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Web sparks person-to-person lending around the world

Social-networking principles have spawned a lending marketplace that lets individuals make loans to almost anyone.

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Every morning, as soon as Diane Reese wakes up in her Saratoga, Calif., home, her first steps lead to the family computer. She can't wait to find out whether her 782 debtors are making their payments on time.

For Ms. Reese, an IBM engineer, the revenue stream from loans she's made at 0 percent interest through www.kiva.org isn't as important as what the payments represent. They mean her hand-picked business partners – a barber in Uganda, a fish saleswoman in Vietnam, a school principal in Kenya – are lifting themselves out of poverty.

"We're peers now," Reese says. "I'm investing in their small enterprises.... I'm not being the beneficent Santa Claus or something. I'm a partner with people who are working to improve things. It's a very satisfying way to invest money."

As Christmas arrives with a seasonal reminder to look out for the less fortunate, investors are finding a growing range of options for helping without a handout. Thanks to creative intermediaries and new avenues on the Internet, they're lending to specific individuals or operations that tug at their heartstrings. And they're usually getting their money back, sometimes with a respectable interest rate.

For would-be lenders with a social agenda, options are proliferating at a rapid clip. In February, Prosper (www.prosper.com) debuted with a claim to be America's "first people-to-people lending marketplace." In May, LendingClub launched a direct lending site (www.lendingclub.com) that uses a social-networking database to link lenders with suitable borrowers on the basis of a lender's preferences and risk tolerance. Next year, Kiva plans to begin paying nominal interest to its lenders, who are often drawn to the nonprofit's borrower network of entrepreneurs in developing countries.

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