity and ability to tap into the power of the human experience.

How to Curb Your Microfinance Spending

Helping others is certainly a noble goal, but it’s easy to donate $25 here and $50 there and before you know it, you have overextended yourself. You can quickly donate hundreds of dollars with just a click of the mouse, so it’s important to be able to place a limit on how much you give away at one time. The lending process can most definitely be addicting, so Sam Dogen, the man behind and author of “How to Engineer Your Layoff,” gave himself a limit of a few thousand dollars, issuing 25 loans of $100 to $250 a pop. Dogen considers the money part of his “alternative investments” category and does not put in more than what he can afford to lose.

You don’t need to drain your bank accounts in order to save the world by tomorrow. Instead, practice patience. 98.75 percent of all Kiva loans are paid back, so if you wait long enough, there is a good chance your $25 or $50 will circle back around. You can send that money back out and get another charitable fix. Keep in mind the repayment terms depend on the individual project. If you are in a relationship, make sure your partner is aware of your donations and do not lend out more than you can afford. There’s no denying the allure of giving money to deserving people both at home and abroad. When your $20 is sent to Guatamela to help a struggling mother afford food for her children, you can’t help but feel a rush of pride and excitement. As long as you keep your donation habit in check, microfinance is a great way to change the world for the better.