Microfinance · Social Impact Investing

Ebay enables investing in microfinance

Ebay recently opened a new web site called MicroPlace which enables individuals to make loans to the world’s working very poor. This enables what I refer to as Socially Responsible Investing version 2 … choosing to make a positive social impact with your investing.

Here’s generally how it works:

  • You can preview the investment options … currently there are 15 choices of microfinance institutions (MFIs) across 11 countries. The term of the loans ranges from 2-4 years and the interest rate paid ranges from 1.5-3% per annum.
  • To make an investment, you create an online account…email address, password and then [unfortunately] a lot of personal information which they are required to capture as a securities broker.
  • You can then invest a minimum of $100. This means that almost anyone can invest which is great! You fund your investment through Paypal (another Ebay company) or directly with a checking account transfer.
  • Once you’ve made your investment, you can track it on their web site.

I have written previously about Kiva, another way to provide loans to microentrepreneurs. I thought it would be helpful to compare and contrast these two services.

Here’s a summary comparison … Kiva let’s you loan directly to a specific borrower which is much more personalized. The downside of Kiva is that you are receiving no interest on your loan. On the risk (of getting your loan repaid) side, with Kiva you need to manage your own risk by splitting up your loans across multiple borrowers whereas you’re investing in a fund with Microplace so your risk is already diversified across a group of borrowers (although typically with one MFI). Generally, Kiva loans are shorter duration. Currently Kiva provides many more countries and MFI partner options … although because of its popularity there are often on a few borrower loans listed at any given time.

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