Building company sustainability out-side the company

The term Sustainability, more than just referring to environmental concerns, incorporates concepts such as social justice and equity. As we go about our daily lives in our society we often get glimpses on our television of poverty, starving children, disease and requests for much needed funds to help those children and their families around the world so they have enough to eat and the opportunty to become educated. We view such sights with sadness and sympathy and yet it is combined with a reluctance to actually pick up the phone and pledge money. After all, many of us already support a worthy charity on a regular basis and, let’s face it, we all have limits on our ability to be charitable. And, to be fair, we may even doubt the efficacy of the organization appealing to us for funds. We have often heard the story of the tremendous overheads of some organizations and how little of our money actually gets to it’s intended destination. There are sites on the internet that rate charitable organizations which is a good start, but there are also other ways of helping.

What if you could find a way of supporting the less fortunate by loaning them money rather than just giving them money? 

Micro-lending is a trend that has been around for several years started by individuals who realized that many viable small businesses in third world countries were unable to get off the ground due to a lack of capital.

Mainstream banks would not lend to these small businesses because the amounts they required were far too small to expect any reasonable profit and the entrepreneurs involved had virtually no credit history due to their lack of resources to become established businesses in the first place. Many of these small businesses are run by women with a simple idea and the enthusiam to meet a local community need. 

Micro-lending organizations then began popping up. They would select the most viable small business enterprises and give them very small loans, sometimes as small as $50 matching the equity offered by the entrepreneur, at very low or 0% interest, knowing that they were classified by all traditional standards of finance as “high risk”. As it turned out, most of these initial enterprises paid back their loans and with a reasonable rate of return. The people operating these businesses not only had a good understanding of the needs of their community but tremendous pride in their work and the willingness to put in the effort necessary to succeed.

The concept of micro-lending was born out of a need and since that time has become well established in many impoverished nations, thereby assisting small entrepreneurs to have a real opportunity to become successful and make a difference to the sustainability of their communities.

I recently came upon Kiva which is a California based non-profit organization. Through the internet, it connects small lenders with established and audited micro-lending organizations and their clients. It allows each individual lender to decide on how much they would like to lend and which projects they wish to fund. The funding level appears to begin at $25. Based on my reading, 100% of the loan is expected to be re-paid to the lender and the lender, in agreeing to take part, understands that these are considered high risk and that in some cases re-payment doesn’t happen. But history has proven most of these projects to be successful. In addition, there are many lenders funding these projects, thus sharing the risk. Based on my current understanding (and I look forward to those more knowledgable to correct me), the Interest earned on money returned to Kiva is used to administer their organization. The point of the lending, of course, is not to get rich from the loan, but it is an excellent alternative way of helping others to build their economy and their lives without having them rely on charity. Building without charity engenders a greater sense of accomplishment and allows the lender to contribute that same amount of money to more than one project. 

Kiva only partners with audited micro-lending organizations with a history of successful projects. It allows for rating of the micro-lenders and also provide a history of these organizations.

Kiva’s web-site is an interesting example of the power of collaboration through the internet. It provides people who would like to lend to these small companies an opportunity to make a difference.

Take some time to check it out.

Garth Schmalenberg

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