Highlight: MicroPlace

MicroPlace

Today's highlight is on a peer-to-peer lending site, MicroPlace. I liked the idea of p2p lending when I highlighted Kiva.org so I went to look for another interesting p2p idea. MicroPlace is a p2p lending site that is run by Ebay. The Ebay founders have always been involved in microfinance. They have their own foundation that gives out millions in microloans. MicroPlace was started by Stanford graduate, Tracy Turner. Her experience working for the Bangladesh based Grameen Bank inspired her to start her own site for microfinance. The company was bought by Ebay shortly after. Microplace is similar to Kiva in that people give money to entrepenuers that are listed on the site. The first loan must be at least $100 but after that the loans can be as small as $50. Although it sounds very similar to Kiva there is one real difference. The lenders are actually investing in securitized funds. The lenders are more like investors. They invest in these securities then the funds from the sales are given to the MFIs. Then they are repaid the loan with interest. They can choose funds that have higher returns but more risk. They recently announced that they will be offering 6% returns on investments, which is a first for any microfinance institution. Investors can choose the type of people that will be getting their money but not as specifically like Kiva. The borrowers are categorized in man different areas like poverty level, green projects, rural areas, focus on women, fair trade, repayment schedule, geographical area, and financial return level. There is no guarantee on any returns but they are confident that borrowers have a great repayment rate. This is allowing people to smartly invest in something that they believe in. It is killing two birds with one stone. I think it is next place where microfinance will eventually head to. As microfinance becomes more commercialized and more regular investors get involved markets will form and demand will grow. It is possible that eventually there will be trading desks for these securities and it will become a global market. It is not a far fetched idea. Banks have traded weirder things than microfinance loans. It is almost like a subprime loan but safer...hopefully. I believe MicroPlace is putting itself smartly in front of any competition and will be more successful than other p2p lending sites that have come after Kiva.